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Case 1

a. Bad debts 9,300.00

Allowance for bad debts 9,300.00

to record provision for bad debts

(P620,000 x 1.5%)

b. Bad debts 13,000.00

Allowance for bad debts 13,000.00

to record provision for bad debts

Computation:
Required Allowance for bad debts at year
end 14,500.00

(P290,000 x 5%)

Less: Allowance for bad debts, beginning 9,300.00

Bad debts written off (7,800.00) 1,500.00

Bad debts expense 13,000.00

Case 2

a. Accounts receivable 5,000.00

Sales 5,000.00

to record sales on account

Cost of sales 3,500.00

Merchandise inventory 3,500.00

to record cost of sales

b. Merchandise inventory 720.00

Cash 720.00

to record purchase of inventory

c. Merchandise inventory 2,600.00

Accounts payable 2,600.00

to record purchase of inventory on account


d. Sales returns and allowances 300.00

Accounts receivable 300.00

to record return of merchandise sold

Merchandise inventory 210.00

Cost of sales 210.00

to record cost of merchandise returned by the customer

e. Cash 4,850.00

Sales discounts 150.00

Accounts receivable 5,000.00

to record collection of account

f. Accounts payable 600.00

Merchandise inventory 600.00

to record return of faulty merchandise to the supplier

g. Merchandise inventory 200.00

Cash 200.00

to record payment of freight of the merchandise purchased

h. Accounts payable 2,000.00

Merchandise inventory 20.00

Cash 1,980.00

to record payment of merchandise

I. Accounts receivable 7,000.00

Sales 7,000.00

to record sales on account

Cost of sales 4,900.00

Merchandise inventory 4,900.00

to record cost of sales

j. Cash 6,860.00

Sales discounts 140.00

Accounts receivable 7,000.00


to record collection of account

Case 3

XYZ Corporation
Statement of Cash Flow
For the year ended March 31, 2006
(amounts in Philippine Peso)

Net Cash Provided / Used in Operating Activities:

Net income 141,000.00

Add: Depreciation expense 25,000.00

Gain on sale of equipment (1,000.00)

Increase in receivables (20,000.00)

Increase in prepaid expenses (2,000.00)

Decrease in inventory 40,000.00

Increase in accounts payable 8,000.00

Decrease in salaries payable (24,750.00)

Increase in interest payable 2,000.00 168,250.00

Net Cash Provided / Used in Investing Activities:

Acquisition of fixed assets (90,000.00)

Proceeds from sale of fixed assets 41,000.00 (49,000.00)

Net Cash Provided / Used in Financing Activities:

Payment of bonds payable (30,000.00)

Issuance of capital stock 90,000.00

Payment of dividends (135,000.00)

  Reacquisition of capital stock (Treasury stocks) (20,000.00) (95,000.00)

Net increase in cash 24,250.00

Add: Cash beginning balance 20,000.00


         

Cash balance, March 31, 2006   44,250.00

A Computation of proceeds of sales of fixed assets


Fixed Assets

Beginning Balance 535,000.00

Add Purchases 90,000.00

Total 625,000.00

Balance per Books 575,000.00

Cost of Disposal 50,000.00


Related Depreciation

Beginning Balance 130,000.00

Depreciation for the Year' 25,000.00

Accumulated 155,000.00

Balance per Books 145,000.00

Depreciation for the Disposed Fixed Asset 10,000.00

Cost of Fixed Asset 50,000.00

Less: Accum Depreciation 10,000.00

Book Value 40,000.00

Gain on Sale(Disposal) 1,000.00

Cash Proceeds 41,000.00

B Retained Earnings Beginning 140,000.00

Net Income for the Year 141,000.00

Should be RE 281,000.00

Less Balance as of 2001 146,000.00

Distributed Earnings/Dividends 135,000.00

Case 4

1 Supplies expense 4,700.00

Supplies inventory 4,700.00

to record used supplies

2 Depreciation expense 1,925.00

Accumulated depreciation 1,925.00

to record provision for depreciation

3 Cost of sales 1,000.00

Inventory 1,000.00

to reconcile the quantity per stock card

with the quantity per physical count

4 Administration expenses 500.00

Advertising 500.00

to reclassify accounts
5 Cash in bank 16,000.00

Accounts payable 16,000.00

to close bank overdraft

Case 5

1.a

Date Transaction Quantity Unit Cost Balance

April 1 Beginning balance 100 5.00 500.00

4 Purchases 400 5.10 2,040.00

5 Sales (350) 5.10 (1,785.00) *

100 5.00 500.00


Balance

50 5.10 255.00

11 Purchases 300 5.30 1,590.00

12 Sales (300) 5.30 (1,590.00) *

(50) 5.10 (255.00) *

  (25) 5.00 (125.00) *

Balance 75 5.00 375.00

18 Purchases 200 5.35 1,070.00

25 Sales (100) 5.35 (535.00) *

75 5.00 375.00
Balance

100 5.35 535.00

26 Purchases 100 5.60 560.00

Ending balance 275 1,470.00

* Cost of goods sold under LIFO = P4,290

1.b

Date Transaction Quantity Unit Cost Balance

April 1 Beginning balance 100 5.00 500.00

4 Purchases 400 5.10 2,040.00

5 Sales (100) 5.00 (500.00)

  (250) 5.10 (1,275.00) *


Balance
150 5.10 765.00

11 Purchases 300 5.30 1,590.00

12 Sales (150) 5.10 (765.00) *


  (225) 5.30 (1,192.50) *

Balance 75 5.30 397.50

18 Purchases 200 5.35 1,070.00

25 Sales (75) 5.30 (397.50) *

  (25) 5.35 (133.75) *


Balance
175 5.35 936.25

26 Purchases 100 5.60 560.00

Ending balance 275 1,496.25

Sales:

April 5 (350 x P10.00) 3,500.00


April
12 (375 x P10.50) 3,937.50
April
25 (100 x P10.50) 1,050.00 8,487.50

* Cost of sales (4,263.75)

Gross Profit on Sales 4,223.75

2.a

Date Transaction Quantity Unit Cost Balance

April 1 Beginning balance 100 5.00 500.00

4 Purchases 400 5.10 2,040.00

Balance 500 5.08 2,540.00

5 Sales (350) 5.08 (1,778.00)


Balance
150 5.08 762.00

11 Purchases 300 5.30 1,590.00

Balance 450 5.23 2,352.00

12 Sales (375) 5.23 (1,961.25)

Balance 75 5.23 390.75

18 Purchases 200 5.35 1,070.00

Balance 275 5.31 1,460.75

25 Sales (100.00) 5.31 (531.00)


Balance
175.00 5.31 929.75

26 Purchases 100.00 5.60 560.00

Ending balance 275.00 5.41 1,489.75

2.b Ending inventory, end under LIFO = P1,470


(see stock card for LIFO, 1.A requirement)

2.c Cost of goods sold under FIFO = P4,263.75

(see stock card for FIFO, 1.B requirement)

Case 6

1. Adjusting Journal Entries:

a. Accounts receivable 15,800.00

Sales 15,800.00

to record sales on account

b. Bad debts 3,800.00

Allowance for bad debts 3,800.00


to record provision for bad
debts

c. Purchases 13,500.00

Accounts payable 13,500.00


to record purchases on
account

d. Merchandise inventory 10,800.00

Income summary 10,800.00

to establish merchandise inventory end

e. Insurance 2,600.00

Ella's capital 2,600.00

to correct overstatement of last year's insurance expense

(P7,800/12 x 4 months)

Prepaid insurance 2,900.00

Insurance 2,900.00

to establish unexpired insurance for the current year

(P8,700/12 x 4 months)

f. Depreciation expense 13,200.00

Accumulated depreciation 13,200.00

to record provision for depreciation


g. Ella's capital 2,000.00

Utilities 900.00

Salaries 1,100.00

to record last year's accrued expenses

Utilities 1,500.00

Salaries 1,600.00

Accrued expense 3,100.00

to accrue expenses

2. The bank requested for the 2005 financial statements prepared under the
Accrual Basis of accounting because the bank wants to see the real
performance and position of the business. Proper matching of revenues and
expenses are observed under the Accrual Basis.

Case
8

1 Depreciation expense 2,816.00

Accumulated depreciation 2,816.00

to take up provision for depreciation

2 Cash 27,000.00

Accumulated depreciation 18,656.00

Equipment 44,000.00

Gain on sale of equipment 1,656.00

to take up sale of equipment

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