KEY TO CORRECTIONS

ACCOUNTING EXERCISES

Accounting Exercises Page 1

Analysis Accounts Affected

1 Increase in Asset Debit Cash

Increase in Capital Credit Owner, Capital

2 Increase in Asset Debit Cash

Increase in Revenue Credit Service Revenue

3 Increase in Expense Debit Salaries Expense

Decrease in Asset Credit Cash

4 Increase in Asset Debit Machinery and Equipment

Decrease in Asset Credit Cash

5 Increase in Withdrawal Debit Owner, Withdrawal

Decrease in Asset Credit Cash

6 Increase in Asset Debit Accounts Receivable

Increase in Revenue Credit Service Revenue

7 Increase in Asset Debit Cash

Decrease in Asset Credit Accounts Receivable

8 Increase in Asset Debit Supplies

Increase in Liability Credit Accounts Payable

9 Decrease in Liability Debit Accounts Payable

Decrease in Asset Credit Cash

10 Increase in Asset Debit Accounts Receivable

Increase in Revenue Credit Service Revenue

11 Increase in Expense Debit Utilities Expense

Decrease in Asset Credit Cash

12 Increase in Expense Debit Utilities Expense

Increase in Liability Credit Utilities Payable

13 Increase in Asset Debit Cash

Increase in Capital Credit Owner, Capital

14 Increase in Asset Debit Notes Receivable

Increase in Revenue Credit Service Revenue

15 Increase in Withdrawal Debit Owner, Withdrawal

Decrease in Asset Credit Cash

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Accounting Exercises Page 2

1 Liabilities = P390,000.00

Assets = Liabilities + Capital

950,000.00 = 390,000.00 + 560,000.00

2 Assets = P9,180,000.00

Assets = Liabilities + Capital

9,180,000.00 = 5,980,000.00 + 3,200,000.00

3 Creditors' Equity (Liabilities) = P2,730,000.00

Assets = Liabilities + Capital

10,670,000.00 = 2,730,000.00 + 7,940,000.00

4 Liabilities = P1,200,000.00

Assets = Liabilities + Capital

3,600,000.00 = 1,200,000.00 + 2,400,000.00
1 or 3/3 = 1/3 + 2/3

Since 2/3 divided by 2 = 1/3

P2,400,000.00 divided by 2 = P1,200,000.00

or

By using algebraic equation as follows:

Let: A = Assets, L = Liabilities, C = Capital

A=L+C
L = 1/3A
C = P2,400,000.00

Then:
A = 1/3A + P2,400,000.00
A - 1/3A = P2,400,000.00
where: A, which is also 1A, can be transformed into 3/3A since 3/3 = 1
3/3A - 1/3A = P2,400,000.00
2/3A = P2,400,000.00
A = P2,400,000.00 ÷ 2/3
A = P2,400,000.00 x 3/2
A = P3,600,000.00

L = 1/3A
L = P3,600,000.00 x 1/3
L = P1,200,000.00

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 5 Owner's Equity or Capital = P8,500,000.00 as at the end of the year

Assets = Liabilities + Capital

Beginning 11,000,000.00 = 6,000,000.00 + 5,000,000.00
During 3,000,000.00 = (500,000.00) + 3,500,000.00
Ending 14,000,000.00 = 5,500,000.00 + 8,500,000.00

6 Owner's Equity or Capital = P2,452,500.00 as at December 31

Assets = Liabilities + Capital

4,162,500.00 = 1,710,000.00 + 2,452,500.00

7 Owner's Equity or Capital = P1,130,000.00 as at the end of the year

Assets = Liabilities + Capital

Beginning 3,560,000.00 = 980,000.00 + 2,580,000.00
During (600,000.00) = 850,000.00 + (1,450,000.00)
Ending 2,960,000.00 = 1,830,000.00 + 1,130,000.00

8 Owner's Equity or Capital = P3,020,000.00 as at the beginning of the year

Assets = Liabilities + Capital

Beginning 4,700,000.00 = 1,680,000.00 + 3,020,000.00
During 750,000.00 = 300,000.00 + 450,000.00
Ending 5,450,000.00 = 1,980,000.00 + 3,470,000.00

Accounting Exercises Pages 3-4 Accounting Exercises Page 5

1 Expense 1 B
2 Financial Accounting 2 D
3 Cash 3 B
4 Auditing 4 B
5 Manufacturing Business 5 D
6 Merchandise Inventories
7 Friar Luca Pacioli
8 Capital or Owner's Equity
9 Assets
10 Prepaid Expenses
11 Financial Statements
12 Management Accounting
13 Mortgage Payable
14 Sales Revenue
15 Unearned Revenue
16 Notes to the Financial Statements
17 Accounts Receivable
18 Statement of Cash Flows
19 Investors and Stockholders
20 Partnership
21 Interim Financial Statements
22 Statement of Financial Position (Balance Sheet)
23 Merchandising Business
24 Statement of Changes in Owner's Equity
25 Accounting

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