Multiple Choices:

1. C 5. B
2. D 6. D
3. C 7. D
4. B 8. B
Problem 1:
1. Rent Revenue P90,000
Unearned Rent Revenue P90,000
(108,000/18 months) x 15 months
2. Depreciation Expense 386,000
Accumulated Depreciation 386,000
(740,000 x10% = 74,000)
(1,560,000 x 20% = 312,000)

3. Salaries and Wages Expense 100,000

Salaries and Wages Payable 100,000

4. Salaries and Wages Expense 42,000

Salaries and Wages Payable 42,000

5. Bad Debts Expense 59,000

Allowance for Doubtful Accts. 59,000

6. Interest Receivable 26,250

Interest Revenue 26,250

7. Rent Expense 120,000

Prepaid Rent 120,000

8. Prepaid Insurance 14,850

Insurance Expense 14,850
(16,200/36 = 450 x 33)

Answers: (Problem 1)
1. (b) P590,000 6. (b) P700,000 11. (c) P1,085,750
2. (b) P59,000 7. (c) P2,300,000
3. (a) P14,850 8. (c) P533,400
4. (b) P60,000 9. (a) P1,145,700
5. (c) P26,250 10. (c) P1,620,200

Problem 2:
Audit Finding 1: Accounts Receivable P1,100
Cash P1,100

Audit Finding 2: Bad Debts 4,170

Allowance for Bad Debts 4,170

Audit Finding 3: Sales 4,900

Accounts Receivable 4,900

Inventory 3,500
Cost of Sales 3,500

Audit Finding 4: Cost of Sales 39,500

Inventory 39,500

Inventory 41,500
Cost of Sales 41,500

Audit Finding 5: Interest Receivable 180

Interest Income 180

Audit Finding 6: No Adjustments

Audit Finding 7: Depreciation 5,085

Accumulated Dep’n 5,085

Audit Finding 8: Prepayments 900

Insurance Expense 900

Audit Finding 9 : Prepayments 900

Rent Expense 900
Audit Finding 10: Prepayments 150
Interest Expense 150

Audit Finding 11: Retained Earnings 2,000

Additional Paid-In Cap. 2,000

Audit Finding 12: Retained Earnings 10,000

Goodwill 10,000
Audit Finding 13: Office Salaries 1,200
Accrued Expenses 1,200

Audit Finding 14: Amortization 5,000

Patents 5,000

Audit Finding 15: Loss on Sale 1,000

Investment 1,000

Audit Finding 16: Notes Payable 5,000

Advertising 5,000

Audit Finding 17: Taxes 1,000

Cash 1,000

Audit Finding 18: Retained Earnings 9,000

Stock Dividend Dist. 7,500
Additional Paid-In Cap. 1,500

Audit Finding 19: Land 50,000

Donated Capital 50,000

Audit Finding 20: No Adjustments

Audit Finding 21: Sales Discount 20

Purchase Discount 20

Answers: (Problem 2)
1. (b) P8,400 11. (a) P75,000 21. (c) P2,210
2. (b) P53,400 12. (c) P264,910 22. (c) P300
3. (b) P2,670 13. (a) P189,360 23. (b) P2,510
4. (b) P180 14. (d) P3,910 24. (a) P7,500
5. (c) P45,000 15. (b) P610 25. (b) P25,000
6. (c) P4,170 16. (a) P 0 26. (c) Donated capital
7. (b) P3,700 17. (c) P4,350 27. (b) P15,000
8. (d) P50,850 18. (c) P15,000 28. (b) P1,720
9. (a) P5,085 19. (a) P3,500 29. (a) P21,650
10. (a) P 35,420 20. (c) P24,000 30. (a) P 0
 RUCHELL CORPORATION
WORKING BALANCE
SHEET SEPTEMBER 30, 2006

Per Book Audit Adjustments Final Balances

Cash P10,500 P2,100 P8,400
Marketable Securities 15,000 15,000
AR – Trade 57,200 53,400
Allow. for DA 1,500 (dr) P1,100 4,400 (2,670)
Notes Receivable 21,500 4,170 21,500
Inventories 39,500 45,000 39,500 45,000
Invest. In a Co. – 100 25,000 1,000 24,000
shares
Interest Receivable - 180 180
Prepayments 1,750 1,950 3,700
P171,950 P168,150
Land - 50,000 50,000
Furniture & Equip. 50,850 50,850
Accum. Dep’n (12,170) 5,085 (17,285)
P36,680 P83,595
Goodwill 10,000 10,000
Patents 20,000 5,000 15,000
P30,000 P15,000
Total Assets P240,630 P267,105

Accounts Payable 35,420 35,420

Accrued Expenses 1,200 1,200
Notes Payable 31,000 5,000 26,000
66,420 66,420
Capital Stock, P100 75,000 75,000
APIC 3,500 3,500
Stock Div. Dist. 7,500 7,500
Donated Capital 50,000 50,000
Retained Earnings 99,210 68,485
Total Liab. & SHE P240,630 P267,105
 RUCHELL CORPORATION
WORKING PROFIT OR LOSS
YEAR ENDED SEPTEMBER 30, 2006

Per Book Audit Adjustments Final Balances

Sales P269,810 P4,900 P264,910
Sales Returns (1,950) (1,950)
Sales Discount (1,700) 20 (1,720)
Net sales P266,160 P261,240
Cost of Sales (181,690) (176,170)
Gross Profit P84,470 P85,070
Other Income 430 180 610
Total P84,900 P85,680
Operating Expenses:
Advertising (7,210) 5,000 (2,210)
Doubtful Accounts - 4,170 (4,170)
Salesman’s Salaries (21,650) (21,650)
Misc. Selling Exp. (1,940) (1,940)
Rent Expense (11,700) (11,700)
Insurance Expense (1,200) (1,200)
Light and Water (300) (300)
Taxes (1,510) 1,000 (2,510)
Office Salaries (3,330) 1,200 (4,530)
Misc. Office Expense (1,560) (1,560)
Loss on Sale - 1,000 (1,000)
Amortization of Int. - 5,000 (5,000)
Depreciation -_ 5,085 (5,085)
Income from Op. P34,500 P24,625
Interest Expense (4,060) 150 (3,910)
Net Income P30,440 P20,715