CERTIFIED BOOKKEEPING – LECTURE NOTES

PROBLEM 1: Basic Accounting

Analysis of the Accounts Using the Extended Accounting Equation

Cash Accounts Photo Camera Office Accounts Bonito, Changes in

Receivable Supplies Equipment Equipment Payable Capital Capital

Journal Entries:

Date Particulars F Debit Credit

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CERTIFIED BOOKKEEPING – LECTURE NOTES

Date Particulars F Debit Credit

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CERTIFIED BOOKKEEPING – LECTURE NOTES

PROBLEM 2: Accounting for Petty Cash Fund

As part of the internal control, Benn Ten Company established a petty cash fund. The following
transactions occurred in connection with the petty cash:

1. Established a petty cash fund of P10,000 on January 2 of the current year.

2. Petty cash expenses – January 2-31 are:

Postage P 1,500
Supplies 5,500
Transportation 1,200
Miscellaneous expense 800

3. The fund is replenished on February 1 and increased by P5,000.

Required:
Prepare all entries to record the transactions under each of the following:
a. Fluctuating fund system
b. Imprest fund system

PROBLEM 3: Accounting for Petty Cash Fund

Prepare entries in general journal form to record the following transactions of Gwen Company.

2013
Nov. 2 The entity established an imprest petty cash fund of P10,000.

30 An examination of the cash fund disclosed the following:

Currency and coin 3,000

Memoranda showing expenditures for:
Postage 2,000
Supplies 5,000

A check was drawn to replenish the fund and to increase its amount to P20,000.

Dec. 31 The composition of the fund was as follows:

Currency and coin 11,000

Memoranda showing expenditures for:
Postage 3,000
Supplies 4,000
Deposit for 20 cases of softdrinks 2,000

The fund was not replenished.

2014
Jan. 2 The deposit for 20 cases of softdrinks is collected.

31 A check was drawn to replenish the fund. The composition was:

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CERTIFIED BOOKKEEPING – LECTURE NOTES

Currency and coin 1,000

Postage stamps 500
Memoranda showing expenditures since
November 30, 2010 for:
Postage 5,000
Supplies 6,000
Payment of account 7,000

PROBLEM 4: Bank Reconciliation

The Bank Reconciliation Statement of Bel Company as of March 31, 2014 showed an unadjusted
cash balance of P1,500 with a deposit in transit of P3,000 and three outstanding checks as follows:
#114 – P1,200; #15 – P800; #116 – P300.

There was no credit memo or debit memo for the month of March.

The April Bank Statement showed the following:

FAR EASTERN SAVINGS BANK

BEL COMPANY ACCOUNT NO. 189054

Quiapo, Manila Period: April 30, 2014

Check No. Amount Deposits Date Balance

April 1 1,500
114 P 1,200 P 3,000 2 P 3,300
118 9,000 10,000 6 4,300
117 1,000 2,000 7 5,300
375 1,800 8 3,500
120 2,500 10 1,000
5,000 16 6,000
6,000 20 12,000
121 2,750 6,400 22 15,650
200 SC 24 15,450
123 7,870 2,800 26 10,380
119 4,500 28 5,880
49,750 CM 55,630

Additional information:
• Check No. 375 is a check of Bell Company erroneously charged to Bel Company by the bank.
• Deposit of April 16 was erroneously recorded by the depositor as P5,500.
• SC – service charge of the bank
• CM – proceeds from the loan approved by the bank:

Face Value P50,000

Less: Interest Expense 250
Proceeds P49,750

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• The March deposit in transit was verified to have been deposited in April but only one of the
March outstanding checks was encashed in April.
• The following information were taken from the books of Bel Company:

CASH RECEIPTS BOOK CASH DISBURSEMENT BOOK

April 2 P 10,000 Check No. 117 P 1,000
6 2,000 118 9,000
9 5,500 119 4,500
15 6,000 120 2,500
20 6,400 121 2,750
24 2,800 122 900
28 2,250 123 7,870

Required:
a. Bank Reconciliation Statement as of April 30, 2014.
b. Adjusting entries in the books of Bel Company.

PROBLEM 5: Analysis of the accounts

1. If prepaid insurance amounted to P15,000 at the beginning of the period and total insurance
premium paid during the period amounted to P8,000, what would be the ending balance of
prepaid insurance if insurance expense for the period amounted to P6,000?
a. P17,000
b. P13,000
c. P15,000
d. P1,000

2. Assume all rent revenues are received in advance and accounted for as unearned rent.
Beginning and ending balances of unearned rent are P4,000 and P6,000, respectively. If
total rent revenue for the period amounted to P45,000, what is the amount of rent
collections in advance for the period?
a. P45,000
b. P47,000
c. 43,000
d. P35,000

3. If beginning and ending interest receivable class were P16,000 and P5,000 respectively.
Total interest income amounted to P52,000, how much would be the amount of interest
collections for the period?
a. P41,000
b. P63,000
c. P31,000
d. P52,000

4. Assuming salaries payable at the beginning and at the end of the period amounted to
P17,000 and P38,000 respectively. Salaries paid during the period totaled P155,000. What
would be the amount of salaries expense to be recognized for the period?
a. P155,000
b. P100,000
c. P134,000
d. P176,000

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PROBLEM 6: Cash to accrual

JiHoo maintains its accounting records on the cash basis. During 2014, he collected P125,000 from
his clients and paid P62,000 in expenses. Upon examination of additional evidence, the following
information was obtained:
01/01/2014 12/31/2014
Accounts Receivable P9,000 P15,000
Unearned Service Revenue 7,000 4,000
Accrued Expenses 3,000 2,000
Prepaid Expenses 5,000 12,000

1. What is the total revenue in 2014?

a. P125,00
b. P116,000
c. P134,000
d. P131,000

2. What is the total expense of JiHoo in 2014?

a. P62,000
b. P56,000
c. P70,000
d. 54,000

3. The correct net income of JiHoo for the year 2014 is:
a. P63,000
b. P80,000
c. P64,000
d. P77,000

PROBLEM 7: Single Entry – Cost Accounting

The work-in-process inventory of ABC Paints was completely destroyed by fire on April 1, 2014. You
were able to establish the physical inventory figures as follows:

January 1, 2014 April 1, 2014

Raw materials 30,000 P60,000
Work in process 100,000 -
Finished Goods 140,000 120,000

Sales from January 1 to March 31 were P300,000. Purchases of raw materials were P100,000 and
freight on purchases, P10,000. Direct labor during the period was P80,000. It was agreed with the
insurance adjusters that an average gross profit rate of 32.5% be used and that manufacturing
overhead was 45% of direct labor cost.

1. The value of goods manufactured and completed as of April 1, 2014:

a. P120,000
b. P180,000
c. P190,000
d. P182,500
e. None of these

2. Raw materials used were:

a. P50,000
b. P70,000
c. P80,000
d. P90,000
e. None of these

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3. The total value of goods put in process amounted to:

a. P296,000
b. P300,000
c. P336,000
d. P316,000
e. None of these

4. The work in process inventory destroyed as computed by the adjuster would be:
a. P113,500
b. P131,500
c. P173,500
d. 121,500
e. None of these

PROBLEM 8: Comprehensive Illustration of Single Entry

You were engaged to audit the financial statements of Frost, Inc. on January 15, 2015. Presented
below is a copy of the trial balance as of January 2 and December 31, 2012 given by the company’s
accountant.

Trial Balance Trial Balance

January 2, 2014 December 31, 2014

Debit Credit Debit Credit

Cash P 500,000
Accounts Receivable 124,000 P 187,000
Merchandise Inventory 230,000 245,000
Unexpired Insurance 3,500 2,000
Land 150,000 150,000
Buildings 200,000
Acc. Depreciation - Bldg. 70,000
Equipment 80,000
Acc. Depreciation - Equip. 24,000
Accounts Payable 173,000 86,790
Advances from customers 9,000 5,500
Salaries Payable 6,000 15,950
Utilities Payable 5,500 9,650
Capital Stock - P100 par 1,000,000 1,000,000
1,287,500 1,287,500

No formal books have been kept during 2014. The following information has been gathered from
the checkbooks, deposit slips and other sources:

1. Most balance sheet account balances at December 31, 2014 have determined and recorded
on the worksheet.
2. Cash receipts for the year are summarized as follows:
Advances from customers P 7,000
Cash sales and collections on accounts receivable
(after sales discounts of P15,200 and sales returns
and allowances of P19,400) 1,265,400
Sale of equipment costing P50,000 on which P10,000 of
depreciation had accumulated 45,000
P 1,317,400

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3. Cash disbursements for the year are summarized as follows:

Insurance premiums P 8,250
Purchase of equipment 180,000
Addition to building 46,000
Cash purchase and payments on accounts payable (after purchase
discounts of P11,500 and Purchase returns and allowances
of P18,000) 820,500
Salaries paid to employees 430,700
Utilities 18,500
Dividend paid 15,000
Total cash disbursements P 1,518,950

4. Dividends of P0.75 per share declared on June 30, September 30 and December 31.
5. Depreciation expense for 2012 was: building P4,000; equipment P17,500.
6. Bad debts are estimated to be 1.2% of total sales for the year. The ending accounts
receivable balance of P187,000 has been reduced by P6,500 for specific accounts which
were written off as uncollectible.

Compute the following in 2014:

1. Total sales
a. P1,373,500
b. P1,380,00
c. P1,369,500
d. P1,373,000

2. Total purchases
a. P936,210
b. P906,710
c. P734,290
d. P763,790

3. Cost of goods sold

a. P719,290
b. P748,790
c. P689,290
d. P718,790

4. Gain or (loss) on sale of equipment

a. (P5,000)
b. P10,000
c. 5,000
d. P0

5. Insurance expense
a. P8,250
b. P6,750
c. P6,250
d. P9,750

6. Salaries expense
a. P434,850
b. P430,700
c. P440,650
d. P420,750

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7. Utilities expense
a. P28,150
b. P14,350
c. P18,500
d. P22,650

8. Bad debts expense

a. P16,482
b. P16,560
c. P16,398
d. P16,434

9. Net income
a. P130,000
b. P154,600
c. P113,578
d. P148,178

10. Dividends
a. P15,000
b. P7,500
c. P30,000
d. P22,500

11. Allowance for bad debts

a. P9,982
b. P10,060
c. P9,898
d. P9,934

PROBLEM 9: Correction of Errors

The trial balance of Rachel Company does not balance. The debit column totaled P392,000 while
the credit column totaled P357,500 an examination of the ledger shows these errors:
• Cash received from customers on account was recorded (both debit and credit) as P36,900
instead of P39,000.
• The purchase on account of officer’s computer trade worth P30,000 was recorded as debit
to Office Expense and a credit to Accounts Payable.
• Purchases on account was recorded as P24,500 instead of P42,500
• Services performed on account for a client, P30,000 was recorded as a debit to Accounts
Receivable P30,000 and a credit to Service Revenue of P3,000.
• A payment of P5,000 for utilities used was posted as a debit to Utilities Expense and a debit
to cash
• The rent revenue account was totaled at P34,500 instead of P32,000.

The correct debit/credit column totals should be:

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PROBLEM 10: Correction of Errors

The trial balance of Remy Company does not balance.

Remy Company
Trial Balance
December 31, 200X

Debit Credit
Cash P 178,000
Accounts receivable 63,500
Rent receivable 62,000
Prepaid insurance P 28,900
Property and equipment 170,450
Accounts payable 53,000
Accrued expenses 26,500
Income taxes payable 18,100
Emmy, Capital 74,700
Service revenue 269,600
Rent revenue 116,500
Interest revenue 93,600
Utilities expense 77,800
Advertising expense 46,400
Income tax expense 22,650
Totals P 717,400 P 584,300

Your review of the ledger reveals the following:

a. Each account has a normal balance.
b. Debit footings in Property and Equipment, and Accounts Payable were each understated by
P2,000.
c. Debit footings in Rent Receivable and Rent Revenue were each overstated by P3,000.
d. Credit footings in Prepaid Insurance and Accrued Expenses were each understated by
P1,000.
e. Credit footings in Cash and Income Taxes Payable were each overstated by P1,300.
f. Transposition errors were made in Accounts Receivable and Service Revenue. The correct
balances were P65,300 and P266,900 respectively.
g. Credit posting for Advertising expense of P800 was omitted.

The correct debit/credit columns totals in Remy Company’s trial balance are:

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