Basic Accounting: Quiz

Complete Accounting Cycle for Service Business

On December 1, 2020, Mr. Juan M. Dela Cruz, CPA, establish an accounting service
business, named PINADALI ACCOUNTING SERVICES. The transactions for the month
of December are as follows:

December 1: Juan invested the following to the business: Cash amounting to 350,000 in
Philippine peso; 1 laptop and 3 computer desktops with the value of P56,000 and P45,000
respectively; and 6 office chairs and tables with the value of P1,200 per chair and P2,500
per table.

December 2: Paid 6 months advance rent for the office space to be use in the business.
P10,000 per month. Rent also include 2% of 200,000, if the business reaches the
minimum revenue of 200,000 per month.

At the same day, paid business permit amounting to P15,000.

December 3. Purchased office supplies in ABC School Supplies amount of 35,000 on

credit payable after 15 days. The business uses the expense method in recording the
supplies.

December 4. Hired 2 accounting staffs and an accounting officer for a monthly salary of
15,000 and 20,000 on respective positions.

December 5. Received P120,000 cash from a customer for the services to be performed
for the next 6 months.

December 6. Purchased Air-condition units worth 250,000 paying 35,000 as down

payment and the balance issuing a 2-year, 24% notes payable (interest is payable every 6
months).

December 7. Acquired “all-in-one” insurance for a year, P24,000. Use Expense Method

December 8. Received cash from clients amounting to P90,000.

December 10. Billed the following clients for the services performed:
Mang Kanor P 150,000
Aling Bebang 45,000
Aling Puring 120,000
Mang Jose 75,000

December 12. Aling Puring issued a 2-year 15% note for the balance of her account.
Interest is payable every quarter.
December 15. Enter into a contract with a security guard services for a monthly fee of
35,000. The guard starts his duty the following day.

December 17. Paid ABC School Supplies for the supplies purchased last December 3.

December 21. Paid the semi-monthly salary of the employees.

December 23. Purchase additional supplies worth 45,000 on account in DEF Supplies
payable after 15 days,

December 25. Collected the 40% payment from Aling Bebang and Mang Jose.

December 27. Mr. Juan Dela Cruz made additional investment worth 50,000.

December 29. Paid the following bills:

Telephone Bill P 3,500
Water Bill Consumption 15 cubic meter @ P100 per cubic meter
Provided further that water bill is higher between
Actual consumption and P2,000
Miscellaneous 3,500

December 30. Received billing for the Electricity worth P6,500.

December 31. Withdrew cash of 40,000 for personal use.

Required:

1. Established the following accounts and account numbers in a ledger.

Account Code

Cash 110
Accounts Receivable 120
Notes Receivable 130
Allowance for Doubtful Accounts 135
Interest Receivable 140
Prepaid Rent 150
Prepaid Insurance 160
Office Supplies 170
Computer Equipment 180
Accumulated Depreciation – Computer Equipment 181
Furniture and Fixtures 185
Accumulated Depreciation – Furniture and Fixtures 186
Air-condition Equipment 190
Accumulated Depreciation – Air-condition 191
Accounts Payable 210
Notes Payable 220
 Salaries Payable 230
Interest Payable 240
Unearned Service Revenues 250
Accrued Security Payable 260
Dela Cruz, Capital 310
Dela Cruz, Withdrawal 320
Income Summary 330
Service Revenues 410
Interest Income 420
Salaries Expense 510
Rent Expense 515
Insurance Expense 520
Taxes, Permits and Licenses 530
Office Supplies Expenses 535
Telephone Expenses 540
Security Service Expenses 545
Water Expenses 550
Miscellaneous Expenses 560
Electric Expenses 570
Depreciation Expense – Computer Equipment 580
Depreciation Expense – Furniture and Fixtures 581
Depreciation Expense – Air-condition 582
Interest Expenses 590
Doubtful Accounts 595

2. Record the transactions for the month of December in journal and post entries
to the ledger.
3. Prepare a trial balance and prepare a worksheet and record the following
adjustments on the worksheet:
a. Insurance and rent for one month have expired.
b. Office supplies used at the end of the month is 48,000.
c. Depreciation of the Properties are as follows:
- Computer Equipment: Salvage value of 11,000 and useful life of 3 years
- Furniture and Fixtures: Monthly Depreciation of 925
- Air-condition: Annual Depreciation of 24,000
d. One-fifth of unearned service revenues have been earned.
e. Salaries of the employees for the other semi-monthly has accrued
f. Accrue one-month Interest on Notes issued on the balance of air-condition
purchased
g. Accrue one-month interest on notes received from Aling Puring
h. Accrue Percentage rent the month.
i. Accrue half of security guard services fee
j. Mr, Dela Cruz estimates that 5% of Mang Kanor’s balance is uncollectible.
4. Complete the worksheet and prepare an income statement, a statement of
changes in equity, a balance sheet and a cashflow statement.
5. Record the adjusting and closing entries in the journal and post the entries to
the ledger
 6. Prepare a post-closing trial balance
7. Prepare necessary reversing entries

Please submit your answers in my email sta.ritarolancpa@gmail,com on or before

November 14, 2021 5pm.

Goodluck and God Bless…