FUNDAMENTALS OF ACCOUNTING

Chapter 1
Activity 1
JOURNAL
Date Account Titles Debit Credit
September 1 Cash 950, 000
J. Alegre, Capital 950, 000
September 1 Furniture and Fixtures 250, 000
J. Alegre, Capital 250, 000
September 2 Medical Equipment 200, 000
Cash 200, 000
September 2 Medical Equipment 550, 000
Notes Payable 550, 000
September 4 Unused Medical Supplies 100, 000
Cash 100, 000
September 5 J. Alegre, Drawings 15, 000
Cash 15, 000
September 7 Cash 50, 000
Medical Fees 50, 000
September 7 Accounts Receivable 60, 000
Medical Fees 60, 000
September 9 Cash 350, 000
J. Alegre, Capital 350, 000
September 11 Notes Payable 550, 000
Cash 550, 000
September 14 Cash 30, 000
Medical Fees 30, 000
September 14 Accounts Receivable 10, 000
Medical Fees 10, 000
September 15 Medical Fees Income 60, 000
Accounts Receivable 60, 000
September 18 Unused Medical Supplies 30, 000
Accounts Payable 30, 000
September 28 Cash 40, 000
Medical Fees 40, 000
September 28 Accounts Receivable 70, 000
Medical Fees 70, 000
September 30 Taxes and Licenses 20, 000
Cash 20, 000
September 30 Salaries Expense 45, 000
Cash 45, 000
September 30 Utilities Expense 40, 000
Cash 40, 000
Chapter 2
Activity 1
a) Provide the journal entries for the transaction.
JOURNAL
Date Account Titles Debit Credit
November 1 Cash 100, 000
J. Reyes, Capital 100, 000
To record the owner’s investment to the business
November 1 Equipment 72, 000
Cash 72, 000
To record the acquisition of equipment for cash
November 1 Insurance 24, 000
Cash 24, 000
To record the prepayment of insurance
November 12 Purchase 30, 000
Cash 30, 000
To record the acquisition of inventory for cash
November 14 Cash 30, 000
Sales 30, 000
To record cash sales
December 1 Notes Receivable 24, 000
Sales 24, 000
To record sale in exchange for note
December 5 Purchase 4,000
Accounts Payable 4, 000
To record the acquisition of inventory on account
December 26 Account Receivable 34, 000
Sales 34, 000
To record sale account
December 27 Account Payable 2, 000
Cash 2, 000
To record the payment of account payable
December 29 Cash 20, 000
Accounts Receivable 20, 000
To record the collection of account receivable

b) Post the entries to the ledger using T-accounts

ASSETS
CASH INSURANCE
1-Nov. 100,000 72,000 1-Nov. 1-Nov. 72, 000
14-Nov. 30, 000 24, 000 1-Nov.
29-Dec. 20, 000 30, 000 12-Nov.
2, 000 27-Dec. 72, 000
150, 000 128, 000 72, 000
22,000

EQUIPMENT NOTES RECEIVABLE

1-Nov. 24, 000 1-Dec. 24, 000

24,000 24, 000

24, 000 24, 000
ACCUMULATED DEPRECIATION-EQUIPMENT ACCOUNTS RECEIVABLE
3,000 31-Dec. 26-Dec. 34, 000 20, 000 29-Dec.

3, 000 34, 000 20, 000

3, 000 14, 000
LIABILITY EQUITY
ACCOUNTS PAYABLE J. REYES, CAPITAL
27-Dec. 2, 000 4, 000 5- Dec. 100, 000 1-Nov.

2, 000 4, 000 100,000

2, 000 100,000
INCOME EXPENSES
SALES PURCHASES
30, 000 14-Nov. 12-Nov. 30, 000
24, 000 1-Dec. 5-Dec. 4, 000
34, 000 26-Dec.
88, 000 34, 000
88, 000 34, 000
Assets
Adjusted Entries T-Accounts
Prepaid Insurance Interest Receivables
20,000 31-Dec. 200 31-Dec.

20,000 200
20, 000 200

Inventory Allowance for Bad Debts

31-Dec. 21, 000 2.000 31-Dec.

21,000 2,000
21,000 2,000
Liability Income
Salaries Payable Interest Income
20,000 31-Dec. 31-Dec. 200

20, 000 200

20, 000 200
Expenses
Depreciation Expense Insurance Expense
31-Dec. 3, 000 31-Dec. 20, 000

3,000 20,000
3,000 20,000

Salaries Expense Bad Debts Expense

31-Dec. 20,000 31-Dec. 2,000

20,000 2,000
20,000 2,000
 c) – f) Prepare the unadjusted trial balance using a worksheet.
J Reyes Merchandising
Worksheet
For the Month ended December 31, 20x1
Unadjusted Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet Closing entries Post-closing trial
balance
Account Titles Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 22, 000 22,000 22,000 22,000
J. Reyes, Capital 100, 000 100,000 100,000 46,200 146,200
Equipment 72, 000 72, 000 72, 000 72,000
Accumulated Depreciation-Equipment 3,000 3,000 3,000 3,000
Prepaid Insurance 24, 000 4,000 20, 000 20, 000 20,000
Purchase 34, 000 34, 000 34,000 34,000
Notes Receivable 24, 000 24, 000 24, 000 24,000
Accounts Payable 2, 000 2, 000 2, 000 2,000
Accounts Receivable 14, 000 14, 000 14, 000 14,000
Sales 88, 000 88, 000 88, 000 88,000
Total 190, 000 190, 000
Adjustments
Depreciation expense 3,000 3,000 3,000 3,000
Inventory, end. 21,000 21,000 21,000 21,000
Income summary 21,000 21,000 21,000 21,000
Interest receivable 200 200 200 200
Interest income 200 200 200 200
Insurance expense 4,000 4,000 4,000 4,000
Bad debts expense 2,000 2,000 2,000 2,000
Allowance for bad debts 2,000 2,000 2,000 2,000
Salaries expense 20,000 20,000 20,000 20,000
Salaries payable 20,000 20,000 20,000 20,000
50,200 50,200 236,200 236,200 63,000 109,200 173,200 127,000 109,200 109,200 173,200 173,200
46,200 46,200
109,200 109,200 177,200 177,200

Income Summary
21,00

21,000
21,000
 d) Prepare the adjusting entries
Adjusting Entry
Date Account titles Debit Credit
31-Dec. Depreciation expense 3,000
Accumulated Depreciation-Equipment 3,000
To record depreciation expense for the year
Inventory, end. 21,000
Income summary 21,000
To record the ending inventory
Interest receivable 200
Interest income 200
To accrue interest income earned but not yet collected
Insurance expense 20,000
Prepaid insurance 20,000
To record insurance expense
Bad debts Expense 2,000
Allowance for Bad Debts 2,000
To record bad debts expense for the period
Salaries expense 20,000
Salaries payable 20,000
To accrue salaries expense incurred but not yet paid

g) Prepare the balance sheet and income statement

J Reyes Merchandising
Income Statement
For the Month ended December 31, 20x1

Revenue:
Sales 88,000
Interest income 200
Cost of Goods Sold:
Inventory, beg. –
Purchases 34,000
Total goods available for sale 34,000
Inventory, end. (21,000) (13,000)
GROSS PROFIT 75,200

Operating expenses:
Depreciation expense (3,000)
Insurance expense (4,000)
Bad debts expense (2,000)
Salaries expense (20,000)
Operating income: 46,200
Less: Finance Charges 0
Profit 46,200
 J Reyes Merchandising
Balance Sheet
As of December 31, 20x1
Assets
Current Assets:
Cash 22,000
Accounts Receivable 14,000
Less: Allowance for bad debts (2,000)
Inventory 21,000
Interest receivable 200
Insurance 24,000
Less: Prepaid insurance (20,000)
Note Receivable 24,000
Total Current Assets 83,200

Non-Current Assets:
Equipment 72,000
Less: Accumulated Depreciation (3,000)
Total Non-Current Assets 69,000

Total Assets 152,200

Liabilities and Owner’s Equity

Liabilities
Accounts Payable 2,000
Salaries Payable 20,000
Total Liabilities 22,000

Owner’s Equity
J. Reyes, Capital 130,200

Total Liabilities and Owner’s Equity 152,200

h) Prepare the reversing entries to be recorded in the next accounting period.

J Reyes Merchandising
Trial Balance
January 1, 20x2
Accounts Dr. Cr.
Cash 22,000
Account receivable 14,000
Note receivable 24,000
Interest receivable 200
Inventory 21,000
Equipment 72,000
Prepaid insurance 20,000
Accumulated depreciation 3,000
Allowance for bad debts 2,000
Accounts payable 2,000
Salaries payable 20,000
J. Reyes, Capital 146,200
Totals 173,200 173,200
Chapter 3
Activity 1
1) True 6) False
2) True 7) True
3) False 8) False
4) False 9) False
5) False 10) False
Activity 2
Cash 22,000
Accounts receivable 44,000
Notes receivable (trade) 66,000
Notes receivable (nontrade)- 40,000 due within 1 yr. 110,000
Inventory 143,000
Prepaid insurance 11,000
Land 220,000
Building 880,000
Accumulated depreciation (264,000)
Total Assets 1,192,000
Cash 22,000
Accounts receivable 44,000
Notes receivable 66,000
Inventory 143,000
Prepaid insurance 11,000
Total Current Assets 286,000
Notes receivable 70,000
Land 220,000
Building 880,000
Accumulated depreciation (264,000)
Total Noncurrent Assets 906,000

Activity 3
Cash 30,000
Accounts receivable 70,000
Inventory 150,000
Equipment 2,000,000
Total current assets 2,250,000
Notes receivable (nontrade)- matures in 4 equals annual installments 400,000
Accumulated depreciation (380,000)
Total noncurrent assets 20,000
Accounts payable 187,000
Rent payable 62,000
Utilities payable 30,000
Interest payable 25,000
Salaries payable 90,000
Unearned income 750,000
Total current liabilities 1,144,000
Notes payable 600,000
Total noncurrent 600,000
Owner’s capital 526,000
Total Equity 526,000
Chapter 4
Activity 1
1) True 6) False
2) False 7) False
3) False 8) True
4) True 9) False
5) True 10) False

Activity 2

Ju Taime Co.
Statement of Comprehensive Income
For the period ended December 31,20x1

INCOME
Service fees 696,000
Interest Income 48,000
Gain on sale of equipment 16,000
Total Income 760,000

EXPENSES
Salaries expense 240,000
Rent expense 24,000
Utilities expense 16,000
Supplies expense 8,000
Depreciation expense 32,000
Taxes and licenses 56,000
Bad debts expense 6,400
Interest expense 1,600
Miscellaneous expense 800
Total Expenses 384,800

PROFIT OF THE YEAR 375,200

Other comprehensive income ---------
Comprehensive Income of the Year 375,200
 Activity 3
a) Nature of expense method (single-step approach)

Ju Taime Co.
Statement of Comprehensive Income
For the period ended December 31, 20x1

INCOME
Sales 1,045,000
Interest income 80,000
Gains 30,000
Total Income 1,155,000

EXPENSES
Net purchase (a) 288,000
Change in inventory (20,000)
Freight-out 25,000
Sales commission 60,000
Advertising expense 35,000
Salaries expense 350,000
Rent expense 60,000
Depreciation expense 80,000
Utilities expense 40,000
Supplies expense 30,000
Transportation and travel expense 25,000
Insurance expense 10,000
Taxes and license 50,000
Interest expense 5,000
Miscellaneous expense 2,000
Loss on sale of equipment 15,000
Total Expenses 1,055,000

PROFIT FOR THE YEAR 100,000

Other comprehensive income ---------
Comprehensive Income for the Year 100,000
 b) Function expense of method (Multi-step approach)

Ju Taime Co.
Statement of Comprehensive Income
For the period ended December 31, 20x21

Notes
Sales 1,045,000
Cost of sales 1 (268,000)
Gross Profit 777,000
Other income 2 110,000
Distribution costs 3 (487,500)
Administrative expenses 4 (524,500)
Other expense 5 (15,000)
Interest expense (5,000)
Profit for the year (145,000)
Other comprehensive income -
Comprehensive Income for the year (145,000)

Chapter 5
Activity 1
1) True 6) False
2) False 7) True
3) False 8) True
4) True 9) False
5) True 10) False

Activity 2
Azim Repair Shop
Statement of Changes in Equity
December 31, 20x1

Azim, Capital-beg. 150,000

Additional investment 50,000
Drawings (15,000)
Profit 150,000
Azim, Capital-end 335,000

Activity 3
Ron Weasley Antique Shop
Statement of Changes in Equity
December 31, 20x1

Weasley, Capital-beg. 750,000

Additional investment 250,000
Drawings (50,000)
Incurred loss (450,000)
500,000
Chapter 6
Activity 1
1) OA 6) FA
2) OA 7) IA
3) FA 8) IA
4) FA 9) OA
5) OA 10) OA

Activity 2
Ju Taime Co.
Statement of Cash Flows
For the period ended December 31, 20x1

Cash flows from operating activities:

Cash receipts from sale of goods 1,160,000
Cash paid for purchases of inventory (240,000)
Cash paid for salaries expense (280,000)
Cash paid for rent expense (420,000)
Cash paid for utilities expense (40,000)
Net cash from operating activities 180,000

Cash flows from investing activities:

Cash paid for the acquisition of equipment (400,000)
Net cash used in investing activities (400,000)

Cash flows from financing activities:

Cash proceeds from loan borrowed 360,000
Cash proceeds from investment by owner 40,000
Cash payments to owner (120,000)
Net cash used in financing activities 280,000

Net increase in cash 60,000

Cash, beginning balance 40,000
Cash, ending balance 100,000
 Activity 3
Ju Taime Co.
Statement of Cash Flows
For the period ended December 31, 20x1

Cash flows from operating activities:

PROFIT FOR THE YEAR 170,000
Non-cash items:
Depreciation 40,000
Gain on sale of equipment (40,000)
Total 170,000
Changes in operating assets & liabilities:
Increase in Trade and other receivables (70,000)
Decrease in inventory 90,000
Decrease in prepaid assets -
Increase in Trade and other payables 60,000
Increase in short-term borrowings 120,000
Net cash from operating activities 200,000

Cash flows from investing activities:

Cash proceeds from sale of equipment 140,000
Cash paid for the acquisition of equipment (300,000)
Net cash used in investing activities (160,000)

Cash flows from financing activities:

Cash receipts from investments of owner 50,000
Net cash used in financing activities 50,000

Net increase in cash and cash equivalents 300,000

Cash and cash equivalents, beginning 100,000
Cash and cash equivalents, ending 400,000