ANSWER KEY

The account balances for Villash Corp. as of December 31, 2003 follow: Accounts payable - P100,000; Accounts receivable - P120,000; Building - P400,000; Capital stock P760,000; Cash - P60,000; Equipment - P160,000; Land - P50,000; Notes payable - P280,000; Retained earnings - P100,000 In a trial balance prepared on December 31, 2003, the sum of the debit column is: a. P860,000 b. P1,440,000 c. P790,000 d. P1,240,000

Tom, a partner in TJ Partnership, has a 30% share in the partnerships profit and loss. His capital account had a net decrease of P60,000 in year 2. In year 2, he withdrew P130,000 from the partnership against his capital and invested property, valued at P25,000, in the partnership. The net income of the partnership in year 2 is a. P150,000 c. P350,000 b. P233,333 d. P550,000

1. A balance sheet for the partnership of Susan, Myrna and May, who share profits in the ratio of 50:25:25, shows the following balance just before liquidation: Cash P162,000 Susan, capital P297,000 Other assets 803,250 Myrna, capital 209,250 Liabilities 270,000 May, capital 189,000 On the first month of liquidation, certain assets are sold for P432,000. Liquidation expenses of P13,500 are paid, and additional liquidation expenses are anticipated. Liabilities are paid amounting to P72,900 and sufficient cash is retained to insure the payment to creditors before making payments to partners. On the first payment to partners, Susan receives P84,375. The amount of cash withheld for anticipated liquidation expenses is: a. P0 b. P237,600 c. P197,100 d. P40,500 2. The partnership agreement of Paul, Simon and Peter provides for the division of net income as follows: Simon, who manages the partnership is to receive an annual salary of P120,000. Each partner is to be allowed interest at 10% on ending capital. Balance is to be divided 40:25:35. During 2008, Paul invested an additional P90,000 in the partnership. Simon made an additional investment of P75,000 and withdrew P110,000 and Peter withdrew P60,000. No other investments or withdrawals were made during 2008. On January 1, 2008, the capital balances were Paul, P300,000; Simon, P410,000; and Peter, P220,000. Total

capital at year-end was P600,000. Compute the capital balance of each partner at yearend: Paul Simon Peter a. (P176,000) P948,125 (P172,125) b. 214,000 410,250 24,250 c. 214,000 398,125 ( 12,125) d. 390,000 375,000 ( 165,000) 3. The balance sheet as of September 30, 2008, for the partnership of Diana, Elma and Flora shows the following information: Assets P180,000 Diana, loan P 10,000 Diana, capital 41,500 Elma, capital 38,500 Flora, capital 90,000 Total P180,000 Total P180,000 It was agreed among the partners that Diana retires from the partnership, and it was also further agreed that the assets should be adjusted to their fair value of P172,500 as of September 30, 2008. Net loss prior to the retirement of Diana amounted to P35,000. The partnership is to pay Diana P31,000 cash for Dianas partnership interest, which would include the payment of her loan. No goodwill is to be recorded. Diana, Elma and Flora share profit 40%, 15% and 45%, respectively. After Dianas retirement, how much would Floras capital balance be? a. P33,000 b. P73,500 c. P68,250 d. P92,625

The trial balance of ANN CO., prior to the closing of its account for the fiscal year ended September 30, 2006 follows: Cash Accounts receivable Allowance for doubtful accounts Note receivable Merchandise inventory, 9/30/02 Furniture and equipment Accumulated depreciation Goodwill Accounts payable Notes payable Capital Stock Retained Earnings Sales Sales return and allowances Purchases Purchase return and allowances Advertising Sales salaries P22,500 93,600 15,500 56,890 61,800 30,000 P 3,190

18,750 53,600 10,000 100,000 55,250 372,000 3,650

4,760 215,930 9,610 28,850

Commission expense Miscellaneous expense Rent expense Office salaries Light and Water Insurance expense Taxes and licenses General expense Interest expense Interest income

15,200 2,990 13,000 19,720 1,500 1,080 4,780 16,340 4,120

910

Your examination of the companys account has the need for adjustments based on the following items: a. The cash account included a customers check for P1,500 deposited on September 25, 2006 but returned by the bank on September 29, 2006 for lack of countersignature. No entry was made for the returned check. b. Unrecorded bank charge for September 2006, P500 c. The allowance for doubtful accounts should be adjusted to 5% of the outstanding accounts receivable balance on September 30, 2006. d. A physical inventory of merchandise taken at the end of the fiscal year 2006 amounted to P60,120. e. Goods received on consignment, still unsold costing P2,000 were included in the physical inventory. f. The merchandise inventory on September 30, were correctly stated.

g. Depreciation of furniture and equipment at 10% annually has not been recognized. h. Accrued salesmens salaries not recorded P5,000 i. j. An insurance policy was taken on the inventory and equipment on March 1, 2006 with the annual insurance premium of P1,080 paid on that date. Rent expense account considered of rent for the store and office space for thirteen months starting August 1, 2006.

Based on the aforementioned data, answer the following questions; 1. The adjusting entry on item A is a. Cash 1,500 Accounts receivable 1,500 b. Accounts payable 1,500 Cash 1,500 c. Accounts receivable 1,500 Cash 1,500 d. No adjustment

2. The adjusting entry on item B is a. Cash Accounts receivable b. Cash 500 General expenses c. General Expenses 500 Cash d. No adjustment

500

500 500 500

3. The adjusting entry on item C is a. Accounts receivable 4,680 Allowance for Doubtful Accounts b. Doubtful Accounts 1,565 Allowance for Doubtful Accounts c. Allowance for Doubtful Accounts 1,490 Doubtful Accounts d. Doubtful Accounts 1,490 Allowance for Doubtful Accounts 4. The adjusting entry on item D is a. Merchandise Inv. 60,120 Income Summary b. Merchandise Inv. 60,120 Purchases c. Income summary 60,120 Merchandise inventory d. No adjustment 5. The adjusting entry on item E a. Income summary Merchandise Inv. b. Sales Merchandise Inv. c. Merchandise inventory Income summary d. No adjustment 2,000 2,000 2,000

4,680 1,565 1,490 1,490

60,120 60,120 60,120

2,000 2,000 2,000

6. The adjusting entry on item F is a. Merchandise Inv. 56,890 Income summary b. Merchandise Inv. 56,890 Purchases c. Income summary 56,890 Merchandise inventory d. No adjustment 7. The adjusting entry on item G is a. Depreciation Exp. 6,180 Accumulated Depreciation b. Accumulated Depreciation 6,180 Furniture and Equipment c. Accumulated depreciation 6,180

56,890 56,890 56,890

6,180 6,180

Depreciation expense d. No adjustment 8. The adjusting entry on item H is a. Accrued Salaries Expense 5,000 Sales salaries b. Accrued salaries exp. 5,000 Office salaries c. Office salaries 5,000 Depreciation expense d. Sales salaries 5,000 Accrued salaries expense 9. The adjusting entry on item I is a. Insurance Exp. 630 Prepaid insurance b. Prepaid insurance 630 insurance exp. c. Insurance expense 450 Prepaid insurance d. Prepaid insurance 450 Insurance expense 10. The adjusting entry on item J is a. Rent expense 11,000 Prepaid rent b. Prepaid rent 2,000 Rent expense c. Prepaid rent 11,000 Rent expense d. Rent expense 2,000 Prepaid rent

6,180

5,000 5,000 5,000 5,000

630 630 450 450

11,000 2,000 11,000 2,000

After making the adjustments compute the following: 11. Cash a. P24,000 b. P21,000 c. P20,500 c. P88,920 d. P20,000 d. P88,845 d. P58,120 d. 36,890 d. P262,700 d. P212,280

12. Net realizable value of accounts receivable a. P90,410 b. P90,345

13. Merchandise inventory, September 30, 2006 a. P60,120 b. P56,890 c. P62,120 14. Furniture and Equipment, net of accumulated depreciation a. P55,620 b. P36,870 c. P36.700 15. Total assets, September 30, 2006 a. P262,785 b. P250,845 16. Cost of goods sold, September 30, 2006 a. P211,050 b. P210,050 c. P223,850 c. P212,300

17. Net income, September 30, 2006 (disregard tax effect) a. P31,635 b. P31,625 c. P38,935 18. Prepaid insurance a. P630 19. Prepaid rent a. P11,000
Answer: 1. C 2. C 11. C 12. B 3. B 13. D 4. A 14. B

d. P38,115 d. P600 d. P10,000

10. C

b. P450 b. P2,000
5. A 15. A 6. D 16. A 7. A 17. D

c. P1,080 c. P13,000
8. D 18. B 9. D 19. A

You are given the following closing entries of PASS NOW, INC.: Entry 1 Interest Revenue Accounts Payable Capital Stock Sales Entry 2 Income Summary Income Summary Gain on Sale of Land Cost of Goods Sold Accounts Receivable Operating Expense Other Assets

4,700 1,900 10,000 45,000 61,600 48,700 3,000 32,000 12,000 4,200 3,500 12,900 12,900

Entry 3

Income Summary Retained Earnings The properly computed net income is a. P11,800 b. P8,800

c. _P12,900

d. P16,500

The CASH account of Don Corporations ledger on December 31, 2006 showed the following: a. Petty cash fund (including P7,500 unreplenished voucher of which P2,400 is dated January 3, 2007) P Redemption Fund Account PNB Travelers check Money order Treasury bill, purchased December 1, 2006 (due on Feb. 1, 2007) Time deposit due on March 31, 2007 180-day Treasury bill, due March 15, 2007 Note receivable in the possession of a collecting agency PNB Checking Account #211-009-091 Cash on hand, including customer postdated check of P15,000 Savings deposit, earmarked for acquisition of equipment l. A check payable to San Ignacio Incorporated, dated January 5, 2007, that was included in the December 31 PNB Checking Account #211-009-091 m. Bond Sinking Fund (used to finance the maturing long-term obligation on March 31, 2007) 15,000 500,000 100,000 10,000 50,000 50,000 120,000 20,000 325,900 23,000 210,000 50,000 150,000

b. c. d. e. f. g. h. i. j. k.

n. Overdraft in PNB Checking Account #211-099-085 o. Check #801 in payment to Accounts Payable, dated Dec. 31, 2006 not mailed until January 5, 2007 p. Advances to Officers/Employees for Seminars (no liquidation is required) q. Money market placement (due June 30, 2007) r. Listed stock held as temporary investment s. Check #789 in payment to Suppliers, dated January 5, 2007 and recorded December 31, 2006. t. Customers certified checks u. Pension Fund TOTAL Questions 1. The entry to correct/adjust item F is: a. Investment 50,000 Cash b. Other assets 50,000 Cash c. Short-term investment 50,000 Cash d. No adjustment 2. The entry to correct/adjust item L is: a. Accounts payable 50,000 Cash b. Cash 50,000 Other liabilities c. Cash 50,000 Accounts payable d. No adjustment 3. The entry to correct/adjust item M is: a. Investment 150,000 Cash b. Other assets 150,000 Cash c. Short-tem investment 150,000 Cash d. No adjustment

( 50,000) 20,000 80,000 600,000 100,000 35,000 10,000 150,000 2,568,900

50,000 50,000 50,000

50,000 50,000 50,000

150,000 150,000 150,000

4. DON CORPORATIONS cash and cash equivalents balance at December 31, 2006 is: a. Overstated by P1,950,100 c. Overstated by P 1,845,100 b. Overstated by P 1,895,100 d. Overstated by P 1,795,100 5. DON CORPORATIONS adjusted cash and cash equivalents balance at December 31, 2006 is: a. P 618,800 b. P 623,800 c. P 673,800 d. P 723,800
Solution a. b. Operating expenses Cash Investment 5,100 500,000 5,100

c.

No d. e. f. g. h. i. j. k. l. m. n. o. p. q. r. s. t. u.

Cash adjustment No adjustment No adjustment No adjustment Short-term investment Cash Notes receivable Cash No adjustment Accounts receivable Cash Cash restricted Cash No adjustment Investment current Cash No adjustment No adjustment Operating expenses Cash Short-term investment Cash Short-term investment Cash No adjustment No adjustment Investment Cash 2. D

500,000

120,000 20,000 15,000 210,000 150,000 150,000 80,000 600,000 100,000 80,000 600,000 100,000 150,000 150,000 3. C 4. A 5. A 120,000 20,000 15,000 210,000

Answer: 1. D

Problem 16 The following information pertains to the cash of Jenny Company: Balance shown on bank statement Balance shown in general ledger before reconciling the bank account Outstanding checks Deposits in transit Deposits shown in bank statement Charges shown on bank statement Cash receipts shown in companys books Cash payments shown in companys books Nov 31 P 27,380 25,780 8,630 6,850 For Dec. P 55,880 56,300 53,980 54,760 Dec. 31 P 26,960 25,000 10,150 12,450

The bank service charge was P180 in November (recorded by the company during December) and P240 in December (not yet recorded by the company). Included with the December bank statement was a check for P5,000 that had been received on December 25 from a customer on account. The returned check marked NSF by the bank, has not yet been recorded on the companys books. During December the bank collected P7,500 of bond interest for the company and credited the proceeds to the companys account. The company earned the interest during the current accounting period but has not yet recorded it.

During December the company issued a check for P6,960 for equipment. The check, which cleared the bank during December, was incorrectly recorded by the company for P8,960. Questions 1. The adjusted cash receipts of JENNY COMPANY at December 31 is: a. P 61,480 b. P 53,980 c. P 50,280 d. P 46,480 2. The adjusted cash disbursements of JENNY COMPANY at December 31 is: a. P 63,980 b. P 61,980 c. P 57,820 d. P 54,780 3. In a proof of cash, the NSF check: a. Should be added in the December 31 column since this was returned back by the bank. b. Should be deducted in the December 31 column since this was returned back by the bank. a. Should be deducted in the December 31 column since this was returned back and not paid by the bank, thus not considered as receipts. b. Should be added in the December 31 column since this was returned back and not paid by the bank, thus not considered as receipts. 4. The adjusted December 31 cash balance of JENNY COMPANY is: a. P 29,760 b. P 29,260 c. P 27,260 5. The adjusted November 31 cash balance of JENNY COMPANY is: a. P 29,160 b. P 27,260 c. P 26,160 d. P 25,600 d. P 25,600

6. The check issued but was incorrectly recorded as P8,960 should be adjusted by: a. Accounts payable 2,000 c. Cash 2,000 Cash 2,000 Accounts payable 2,000 b. Equipment 2,000 d. Cash 2,000 Cash 2,000 Equipment 2,000
Solution Balance per book Service charge Nov. 30 - Dec. 31 NSF check Interest earned Book error Adjusted Balance Balance per bank Outstanding check Nov. - Dec. Deposit in transit - Nov - Dec Adjusted balance Adjusting entry Service charge Cash Accounts receivable Cash 240 240 5,000 5,000 Nov. 30 25,780 (180) Receipts 53,980 Disburs. 54,760 (180) 240 5,000 (2,000) 57,820 Disburs. 56,300 (8,630) 10,150 _________ 57,820 Dec. 31 25,000 (240) (5,000) 7,500 2,000 29,260 Dec. 31 26,960 (10,150) 12,450 29,260

__________ 25,600 Nov. 30 27,380 (8,630) 6,850 __________ 25,600

7,500 _________ 61,480 Receipts 55,880 (6,850) 12,450 61,480

Cash Interest income Cash Equipment Answer: 1. A

7,500 7,500 2,000 2,000 4. B 5. D 6. D

2. C

3. C