LOMA, ABIGAIL JOY C.

BSACC 1-YA-1

FINANCIAL ACCOUNTING AND REPORTING

PROBLEM 1:
1. FALSE
2. FALSE
3. TRUE
4. TRUE
5. FALSE
6. FALSE
7. TRUE
8. TRUE
9. FALSE
10. TRUE

PROBLEM 2:

ACCOUNT TITLE DEBIT CREDIT

1 Advertising Expense ₱ 200,000.00
Advertising payable ₱ 200,000.00
2 Interest receivable (180k x 10% x 2/12) ₱ 3,000.00
Interest income ₱ 3,000.00
3 Depreciation expense ₱ 4,375.00
Accumulated depreciation ₱ 4,375.00
4 Bad debts expense ₱ 45,000.00
Allowance for bad debts ₱ 45,000.00

5. Solutions:
Requirements a:

Liability method Income method

May 1, 20x1 May 1, 20x1
Cash ₱ 480,000 Cash ₱ 480,000
Unearned rent ₱ 480,000 Rent income ₱ 480, 000
To record of 1-year rent in advance. To record the receipt of 1 year rent in
advance.
Requirements b:

Liability method Income method

Dec. 31, 20x1 Dec 31, 20x1
Unearned rent ₱ 320,000 Rent income ₱ 480,000
Rent income ₱ Unearned rent ₱ 480, 000
320,000 To recognized the unearned portion of
To recognized the earned portion of the the 1-year rent in advance.
1-year rent in advance.
 (₱ 480,000 X 8/12) = ₱ 320,000
 (₱ 480,000 X 4/12) = ₱ 320,000
6. Solutions:
Requirements a:

Asset method Expense method

Aug. 1, 20x1 Aug. 1, 20x1
Prepaid insurance ₱ 360,000 Insurance expense ₱ 360,000
Cash ₱ 360,000 Cash ₱ 360,
To record the prepayment of 1-year 000
insurance. To record the prepayment of 1-year
insurance.
Requirements b:

Asset method Expense method

Dec. 31, 20x1 Dec 31, 20x1
Insurance expense ₱ 150,000 Prepaid insurance ₱ 210,000
Prepaid insurance ₱ Insurance Expense ₱ 210,
150,000 000
To recognized the expired portion of the To recognized the expired portion of the
1-year insurance. 1-year insurance.
 (₱ 360,000 X 5/12) = ₱ 150,000
 (₱ 360,000 X 7/12) = ₱ 210,000

PROBLEM 3:

ACCOUNT TITLE DEBIT CREDIT

1 Interest Expense ₱ 31,500.00
Interest payable ₱ 31,500.00
2 Utilities expense ₱ 32,000.00
Utilities payable ₱ 32,000.00
3 Rent expense ₱ 22,000.00
Rent payable ₱ 22,000.00
4 Rent receivable (400k x 2months) ₱ 8,000.00
Rent Income ₱ 8,000.00
5 Bad debts expense (400k x 5%) ₱ 20,000.00
Allowance for bad debts ₱ 20,000.00
6 Depreciation expense ₱ 500,000.00
Accumulated depreciation ₱ 500,000.00

7. Solutions:
Requirements a:

Liability method Income method

Nov 1, 20x1 Nov 1, 20x1
Cash ₱ 720,000 Cash ₱ 720,000
Unearned income ₱ Rent income ₱ 720,000
720,000 To record of receipts of advanced royalty
To record of receipts of advanced income.
royalty income.
Requirements b:

Liability method Income method

Dec. 31, 20x1 Dec 31, 20x1
 Unearned income ₱ 560,000 Royalty income ₱ 160,000
Royalty income ₱ Unearned income ₱ 160, 000
560,000 To recognized the unearned portion of
To recognized the earned portion of the the 1 advanced royalty.
advanced royalty.
 ₱ 560,000 earned portion
 (₱ 720,000 – 560,000) = ₱ 160,000 unread portion
8. Solutions:
Requirements a:

Asset method Expense method

Oct. 31, 20x1 Oct. 31, 20x1
Prepaid insurance ₱ 360,000 Insurance expense ₱ 360,000
Cash ₱ 360,000 Cash ₱ 360,
To record the prepayment of 1-year 000
insurance. To record the prepayment of 1-year
insurance.
Requirements b:

Asset method Expense method

Dec. 31, 20x1 Dec 31, 20x1
Insurance expense ₱ 60,000 Prepaid insurance ₱ 300,000
Prepaid insurance ₱ Insurance Expense ₱ 300,
60,000 000
To recognized the expired portion of the To recognized the expired portion of the
1-year insurance. 1-year insurance.
 (₱ 360,000 X 2/12) = ₱ 60,000
 (₱ 360,000 X 10/12) = ₱ 300,000

PROBLEM 4:

ACCOUNT TITLE DEBIT CREDIT

1 Interest Expense (400kx14%x7/12) ₱ 32,666.67
Interest Income ₱ 32,666.67
2 Salaries expense ₱ 46,000.00
Salaries payable ₱ 46,000.00
3 Utilities expense ₱ 16,000.00
Utilities payable ₱ 16,000.00
4 Rent expense ₱ 240,000.00
Rent payable ₱ 240,000.00
5 Depreciation expense ₱ 110,000.00
Accumulated Depreciation ₱ 110,000.00
6 Bad debts expense ₱ 30,000.00
Allowance for bad debts ₱ 30,000.00

7. Solutions:
Requirements a:

Liability method Income method

 June 1, 20x1 Nov 1, 20x1
Cash ₱ 360,000 Cash ₱ 360,000
Unearned rent ₱ 360,000 Rent income ₱ 360,000
To record of receipts of 1-year rent in To record of receipts of 1-year rent in
advance. advance.
Requirements b:

Liability method Income method

Dec. 31, 20x1 Dec 31, 20x1
Unearned income ₱ 210,000 Royalty income ₱ 150,000
Royalty income ₱ Unearned income ₱ 150, 000
210,000 To recognized the unearned portion of
To recognized the earned portion of the the 1-year rent in advance.
1-year rent in advance
 (₱ 360,000 x 7/12) = ₱ 210,000
 (₱ 360,000 x 5/12) = ₱ 150,000
8. Solutions:
Requirements a:

Asset method Expense method

Sept. 1, 20x1 Sept. 1, 20x1
Prepaid insurance ₱ 360,000 Insurance expense ₱ 360,000
Cash ₱ 360,000 Cash ₱ 360,
To record the prepayment of 1-year 000
insurance. To record the prepayment of 1-year
insurance.
Requirements b:

Asset method Expense method

Dec. 31, 20x1 Dec 31, 20x1
Insurance expense ₱ 120,000 Prepaid insurance ₱ 240,000
Prepaid insurance ₱ Insurance Expense ₱ 240,
120,000 000
To recognized the expired portion of the To recognized the expired portion of the
1-year insurance. 1-year insurance.
 (₱ 360,000 X 4/12) = ₱ 120,000
 (₱ 360,000 X 8/12) = ₱ 240,000

PROBLEM 5:

ACCOUNT TITLE DEBIT CREDIT

1 Salaries Expense [25employees x ₱ 90,000.00
(600x2)x3days] ₱ 90,000.00
Salaries payable
2 Interest expense (1Mx10%x5/12) ₱ 41,666.67
Interest income ₱ 41,666.67
3 Interest expense (350kx12%x8/12) ₱ 28,000.00
Interest payable ₱ 28,000.00
4 Utilities expense ₱ 13,000.00
 Utilities payable ₱ 13,000.00
5 Depreciation expense [(1.6M/5yrs)x9/12] ₱ 240,000.00
Accumulated depreciation ₱ 240,000.00
6 Prepaid supplies (34k-8k) ₱ 26,000.00
Prepaid Supplies ₱ 26,000.00
7 Prepaid supplies ₱ 8,000.00
Supplies expense ₱ 8,000.00
8 Bad debts expense (340k x 3%) ₱ 10,200.00
Allowance for bad debts ₱ 10,200.00