TAYABAN, Vangeline B.

Assignment/Quiz August 8, 2023

“Lancer Company”

Determine the Capital Balance at the beginning and end of the year.

December 31 January 01
Assets:
Cash ₱ 1,600,000 ₱ 1,200,000

Notes receivable 1,200,000 400,000

Accounts receivable 2,000,000 1,600,000

Inventory 960,000 1,600,000

Equipment 1,120,000 1,200,000

Total ₱ 6,880,000 ₱ 6,000,000

Liabilities:
Notes payable ₱ 480,000 ₱ 720,000

Accounts payable 1,040,000 1,200,000

Accrued interest
payable 40,000 80,000

Unearned rent income 40,000 120,000

Total ₱ 1,600,000 ₱ 2,120,000

Capital Balance ₱ 5,280,000 ₱ 3,880,000

Computing the net income using the single-entry formula for a proprietorship.

Capital Balance, end (5,280,000 - 3,880,000) ₱1,400,000

Add: Withdrawals 400,000

Less: Additional Investments (600,000)

Profit for the Period ₱1,200,000

The following computations are necessary for the presentation of the traditional income statement.

Computation of Sales
Notes receivable - December 31 ₱ 1,200,000
Accounts receivable - December 31 2,000,000
Collection of accounts receivable 3,000,000
Collection of notes receivable 960,000
Sales discounts 100,000
Sales returns 320,000
Accounts written off - bad debts 120,000
Total ₱ 7,700,000
Less: Notes receivable - January 1 400,000
Accounts receivable - January 1 1,600,000 2,000,000
Sales on accounts ₱ 5,700,000
Cash sales 800,000
Total sales ₱ 6,500,000

Computation of purchases
Notes payable - December 31 ₱ 480,000
Accounts payable - December 31 1,040,000
Payment of accounts payable 1,520,000
Payment of notes payable 1,280,000
Purchase allowances 80,000

Total ₱ 4,400,000
Less: Notes payable - January 1 720,000
Accounts payable - January 1 1,200,000 1,920,000
Purchases on accounts ₱ 2,480,000
Cash purchases 600,000
Total purchases ₱ 3,080,000

Computation of interest expense

Interest paid ₱ 160,000
Add: Accrued interest payable- December 31 40,000

Total ₱ 200,000
Less: Accrued interest payable - January 1 (80,000)

Interest Expense ₱ 120,000

Computation of rent income

Rent received ₱ 80,000
Add: Unearned rent income - January 1 120,000

Total 200,000
Less: Unearned rent income - December 31 (40,000)

Rent Income ₱ 160,000

Computation of gain on sale

Sale price ₱ 120,000
Less: Carrying amount of equipment sold (100,000)

Gain on sale of equipment ₱ 20,000

Computation of depreciation

Equipment - January1 ₱ 1,200,000

Add: Equipment acquired 400,000

Total ₱ 1,600,000
Less: Equipment - December 31 1,120,000
Carrying amount of equipment sold 100,000 1,220,000

Depreciation ₱ 380,000

Statement of Comprehensive Income – Accrual Basis

Lancer Company
Statement of Comprehensive Income
Year Ended December 31, 2023

Net Sales (Note 1) ₱ 6,080,000

Cost of goods sold (Note 2) 3,640,000

Gross income ₱ 2,440,000

Other income (Note 3) 180,000

Total income ₱ 2,620,000

Expenses:
Expenses 800,000
Depreciation 380,000
Bad debts 120,000
Interest expense 120,000 1,420,000

Profit for the Period ₱ 1,200,000

Note 1- Net sales

Sales ₱ 6,500,000
Sales discount (100,000)
Sales returns (320,000)
Net sales ₱ 6,080,000

Note 2- Cost of goods sold

Inventory - January 1 ₱ 1,600,000
Purchases 3,080,000
Purchase allowances (80,000) 3,000,000

Goods available for sale ₱ 4,600,000

 Inventory - December 31 (960,000)

Cost of goods sold ₱ 3,640,000

Note 3 - Other income

Rent income ₱ 160,000
Gain on sale of equipment 20,000

Total other income ₱ 180,000

Statement of Financial Position – Lancer Company

Lancer Company
Statement of Financial Position
Year Ended December 31, 2023

Assets
Current assets:
Cash ₱ 1,600,000
Notes receivable 1,200,000
Accounts receivable 2,000,000
Inventory 960,000 ₱ 5,760,000
Noncurrent asset:
Equipment 1,120,000

Total Assets ₱ 6,880,000

Liabilities and Equity
Current liabilities:
Notes payable ₱ 480,000
Accounts payable 1,040,000
Accrued interest payable 40,000
Unearned rent income 40,000 ₱ 1,600,000

Equity
Capital - January 1 ₱ 3,880,000
Add: Net income 1,200,000
Additional investment 600,000
Total ₱ 5,680,000
Less: Withdrawals 400,000 5,280,000

Total Liabilities and equity ₱ 6,880,000