CHAPTER 6

For Ex. 4 Please change pro-forma to record purchase of business based on the solution (from the
viewpoint of buyer
EXERCISES March 15 March 31
1.a) Gross 30,000.00 P15,000.00 P15,000.00
Advances (1,000.00)
SSS ( 581.30)
PH ( 412.50)
Pag-ibig ( 100.00)
Total ded 1,093.80 ( 546.9) ( 546.90)
Taxable 28,906.20
Tax .20(28,906.2-20,833.33=P1,614.57 ( 807.29) ( 807.29)

Net Pay P13,645.81 P12,645.81

2. Semi-monthly
GrossPay SS PH HDMF Tax Advance Total Net Pay
Ted Flores P15,000 290.65 206.25 50.00 807.22 1,354.12 13,645.88
Rose Santos 10,000 290.65 137.50 50.00 500 1,170.65 8,829.35
Shirley Yu 12,000 290.65 165.00 50.00 215.47 721.12 11,278.88
Ben Chavez 7,500 272.50 137.50 50.00 460.00 7,040.00
P44,500 1,144.45 646.25 200.00 959.44 500 3,705.89 40,794.11

b) Employer's Share
SS HDMF EC PH
1,178.70 100.00 30 412.50
1.178.70 100.00 30 275.00
1.178.70 100.00 30 206,25
1,105.00 100.00 30 275,00
4,641.10 400.00 120

c) 1. Advance to Employees 500

Cash On Hand 500
2. Salaries 44,500
Withholding Taxes Payable 959.44
SS Premiums Payable 1,144.45
PH Premiums Payable 611.88
Pag-Ibig 200.00
Cash On Hand 40,972.36
3. Salaries 44,500
Withholding Taxes Payable 959.44
SS Premiums Payable 1,144.45
PH Premiums Payable 611.88
Pag-Ibig 200.00
Advances 500.00
Cash On Hand 40,472.36

3. SSS Premiums Expense 4,641.10

Medicare Premiums Expense 1,306.25
EC Premiums Expense 120.00
Pag-Ibig 400.00
SSS Premiums Payable 4,641.10
PH Premiums Payable 1,306.25
EC Premiums Payable 120.00
Pag-Ibig Premiums Payable 400.00
d) Withholding Taxes Payable 959.44
Cash In bank 959.44
EC Premiums Payable 120.00
SS Premiums Payable 6,930.00
Cash On bank 7,050.00

PH Premiums Payable 4,895

Cash On Hand 4,895
Pag-Ibig Premiums Payable 800
Cash On hand 800

41
3. June 1 Cash In Bank 150,000

42
 Cash On Hand 50,000
Ahmad, Capital 200,000
2 Equipment 55,000
Accounts Payable 25,000
Ahmad, Capital 30,000
5 Furniture & Fixtures 10,000
Ahmad, Capital 10,000
Dec. 8 Ahmad, Drawings 2,250
Accumulated Depreciation 250
Equipment 2,500
4. a) P475,000 – P150,000= P325,000
b) P350,000 against P325,000 = Yes

c) Equipment 300,000
Raw Materials 25,000
Franchise 100,000
Furniture & Fixtures 50,000
Accounts Payavle 150,000
Pena, Capital 325,000

5. Gross Price P750,000

Less Discount ( 15,000)
735,000
Assembly 150,000
Platform 25,000
Total P910,000
6. Machine 750,000
Accounts Payable 750,000
Accounts Payable 750,000
Machine 15,000
Cash In Bank 735,000
Machine 175,000
Cash In Bank 175,000
Repair Expense 3,500
Cash in Bank 3,500
7. Cash On Hand 1.200,000
Accum Depn 273,000
Machine 910,000
Gain 563,000

8. Land 1,500,000
Mortgage Payable 500,000
Cash in Bank 1,000,000

Land 20,000
Cash on Hand 20,000

9. a) Machine (30,000x40.5) 1, 215,000

Cash In Bank 405,000
Accounts Payable 810,000
b) Machine 105,000
Cash On Hand 105,000
c) Accounts Payable 810,000
Cash 805,000
Gain from Foreign Exchange 5,000

10. a) 1. Isaiah Evangelista 3. P8,500 4. P8,691.25

2. Ever Bright 5. 18% P191.25 6. 45 days

b) Notes Receivable 8,500

Service Income 8,500
Cash 8,691.25
Notes Receivable 8,500.00
Interest Income 191.25
c) Expense 8,500
Notes Payable 8,500
Notes Payable 8,500.00
Interest Expense 191.25
Cash 8,691.25
43
11. A B C D
Maturity Date July 16 June 8 Aug. 27 Dec 15
Term 60 days 45 days 75 days 60 days
Interest P 200.00 P750.00 P375.00 P150
Maturity Value 8,200.00 50,750.00 10,375 P15,150
Interest Rate 15% 12% 18% 6%

12. Books of Air Manila Books of Decena

12/15 Repairs & Maintenance 15,000 Notes Receivable 15,000
Notes Payable 15,000 Service Income 15,000
Cash 15,150
2/13 Notes Payable 15,000 Interest Income 150
Interest Expense 150 Notes Receivable 15,000
Cash 15,150
13.
CTC Bank: Books of Master Work
4/24 Notes Receivable 50,000 Cash 49,250
Cash 49,250 Interest Expense 750
Interest Income 750 Notes Payable 50,000
6/8 Cash 50,000 Notes Payable 50,000
Notes Receivable 50,000 Cash 50,000

14.
Equipment 14,250
Accounts Payable 14,250
Equipment 1,200
Cash On Hand 1,200
Accounts Payable 1,500
Equipment 1,500
Accounts Payable 12,750
Notes Payable 12,750
Notes Payable 12,750
Interest Expense 63.75
Cash In Bank 12,813.75
15. Cash 9,500
Accounts Receivable 1,500
Service Income 11,000

Taxes Expense 330

Cash In Bank 330
(11,000x3%)

PROBLEMS
1.
Payroll Sheet
From March 1 to 15, 2018

Position Gross W/ Tax SS PH HDMF Total Ded Net Pay

Helper 4,000 145.35 68.75 50.00 3,861.90
Helper 4,000 145.35 68.75 50.00 3,861.90
Helper 4,000 145.35 68.75 50.00 3,861.90
Helper 4,000 145.35 68,75 50.00 3,861.90
Helper 4,000 145.35 68,75 50.00 3,861.90
Helper 4,000 145.35 68,75 50.00 3,861.90
Lota- Sec-Bkkeeper 4,750 172.60 68,75 50.00 4,458.65
Morris-Technician 4,750 172.60 68,75 50.00 4,458.65
Norlan- teller 4,750 172.60 68,75 50.00 4,458.65

38,250.00 1,389.90 618.75 450.00 2,458.65 36,547.35

44
 Payroll Sheet
From March 16 to 31, 2018

Position Gross W/ Tax SS PH HDMF Advances Net Pay

Helper 4,000 145.35 68.75 50.00 3,861.90
Helper 4,000 145.35 68.75 50.00 3,861.90
Helper 4,000 145.35 68.75 50.00 3,861.90
Helper 4,000 145.35 68,75 50.00 3,861.90
Helper 4,000 145.35 68,75 50.00 3,861.90
Helper 4,000 145.35 68,75 50.00 3,861.90
Lota- Sec-Bkkeeper 4,750 172.60 68,75 50.00 1,500.00 2,958.65
Morris-Technician 4,750 172.60 68,75 50.00 4,458.65
Norlan- teller 4,750 172.60 68,75 50.00 4,458.65

38,250.00 1,389.90 618.75 450.00 1,500.00 35,047.35

2. a) Mar 1 Amusement Rides 3,000,000

Descalzo, Capital 2,500,000
Mortgage Payable 500,000
2 Cash In Bank 200,000
Cash On Hand 50,000
Descalzo, Capital 250,000
3 Equipment 100,000
Notes Payable 100,000
Equipment 1,120
Cash On Hand 1,120
5 Advertising Expense 20,000
Cash On Hand 20,000
12 Cash On Hand 10,000
Accounts Receivable 10,000
Rental Income 20,000
13 Cash On Hand 10,000
Accounts Receivable 10,000
Rental Income 20,000
14 Cash On hand 25,000
Ticket Sales 25,000
15 Cash In Bank 45,000
Cash On Hand 45,000
16 Salary Expense Refer to payroll 38,250.00
SS Premiums Payable
PH Premiums Payable
Pag-Ibig Premiums Payable
Cash In Bank 36,547.35
17 Cash On Hand 22,000
Ticket Sales 22,000
18 Accounts Receivable 10,000
Cash On Hand 10,000
Rental Income 20,000
20 Cash On Hand 5,000
Notes Receivable 5,000
Accounts receivable 10,000
23 Notes Payable 100,000
Interest Expense 889
Cash In Bank 100,889
24 Advances to Employees 1,500
Cash On Hand 1,500
25 Utility Expense 10,500
Cash In Bank 10,500
26 Cash On Hand 10,000
Accounts Receivable 10,000
27 Cash On Hand 10,000
Accounts Receivable 10,000
28 Rent Expense 10,000
Cash In Bank 10,000
30 Cash On Hand 5,016.67
Notes Receivable 5,000.00
Interest Income 16.67
Cash On Hand 28,000
Ticket Sales 28,000
45
 31 Salary Expense Refer to payroll 38,250.00
Advances
SS Premiums Payable
PH Premiums Payable
Pag-Ibig Premiums Payable
Cash In Bank 35,047.35

Customer: Wesleyan
Date Particulars F Debit Credit Balance
March 12 On account 10,000 10,000
27 Full 10,000 0
Customer: International School
Date Particulars F Debit Credit Balance
March 13 On account 10,000 10,000
20 Partial 5,000 5,000
20 10 days 12% note 5,000 0
Customer: St. Michael
Date Particulars F Debit Credit Balance
March 18 On account 10,000 10,000
26 Full 10,000 10,000

b) Accounts Receivable
3/12 10,000 3/20 10,000
13 10,000 26 10,000
18 10,000 27 10,000

c) Employer's Contribution
Names SS EC HDMF PH
A 589.30 10 100.00 137.50
B 589.30 10 100.00 137.50
C 589.30 10 100.00 137.50
D 589.30 10 100.00 137.50
E 589.30 10 100.00 137.50
F 589.30 10 100.00 137.50
Lota 699.80 10 100.00 137.50
Morris 699.80 10 100.00 137.50
Norlan 699.80 10 100.00 137.50

5,005.20 90 900.00 1,237.5

SS Premium Expense 5,005.20

PH Premium Expense 1,237.50
EC Premium Expense 90.00
Pag-ibig Premium Expense 900.00
SS Premiums Payable 5,005.20
PH Premiums Payable 1,237.50
EC Premium Payable 90.00
Pag-ibig Premium Payable 900.00

SS Premiums Payable 7,785.0 0

EC Premium Payable 90.00
Cash in Bank 7,875.00

PH Premiums Payable 2,475.00

Cash in Bank 2,475.00

Pag-ibig Premium Payable 1,800.00

Cash In Bank 1,800.00

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3. Cash On Hand Cash In Bank Accounts Recble. Ticket Rent Inc. Salaries Sundry
Date Names Explanation Debit Credit Debit Credit Debit Credit Credit Credit Debit Account Title Debit
3/1 Descalzo Investment Amusement Rides 3,000,000
Mortgage Payable 500,000
Descalzo, Capital 2,500,000
2 Descalzo Investments 50,000 200,000 Descalzo, Capital 250,000
3 Electro Z 1,120 Equipment 101,120
5 Advertisement 20,000 Notes Payable 100,000
Advertising Expen 20,000
12 Wesleyan Rent of rides 10,000 10,000 20,000
13 Int'l. Rent of rides 10,000 10,000 20,000
School
14 Patrons Ticket Sales 25,000 25,000
15 Bank Deposit 45,000 45,000
Payroll 36,547.35 38,250 Pag Ibig Pay 450.00
17 Patrons Ticket Sales 22,000 22,000 SS Pay 1,389.90
PH Prem Pa 618.75
18 St.Michael Rental 10,000 10,000 20,000
20 Int’l. Shool Partial payment, 5,000 10,000 Notes Receivable 5,000
10 day 12% note
23 Electro Z Paid note 100,889 Notes Payable 100,000
Interest Expense 889.00
24 Employees Advances 1,500 Advances 1,500
25 PLDT Utilities 4,500 Utilities 10,500
Meralco 6,000
26 Wesleyan Collection 10,000 10,000
27 St. Collection 10,000 10,000
Michael
28 Rent 10,000 Rent Expense 10,000
30 Int’l. Paid note 5,016.67 Notes Receivable 5,000.00
Shool
Patrons Ticket sales 28,000 28,000 Interest Income 16.67
31 Employees Salaries 35,047.35 38,250 Advances from Emp 1,500.00
SS Premium Pay 1,389.90
PH Premium Pay 618.75
HDMF Pay 450.00

185,016.67 88,120 245,000 170,691.50 30,000 30,000 75,000 60,000 76,500.0 3,248,120 3,175,993.7
0

4.
. Taxes Expense (135,000 x 3%) 4,050
Cash In Bank 4,050

5. a) July 15 Notes Receivable 1,200,000

Cash In Bank 1,200,000
Notes Receivable 2,000,000
Cash In Bank 1,280,000
Interest Income 720,000
Sept. 13 Cash On Hand 2,000,000
Notes Receivable 2,000,000
Oct. 13 Cash On Hand 1,242,000
Notes Receivable 1,200,000
Interest Income 42,000
b) Victor Co.
July 15 Cash On Hand 1,200,000
Notes Payable 1,200,000
Oct 13 Notes Payable 1,200,000
Interest Expense 42,000
Cash On Hand 1,242,000
Kenneth Co.
July 15 Cash 1,280,000
Interest Expense 720,000
Notes Payable 2,000,000
Sept. 13 Notes Payable 2,000,000
Cash In Bank 2,000,000

6. Total gross earnings for the month of March (fill up the fourth week) are as follows:
1 2 3 4 Total
Steve P5,400 P5,475 P5,600 5,400 21,875
Rudy 3,800 3,750 3,500 3,300 13,850
Shirley 4,000 4,500 4,800 4,500 17,800

SS, PH, Pag-ibig are computed once at the end of the month and divided by 2:

47
 SS PH Pag Tax
Steve P21,600 581.3/2=290.65 594/2= 297/2=148.5 100/2= 50 none
Rudy 14,400 526.8/2=263.40 396/2= 198/2= 99 100/2= 50 none
Shirley 18,000 581.3/2=290.65 495/2= 247.5=123.75 100/2= 50 none

*SS and other contributions are based on monthly pay without regard to absences and overtime.
Author used a 24 day period for the month of March.

Tax is also based on monthly pay, but at the end of the year it will be adjusted based on actual
compensation as reported by employer and submitted using withholding tax form and Income Tax
Return. All gross pay less contributions for SS, PH, HDMF are below P20,833.33 monthly.

EAST CONSTRUCTION COMPANY

PAYROLL SHEET
WE HEREBY ACKNOWLEDGE receipt of the sum specified opposite our respective names as full compensation for our services rend
period March 1 to 15, 2018.

Names Position Gross Pay Withholding Social Philhealth HDMF Total Net Pay S
Tax Security Deductions

Steve 10,875.00 P - P 290.65 P 148.50 P 50.00 P489.15 P10,385.85

Rudy 7,550.00 - 263.40 99.00 50.00 412.40 7,137.60
Shirley 8,500.00 290.65 123.75 50.00 464.40 8,035.60
P26,925.00 P P 781.15 P371.25 P150.00 P1,365.95 P25,559.05

EAST CONSTRUCTION COMPANY

PAYROLL SHEET
WE HEREBY ACKNOWLEDGE receipt of the sum specified opposite our respective names as full compensation for our services rend
period March 16 to 31, 2018.

Names Position Gross Pay Withholding Social Philhealth HDMF Total Net Pay S
Tax Security Deductions

Steve 11,000.00 P - P 290.65 P 148.50 P 50.00 P489.15 P10,385.85

Rudy 6,800.00 - 263.40 99.00 50.00 412.40 7,137.60
Shirley 9,200.00 290.65 123.75 50.00 464.40 8,035.60
P27,000.00 P P 781.15 P371.25 P150.00 P1,365.95 P25,559.05

Schedule of employer’s contribution:

SS Philhealth EC HDMF
Steve P 1,178.70 P 297.00 P30.00 P100.00
Rudy 1,068.20 198.00 10.00 100.00
Shirley 1,178.70 247.50 10.00 100.00
P3,425.60 P 742.50 P50.00 P300.00
Based on this, an added entry will be prepared but only at the end of the month:
ENTRY
ANALYSIS DATE PARTICULARS DEBIT CREDIT

Decrease in owner's March 31 SS Premium Expense 3 425 60

equity contribution NHIP Premium Expense 742 50
expense of the EC Premium Expense 50 00
business, and increase HDMF Premium Expense 300 00
in liabilities due to the SS Premium Payable 3 425 60
NHIP Premium Payable 742 50
different agencies. EC Premium Payable 50 00
HDMF Premium Payable 300 00

CASE STUDY

Assets (45,000 + 135,000 + 3,000) P183,000

Liabilities (3,500 + 10,000 + 1,200) 14,700
Net Worth P168,300

48
1) Yes, if you consider other factors such as good location, steady and captured market, good
product, etc.
2) P168,300.

A Case of Business Ethics

There should be a document evidencing payroll receipt. This should be signed by the employees, be
it a pay slip or a payroll sheet. Deductions such as SS, PH and HDMF are required by law. This
practice may be manipulated by employer who insinuates that it is regularly remitted when it is not.
Employees’ salaries may not be reviewed or audited properly and manipulations such as ghost
employees and higher salaries than what they are receiving are possible. Sometimes employees find
it too late that they have been cheated. Employees must verify from agencies such as SS and the like
to verify whether the deductions are regularly remitted by their employer. Employees must go to the
Dept of Labor for guidance and proper advice.

49