CHAPTER 8

Exercise 1
1. G 8. A 16. B
2. D 9. H 17. F
3. B 10. A 18. G
4. F 11. G 19. H
5. A 12. G 20. B
6. G 13. A 21. B
7. C 14. B 22. B 2. ASSETS
15. A
Nominal Real 2)
Current
Exercise 2 Capital Statement: / Cash
Beg Capital P200,000
Additional investment 160,000
Drawings ( 5,000)
Capital before profit or loss P355,000
Ending Capital P420,000
Net Income P 65,000

2)
Statement of Financial Position: / Accounts Rec
Current Assets:
Cash P ? / Supplies
Accounts Receivable 75,000 / Total
Supplies 15,000 / Non-Current
Total P200,000 / Equipment
Non-Current Assets: / Total Assets
Equipment P160,000 / LIABILI
Car (450,000-150,000) 300,000 460,000

Total Assets P660,000 / Liabilities

LIABILITIES & EQUITY / Accounts Pay
Liabilities Non Current
Accounts Payable P40,000 Notes Payable
Non Current Total Liabilities
Notes Payable 200,000 Owner’s Capita
60
 Total Liabilities 240,000 Total Liabilities
Owner’s Capital (360-5,000= 420,000
355-420= profit 65,000)
Total Liabilities & Owner’s Equity P660,000

Exercise 3 requirements 3) and 4)

Current Assets
Cash P 7,000
Accounts Receivable 35,000
P 42,000
Land 110,000
Car (net of P60,000 depreciation) 120,000
P 130,000
Total Assets P272,000 – 166,000 known liabilities and capital= Notes Payable of 106,000

Accounts Payable 4,000

Interest Payable 2,000
Total Current Liabilities P112,000
Notes Payable 106,000
Green Capital (80 beg captl -50 drawings 160,000
+130 net income)
Total Liabilities and Capital P272,000

1)Bad Debts P5,000

Accounts Receivable P5,000

Depreciation Expense 60,000

Accumulated Depreciation 60,000

2) Cost principle for B and D. Also Going Concern for D. Objectivity may also be a supporting principle.

60
Exercise 4.

Company A Company B Company C Company D

December 31, 2017:
Assets………………… P50,000 P40,000 P30,000 P180,000
Liabilities………… 23,500 22,500 14,000 38,000
Equity P26,500 P17,500 P16,000 P142,000
December 31, 2018:
Assets……………… 53,000 44,000 P53,750* 250,000
Liabilities…………… 17,000* 27,500 25,000 64,000
Equity P36,000 P16,500 P28,750 P186,000

Supporting computation to solve the missing figures w/ asterisk(*):

Owner’s investments 5,000 1,500 7,750 38,000*
Net income (loss)…… 7,500 2,500* 9,000 12,000
Owner’s drawings (3,000) (5,000) (4,000) (6,000)
Beg Capital 2018 26,500 17,500 16,000 142,000
Ending Capital 2018 36,000 16,500 28,750 186,000

Exercise 5
a) Rental Fees Revenue P93,500
Interest Income 1,250
Gain on Sale of Car 15,000
Total Revenues P109,750
Total Expenses 12,250
Profit P97,500

b) 1. Rental Fees Revenue 90,000

Interest Revenue 1,250
Gain on Sale of Car 15,000
Income Summary 109,750
2. Income Summary 12,250
Advertising 800
Doubtful Accounts 2,200
Insurance Expense 8,000
3. Income Smmary 97,500
60
 Luna, Capital 97,500

4. Luna Capital 6,000

Luna Drawing 6,000

Income Summary Luna, Capital

2) 12,250 1) 109,750 4) 6,000 Beg Bal 750,000
3) 97,500 3) 97,500
Balance 841,500

Capital Statement
For the year ended December 31, 2018
Luna Capital, Beginning P750,000
Net Income 97,500
Luna, Drawings (6,000)
Luna Capital, Ending P841,500
Exercise 6
Billiard and Bowling Plaza
Income Statement
For the year ended December 31, 2018
Billiard Revenue P 50,000
Bowling Revenue 95,000
Total P145,000
Expenses:
Wages 28,000
Rent 22,000
Advertising 15,000
Utilities 14,400
Taxes 8,750
Depreciation 2,500
Supplies 2,250 92,900
Net Income P52,100
Billiard and Bowling Plaza
Capital Statement
For the year ended December 31, 2018
60
 Capital, Beginning P268,950
Net Income 52,100
Drawings (5,000)
Capital, Ending P316,050

Billiard and Bowling Plaza

Statement of Cash Flows
For the year ended December 31, 2018

Operation Revenues (145,000-25,000) P120,000

Expenses (92,900-5,000-2,500+2,750-3,700- 71,950 P 48,050
12,500)
Financing PNB Loan 60,000
Investment 268,950
Drawings (5,000) 323,950
Investing Acquisition of Furniture & Equipment
(250,000-28,000) (222,000) (222,000)
P150,000

Cash is correct at P150,000. It decreased because of the investing activities. To prove prepare a statement of financial position. Total Assets will be
P425,250 against liabilities and owner’s equity of P425,250.

Exercise 7.
Sure iPadala Services
Statement of Financial Position
Dec. 31, 2018
Current Assets: Current Liabilities
Cash P17,775 Accounts Payable P 10,000
Accounts Receivable 6,000 Accrued Expenses Note 2 3,500
Supplies 3,000 Notes Payable 400,000
Total 26,775 Payroll Liabilities 4.200
Total P417,700
Property, Plant and Equipment (Note 1) P545,000 Non Current Liabilities:
Bank Loan 50,000
Total Liabilities P467,700

Estrella, Capital 104,075

60
Total P571,775 Total P571,775

Note 1: Note 2: Accrued Expenses

Equipment P 60,000 Utilities Payable P1,500
Accumulated Depreciation 5,000 P 55,000 Interest Payable 2,000

Delivery Truck P500,000

Accumulated Depreciation 10,000 490,000

Total P545,000

Note 3: Payroll Liabilities

Withholding Tax P 650
SS Premiums 2,450
PH Premiums 500
HDMF Premiums 600
Total P4,200

Sure iPadala Services

Income Statement
For the year ended Dec. 31, 2018

Delivery Fee Revenues 230,000

Less Expenses
Rent 90,000
Salaries 75,000
Depreciation (note 4) 15,000
Other operating expenses (note 5) 47,500
Payroll Contributions (note 6) 1,925
Interest Expense 2,000
Total 231,425
Net Loss P 1,425

Note 4: Depreciation
Depreciation Expense-Equipment P 5,000
Depreciation -Truck 10,000
P15,000
60
 Supplies P35,000
Utilities 12,500
P47,500

Note 5: Payroll Contributions:

SS Premiums P 1,125
PH Premiums 500
HDMF Premiums 300
P1,925
Capital Statement:
Estrella Capital June 1 P120,000
Net Loss (1,425)
Drawings ( 14,500)
Estrella Capital Dec. 31 P 104,075

8. Collections from Delivery Fees (230,000 – 6,000) P224,000

Payment for Expenses: Rent P90,000
Salaries (75,000+ 1,925 -650-2,450-500- 72,725
600)
Supplies (35,000+3,000-10,000) 28,000
Utilities (12,500 – 1,500) 11,000 201,725
Cash flow from operation 22,275
Acquisition of equipment (60,000 – 20,000 investment) (40,000)
Acquisition of delivery truck (100,000)
Cash Flow from Investing (140,000)
Bank Loan P50,000
Investment 100,000
Drawings (14,500)
Cash Flow from Financing 135,500
Cash Balance, Dec. 31, 2016 P 17,775
9.
Service Fee Revenues 230,000
Income Summary P230,000

Income Summary 231,425

Rent 90,000
60
 Salaries 75,000
Supplies 35,000
Utilities 12,500
Depreciation Expense-Equipment 5,000
Depreciation –Truck 10,000
Interest Expense 2,000
SS Premiums 1,125
PH Premiums 500
HDMF Premiums 300
Estrella, Capital 1,425
Income Summary 1.425

Estrella, Capital 14,500

Estrella, Drawings 14.500
Estrella, Capital
CE 3 1,425 120,000
CE 4 14.500

10. Current Ratio 26,775/417,700= .064 Acid Test Ratio = 23,775/417,700= .0569
Sure iPadala Delivery is definitely not liquid.
Solvency = 417,700/571,775 = 73.05% debt ratio. There is no balanced financial structure. Very risky leaning more on creditors.
The business is losing and unprofitable.

11. and 12

Timothy Law Office

Income Statement
For the year ended Dec. 31, 2018
Total Revenues:
Legal Fees Revenue P668.00
Interest Income .5 P 668.5

Operating Expenses:
Bad Debts P7.00

60
 Depreciation 49.00
Rent 93.00
Supplies 27.00
Salaries 9.00
Taxes 20.04
Utilities 69.00
SS Premiums Expense 2.00
PH Premiums Expense 1.00
Pagibig Premiums Expense 1.00 278.04

Net Income P 390.46

Statement of Owner’s Equity

Timothy Beg Capital 175.00
Timothy Personal (16.00)
Net Income 390.46
Timothy ending Capital P549.46

Statement of Financial Position

Current Assets
Cash P186.00
Accounts Receivable 20.00
Notes Receivable 60.00
Interest Receivable .50
Office Supplies 12.00
Total P278.50
Furniture & Fixtures net of P9 acc depn P 56.00
Office Equipment net of P40 acc depn 240.00
Total 296.00
Total Assets P574.50

60
Current Liabilities:
Accounts Payable P 5
Unearned Legal Fees 7
Taxes 5.04
Payroll Liabilities 8
Total P 25.04
Timothy Capital 549.46
Total Liabilities & Owner’s Equity P574.50

Closing Entries:
Legal Fees Revenue P668.00
Interest Income .50
Income Summary P 668.50

Income Summary P 278.04

Bad Debts P 7.00
Depreciation 49.00
Rent 93.00
Supplies 27.00
Salaries 9.00
Taxes 20.04
Utilities 69.00
SS Premiums Expense 2.00
PH Premiums Expense 1.00
Pagibig Premiums Expense 1.00

Income Summary P 390.46

Timothy, Capital

Timothy Capital P 16.00

Timothy Personal P16,00

60
 ROE= 390.46/362.23 (175+549.46/2)= 107.8% against 8%
prime rate
Current Ratio: 278.5/25.04 = 11:1 very liquid
Profit Margin 390.46/668.5= 58%

13. a)
Subscription Revenue Unearned Subscription
12/31CE 238,000 12/31AE 238,000 12/31AE 238,000 Sept to
Nov 382,500

1/1/15 144,500
382,500/4,500 no of magazines subscribed (600 x 3 cps+ 450 x 6 cps) = 85 per cpy
Total distributed up to December 2,800 x 85= P238,000

b) 12/31 AE Unearned Subscription 238,000

Subscription Revenue 238,000

At the end of 2019, make again another adjusting entry to transfer unearned to revenue for the balance of P144,500.

c) Subscription Revenue Unearned Subscription

1 12/31AE 144,500 Sept 12/31 144,500
CE 238,000 to Nov 382,500
RE 1/1 144,500

12/31 AE Subscription Revenue 144,500

Unearned Subscription 144,500

1/1 /19RE Unearned Subscription 144,500

Subscription Revenue 144,500

At the end of 2018, there is no need for an adjusting entry, since all the subscriptions are already recorded as earned using the reversing entry.

60
14. Manila Skill Trade Center
a) Oct 2/18 Notes Receivable 500,000
Professional Fees 500,000

Dec 31 Interest Receivable 25,000

Interest Income 25,000
500,000 x .2 x 90/360
2019
Interest Receivable Interest Income
1/1/19 OE 25,000 1/30 25,000 1/30 8,333

500,000 x .2 x 120/360=33,333 – 25,000= 8,333 income for 2019

1/30 Cash 533,333

Notes Receivable 500,000
Interest Receivable 25,000
Interest Income 8,333
12/31/19 Income statement: Interest Income P8,333 Statement of FP : Interest Receivable P 0

15. a) Marcelo Transport Service

Income Statement
For the year ended Dec. 31, 2018
Passenger Fares Earned P2,460,000
Cargo Fares 125,900
P2,585,900
Less Operating Expenses:
Depreciation P585,400
Salaries 450,000
Gas & Oil 150,000
Utilities 140,000
Rent 120,000
Repairs and Maintenance 88,000
Insurance 11,250
Tools Expense 14,750

60
 Supplies Expense 8,000 1,567,400
Operating Income 1,018,500
Less Interest Expense 70,000
Net Income P 948,500

Marcelo Transport Services

Capital Statement
For the year ended Dec 31, 2018
Marcelo Capital, 1/1/14 P4,647,700
Net Income 948,500
Marcelo Drawings ( 15,000)
Marcelo Capital 12/31/1 P5,581,200

Marcelo Transport Services

Statement of Financial Position
December 31, 2018
Current Assets
Cash ( Schedule 1) P153,500
Accounts Receivable 60,000
Prepaid Expenses (Schedule 2) 55,000
Office Supplies 5,500
Total 274,000
Plant Property & Equipment (Schedule 3) 17,770,100
Total Assets P18,044,100
Liabilities & Owner's Equity
Current Liabilities (Schedule 4) 2,577,900
Long Term Liabilities (Schedule 5) 9,885,000
Marcelo, Capital 5,581,200
P18,044,100
Schedule 1
Cash on Hand P 15,500
Cash in Bank 138,000
Total P153,500

Schedule 2
Prepaid Expenses P55,000
Office Supplies 5,500
60
 Total Prepaid Expenses P60,500

Schedule 3
Buses P17,300,000
Less Accumulated Depreciation 572,000 16,728,000
Furniture & Equipment 180,500
Less Accumulated Depreciation 13,400 167,100
Tools 875,000
Total Plant, Property & Equipment 17,770,100

Schedule 4
Notes Payable P2,550,000
Accounts Payable 23,400
Salaries Payable 4,500
Total P2,577,900

Schedule 5

Mortgage Payable P9,885,000

Additional notes:
1) Financial statements are in accordance to generally accepted accounting principles.
2) Revenues and expenses are recognized under the accrual rule.
3) Receivables are presented at net realizable value with provision for doubtful accounts under the allowance method.
4) Plant assets are presented at book value with depreciation under the straight line method.

Profit Margin = 948,500/2,585,900 = 37% The business is very profitable.

ROE = 948,500/5,581,200 = 16.99% Yes the ROE is very attractive

b) Cash flow from operations:

Revenues 2,585,900
Expenses - Salaries (450,000-4,500) 445,500
Gas (150,000-23,400) 126,600
Utilities 140,000
Rent 120,000
Repairs 88,000
Insurance (11,250+115,000) 126,250
60
 Supplies (8,000+5,500) 13,500
Interest Expense 70,000 1,129,850
1,456,050
Cash flow from investing:
Acquisition of Trucks (17,300,000-2,647,700) 14,652,300
Furniture 180,500
Tools (875,000+14,750) 889,750
(15,722,550)
Cash flow from financing:
Notes 2,550,000
Mortgage 9,885,000
Investment 2,000,000
Drawings ( 15,000) 14,420,000
Cash Balance, December 31 P 153,500

The acquisitions were funded mainly from financing activities since cash generated by operation is only P1,456,050

Closing Entries:
Passenger Fares Earned P2,460,000 Income Summary 1,637,400
Cargo Fares 125,900 Depreciation P585,400
Income Summary P2,585,900 Salaries 450,000
Gas & Oil 150,000
Utilities 140,000
Rent 120,000
Repairs and Maintenance 88,000
Insurance 11,250
Tools Expense 14,750
Supplies Expense 8,000
Interest Expense 70,000

Income Summary 948,500

Marcelo, Capital 948,500

Marcelo, |Capital 15,000

Marcelo, Drawings 15,000

60
16.

Royal Laundry Services

Income Statement
Service Income 10,250
Rent 5,000
Salaries 12,000
Taxes 1,500
Utilities 8,675
Supplies Expense 2,000
Depreciation Expense 408
Total 29,583
Net Loss P19,333

Royal Laundry Services

Statement of Financial Position
ASSETS
Cash 24,450
Accounts Receivable 1,250
Washing Supplies 2,500
Prepaid rent 5,000
Total Current Assets P33,200
Furniture & Fixtures 5,000
Washing Equipment 24,000
Accum Depn (333)
Office Equipment 6,000
Accum Depn (75)
Total Non Current 34,592
Total Assets P67,792

LIABILITIES & OWNERS EQUITY

60
Accounts Payable P28,000
Utilities Payable 4,125
Total Liabilities P32,125
De Jesus Capital (55000- 19333 35,667
Total Liabilities & Capital P67,792

60
 PROBLEMS

1. a. Statement of Fin Position- Current Assets j. Income Statement – Expenses

b. Statement of Fin Position-Non-Current Liab k. Income Statement – Expenses
c. Statement of Fin Position - Current Assets l. Income Statement- Revenues
d. Income Statement – Expenses m. Capital Statement
e. Income Statement- Expenses n. Statement of Fin Position - Current Liabilities
f. Capital Statement o. Statement of Fin Position – Current Assets
g. Statement of Fin Position – Non-Current p. Statement of Fin Position – Non-Current Assets
Assets q. Statement of Fin Position- Non-Current Assets
h. Income Statement- Expenses r. Statement of Fin Position – Non-Current Assets
i. Income Statement – Revenue s. Statement of Fin Position – Current Assets
t. Income Statement- Revenues
2. Sure Call Center
Income Statement
For the year ended December 31, 2018
Revenue Earned:
Service Income P1,250,200
Less Expenses Incurred:
Depreciation Expense (note 1) 213,400
Rent P120,000
Salaries 120,000
Repairs & maintenance 7,000
Taxes Expense 15,000
Utilities Expense 4,000
Tools Expense 2,300
Bad Debts Expense 1,500
Insurance 800
Supplies Expense 600 484,600
Operating Income 765,600
Less Interest Expense 25,550
Net Income P 740,050

Note 1: Depreciation –Communication Equipment P172,000

Depreciation Office Equipment 36,000
Depreciation Furniture & Fixtures 5,400
P213,400
Sure Call Center
Statement of Financial Position
As of Dec.31, 2018
Assets
Current Assets:
Cash (Note 1) P 54,200
Accounts Receivable P 133,700
Less: Allowance for Bad Debts 4,200 129,500
Advances for Repairs 91,000
Total Current Assets P 274,700
Property, Plant & Equipment (note 2) 1,263,500
Total Assets P1,538,200
Liabilities & Owner's Equity
Current Liabilities:
Trade & Other Payables (Note 3) P 50,000
Non- Current
Non-Trade Loans 511,000
Owner's Equity:
Ortiz, Capital 977,200
Total Liabilities & Owner's Equity P1,538,200

Note 1:
Cash On Hand P44,200
Cash In Bank 10,000
Total Cash P54,200

Note 2:
Tools P 56,700
Communication Equipment P1,150,000
Less: Accumulated Depreciation- Equipment 216,000 934,000
Office Equipment 340,000
Less: Accumulated Depreciation - Tools 72,000 268,000
Furniture & Fixtures 14,000
16
 Less: Accum. Depn. - Furniture & Fixtures 9,200 4,800
Total Property, Plant & Equipment P 1,263,500
Note 3:
Accounts Payable P 45,000
Notes Payable 5,000
Total Trade and Other Payable P 50,000

3. Reversing Entries- Repairs Expense 91,000

Advances for Repairs 91,000

Sure Call Center

Capital Statement
For the year ended December 31, 2018
Ortiz, Capital, Jan. 1 P 284,650
Less Drawings ( 47,500)
Add: Net Income 740,050
Ortiz, Capital, Dec. 31 P 977,200

c) Current Ratio (274,700 / 50,000) 5.49:1

Acid Test Ratio (183,700 / 50,000) 3.67:1
740,050 / 1,250,200 59%
Solvency Ratio 561,000 / 1,538,200) 36%
The business is liquid, solvent and profitable.

4. 6/30/17 Cooking Supplies 5,000

Cash 5,000
12/31/17 Cooking Supplies Expense 3,500
Cooking Supplies 3,500
Cooking Supplies Cooking Supplies Expense
6/30/17 5,000 12/31/17 3,500 12/31/17 3,500 12/31 CE 3,500
1,500

1/1/18 No RE
10/15/18 Cooking Supplies 7,000
Cash 7,000
12/31/18 Cooking Supplies Expense 6,300
Cooking Supplies 6,300
Cooking Supplies Cooking Supplies Expense
Beg. Bal. 1,500 12/31/18 6,300 12/31/18 6,300
10/15/18 7,000
2,200

5. 6/30/17 Cooking Supplies Expense 5,000

Cash 5,000
12/31/17 Cooking Supplies 1,500
Cooking Supplies Expense 1,500
Cooking Supplies Expense Cooking Supplies
6/30/17 5,000 12/31/17 1,500 12/31/17 1,500 1/1/18 RE 1,500
12/31 CE 3,500 12/31/18 1,500

1/1/18 Cooking Supplies Expense 1,500

Cooking Supplies 1,500

10/15/18 Cooking Supplies Expense 7,000

Cash 7,000
12/31/18 Cooking Supplies 2,200
Cooking Supplies Expense 2,200
Cooking Supplies Expense Cooking Supplies
1/1/18 1,500 12/31/18 2,200 1/1/18 1,500 1/1/18 CE 1,500
10/15 7,000 CE 6,300 AE 2,200
2,200
6.
Income Statement: Repair Fees P200,000
Interest 15,000
Total Revenues P215,000
17
 Rent 120,000
Wages 90,000
Utilities 70,000
Supplies 30,000
Insurance 30,000
Depreciation – Repair Equipment 30,000
Furniture 2,000 372,000
Net Loss P157,000

Capital Statement:
Capital, April 1 P608,550
Net Loss (157,000)
Drawings ( 15,750)
Capital, June 30 435,800

Fin Position: Current Assets : Cash P35,000

Due for Clients 5,500
Prepaid Insurance 20,000
Prepaid Rent 3,500
Prepaid Supplies 5,000
Total Current Assets 69,000

Non-Current Assets:
Furniture P 50,000
Accumulated Depn 5,000
Net 45,000
Repair Equipment 500,000
Accumulated Depn 50,000
Net 450,000
Total non-current P495,000
Total Assets P564,000
Current Liabilities
Accounts Payable P10,500
Utilities Payable 15,200
Wages Payable 2,500
Total Current 28,200
Non-current: Notes due 2014 100,000
Roa Capital 435,800
Total Liabilities & Owner’s Equity P564,000

7. a)
1. Service Revenue 79,900
Advertising 12,900
SS and EC 106
Pag-ibig 50
PhilHealth 60
Supplies 3,700
Depreciation 6,000
Insurance 4,000
Salaries 33,668
Interest 100
Income & Expense Summary
2. Income & Expense Summary 19,316
Unson, Capital 19,316
3. Unson, Capital 12,000
Unson, Drawing 12,000

b) Unson, Capital
3. 12,000 Beg. 40,250
End 47,566 2. 19,316
c)
1. Insurance Expense 4,800
Prepaid Insurance 4,800
2. Salaries Payable 3,000
Interest Payable 1,000
Salaries Expense 3,000
Interest Expense 1,000

18
Exercise 8.
a)
Cash 101 Accounts Receivable 102 Notes Receivable 103
441,453 12/31 441,453 25,000 12/31 AE 15,000 16,000 16,000
16,000

Office Supplies 105 Prepaid Rent 106 Office Equipment 201

3,700 AE 2,900 93,000 74,000 112,000 12/31 bal. 112,000
12/31 800 12/31 19,000
3,700 3,700 93,000 93,000 1/1 bal. 112,000
1/1 800 1/1 19,000

Accum. Depn. Off. Equip. 202 Accounts Payable 301 Unearned Service Revenue 306
12/31 bal 25000 20,000 12/31 bal 55,000 55,000 12/31 32,000 40,000
AE 5,000 bal 8,000
25 000 25,000 1/1 bal 55,000 1/1 8,000
1/1 bal 25,000

Taxes Payable 307 EC & Premium Payable 302 Pag-ibig Premium Payable 303
AE 3,090 533 200

PH Premium Payable 304 W/tax Payable 305 Salaries Payable 308

200 1,617 AE 4000

Solomon, Capital 401 Solomon, Withdrawals 402 Tours Revenue 501

12/31CE 9600 194,500 9,600 CE 9,600 716,800
Bal 501,973 CE 317073 CE 748,800 32,000
1/1 bal 648,800 748,800
501,973

Advertising Expense 601 Salaries Expense 606 Interest Revenue 701

26,000 CE 26,000 176,000 CE 198,400 CE 360 AE 360
AE 4,000
198,400 198,400

Bad Debts 602

15,000 CE 15,000

Utilities Expense 607 Rent Expense 604 Interest Receivable 104

93,000 CE 93,000 AE 74,000 CE 74,000 AE 360 12/31 bal 360

1/1/ bal 360 1/1 RE 360

SS & EC Premium Expense 605 Pag-ibig Premium Expense 606 PH Premium Expense 607
10,897 1,100 1,100

Supplies Expense 604

2,900 CE 2,900

b)
Adjusting Entries for Lakbay Tours:
a) Interest Receivable 104 360 d) Depn. Exp. Off. Equip. 603 5,000
Interest Revenue 502 360 Accum. Depn. Off. Equip. 202 5,000
b) Rent Expense 605 74,000 e) Unearned Service Revenue 302 32,000
Prepaid Rent 106 74,000 Tours Revenue 32,000
c) Salaries Expense 606 4,000 f) Bad Debts 602 15,000
Salaries Payable 308 4,000 Accounts Receivable 102 15,000
g) Office Supplies Exp 604 2,900 h) Taxes Expense 611 3,090
Office Supplies 105 2,900 Taxes Payable 307 3,090

19
 Lakbay Tours
Statement of Financial Position
As of Dec. 31, 2018
Current Assets:
Cash P441,453.00
Trade and other Receivables (Note 1) 26,360.00
Prepaid Expenses (Note 2) 19,800.00
P487,613
Fixed Assets
Office Equipment 112,000
Accumulated Depreciation 25,000 87,000
Total Assets P574,613
Liabilities & Owner's Equity
Liabilities:
Trade and Other Payables (Note 3) P64,640
Unearned Service Revenue 8,000
P 72,640
Owner's Equity
Solomon, Capital 501,973
Total Liabilities & Owner's Equity P574,613

Note 1:
Accounts Receivable 10,000.00
Notes Receivable 16,000.00
Interest Receivable 360.00
P26,360.00
Note 2
Prepaid Rent P 19,000.00
Office Supplies 800.00
P 19,800.00
Note 3: Trade and Other Payables:
Accounts Payable P55,000.00
W/ Tax Payable 1,617.00
EC & SS 533.00
Pag-ibig 200.00
PH 200.00
Salaries Payable 4,000.00
Taxes Payable 3,090.00 P64,640.00

Lakbay Tours
Income Statement
For the year ended Dec. 31, 2018
Service Revenue P748,800.00
Interest Revenue 360.00
Total Revenues 749,160.00
Expenses: Salaries 180,000
Depreciation 5,000
Other Expenses 247,087 432,087.00
Net Income P317,073.00

Note 4:
Advertising 26,000
Utilities 93,000
Rent 74,000
SS & EC 10,897
Pag-ibig 1,100
Phil Health 1,100
Office Supplies 2,900
Bad Debts 15,000
Taxes Expense 23,090
247,087

Lakbay Tours
Capital Statement
For the year ended Dec. 31, 2018
Solomon Capital, Jan. 1 P 94,500
Additional Investment 100,000
Net Income 317,073
Solomon, Drawings (9,600)
Solomon, Capital Dec. 31 P501,973

. e) Income & Expense Summary 438,757.60

Depreciation – 10,000
Salaries 180,000
20
 Rent 74,000
Advertising 26,000
Utilities Expense 93,000
SS & EC 12,047.60
Pag-ibig 1,300
Phil Health 1,420
Taxes 23,900
Office Supplies 2,900
Bad Debts 15,000
Tours Revenue 748,800
Interest Revenue 360
Income & Expense Summary 749,160
Income & Expense Summary 310,402.40
Solomon, Capital 310,402.40

Solomon, Capital 9,600

Solomon, Drawings 9,600

9. GDR Park-Wash Services

Comparative Income Statement
For the year ended Dec. 31
2017 2016
Revenues:
Parking Fees P 1,710,000 1,765,000
Car Wash and Cleaning 94,000 55,000
1,804,000 1,820,000
Expenses:
Rent 600,000 600,000
Salaries 300,000 280,000
Depreciation (Note 1) 114,500 114,500
Utilities 115,500 112,550
Supplies 85,000 90,000
Insurance 60,000 75,000
Advertising 64,500 50,000
Taxes & Licenses 85,000 95,000
Repairs and Maintenance 15,500 8,000
1,440,000 1,425,050
Net Income P 364,000 394,950

Note 1: Depreciation:
Car Wash Equipment P 100,000 100,000
Furniture & Fixture 2,500 2,500
Office Equipment 12,000 12,000
Total P 114,500 114,500
GDR Park-Wash Services
Statement of Financial Position
December 31
2017 2016
Current Assets:
Cash P 550,000 485,500
Accounts Receivable 63,000 54,000
Prepaid Expenses (Note 1) 90,000 60,000
703,000 599,500
Non-Current Assets (Note 2) 1,236,000 1,340,500
Total Assets P1,939,000 1,940,000
Liabilities & Owner's Equity
Current Liabilities:
Trade & Other Payables (Note 3) P 255,000 250,000
Non-Current:
Loans Payable 500,000 750,000
Total Liabilities P 755,000 1,000,000
Del Rio, Capital 1,184,000 940,000
Total Liabilities & Capital P 1,939,000 1,940,000

Note 1: Office Supplies P 40,000 35,000

Prepaid Insurance 50,000 25,000
Prepaid Expenses P 90,000 60,000
2017 2016
Note 2: Car Was Equipment P1,200,000 1,200,000
Accumulated Depreciation 200,000 P1,000,000 100,000 1,100,000
Office Equipment 240,000 240,000
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 Accumulated Depreciation 24,000 216,000 12,000 228,000
Furniture & Fixtures 25,000 15,000
Accumulated Depreciation 5,000 20,000 2,500 12,500
Total Property, Plant & Equipment P1,236,000 1,340,500

Note 3: Accounts Payable P100,000 65,000

Taxes & Licenses Payable 5,000 10,000
Notes Payable 150,000 175,000
Trade & Other Payable P255,000 250,000

10.
2017 2016
Current ratio 703,000/255,000 2.76:1 599,500/250,000 2.398:1
Acid test ratio 613,000/255,000 2.40:1 539,500/250,000 2.158:1
Yes the business is liquid in both yrs.

Return on Equity 364,000/1,184,000 30.74% 394,950/940,000 42.00%

Yes the business is profitable specially in 2016

Debt ratio 500,000/1,939,999 25.79% 750,000/1,940,000 38.66%

Yes the business is stable specially in 2017.

CASE STUDIES

1. Bata Learning Center

Statement of Financial Position
As of Dec. 31, 2009

Assets
Current Assets:
Cash In Bank P8,500
Accounts Receivable 8,500
Unused Supplies 800
Total Current Assets P17,800
Property, Plant & Equipment
Leasehold Improvement P 80,000
School Bus (Less Acc. Depn. P175,000) 200,000
Furniture (Less Acc. Depn. P25,000) 50,000
Equipment (Less Acc. Depn. P30,000) 52,000
Total Property, Plant and Equipment 382,000
Total Assets P397,800
Liabilities & Owner’s Equity
Current Liabilities:
Accounts Payable P 7,250
Notes Payable 28,750
Total P 36,000
Owner’s Equity:
Grace Bato, Capital 361,800
Total Liabilities & Owner’s Equity P397,800

Ratio of properties to total assets: 382/397.8= 96%

Ratio of debt to total assets = 9% only

2 a. Venture A Venture B
Total revenues P2,000,000 P1,500,000
Total expenses 950,000 850,000
Net Income P1,050,000 P 650,000
Return on Owner’s Equity: Operating Ratio:
1,050,000 / 10,500,000 10% 1,050,000 / 2,000,000 52,5%
650,000 / 5,500,000 11.82% 650,000 / 1,500,000 43.3%

b. Venture A Venture B
Cash from Customers P1,750,000 P500,000
Disbursements for expenses 800,000 200,000
Cash inflow P 950,000 P300,000

Venture A is more liquid.

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Acctg Proc 18th ed Body Building Center
Income Statement
For the year ended December 31, 2010

Revenues: Membership Dues P1,675,000

Expenses: Rent P540,000
Depreciation (Note 1) 284,500
Advertising 195,000
Salaries 188,000
Utilities 165,000
Repairs 155,500
Supplies 25,000
Insurance 12,000 1,565,000
Net Income P 110,000
Note 1:
Depreciation Expense
Furniture & Fixtures P 14,500
Gym Equipment 270,000
P284,500

Body Building Center

Capital Statement
For the year ended December 31, 2010
Gonzales Capital, January 1 P1,016,400
Net Income 110,000
Drawings ( 312,000)
Gonzales Capital, December 31 P 814,400

Body Building Center

Balance Sheet
December 31, 2010
ASSETS Liabilities & Owner's Equity
Current Assets: Current Liabilities
Cash P 110,000 Trade & Other Payables (note 2) P 25,000
Accounts Receivable 24,000 Long Term Loan 500,000
Unused Supplies 53,400 Total P 525,000
Total 187,400 Gonzales, Capital 814,400
Property, Plant & Equipment (note 1) 1,152,000
Total P1,339,400 Total P1,339,400

Note 1:
Gym Equipment P2,200,000
Accumulated Depreciation 1,080,000 P1,120,000
Furniture & Fixtures P 90,000
Accumulated Depreciation 58,000 32,000
P1,152,000
Note 2:
Accounts Payable P16,000
Salaries Payable 9,000
Total P25,000

Debt ratio: 39% meaning 61% of the assets were sourced from the owner, only 39% from creditors.
The company is financially stable.

Cash flow from operation:

Collection from customer (1,675,000-24,000+15,000) 1,666,000
Payments for: Rent P540,000
Advertising 195,000
Salaries (188,000-9,000) 179,000
Utilities 165,000
Repair 155,500
Supplies (25,0000+20,100-16,000+53,400) 82,500
Insurance 12,000 1,329,000
337,000
Cash flow from financing:
Payment of loan (100,000)
Drawings (312,000) (412,000)
Net Cash flow for the year ( 75,000)
Cash, Jan. 1 185,000
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 Cash, Dec. 31 P110,000

Exercise 11 and 12.

Jasmine Park Place
Income Statement
For the year ended December 31, 2013
Parking Fees P659.0
Interest Income 14.0
Total Income P673.0
Less Expenses:
Depreciation (Schedule 1) P 67
Other Operating Expenses (Schedule 2) 513.5
Interest Expense 8 587.5
Net Income P 85.5

Schedule 1- Depreciation
Depreciation-Leasehold Improvements P63
Depreciation-Furniture & Fixtures 4
Total P67

Schedule 2 Other Operating Expenses

Salaries 190
Rent 180
Utilities 96
Taxes 19.5
Bad Debts 6
SSS and EC 4
HDMF 4
PhilHealth 4
Insurance 3
Supplies 7
Total P513.5

Jasmine Park Place

Capital Statement
For the year ended December 31, 2018
Jasmine, Capital, Jan/1 P144.0
Net Income 85.5
Jasmine, Drawings (85.0)
Jasmine Capital, Dec 31 P144.5

Jasmine Park Place

Statement of Financial Position
December 31, 2013
Current Assets
Cash P18
Accounts receivable P180
Allowance for Bad Debts ( 9) 171
Prepaid Insurance 2
Office Supplies 1
Total 192
Plant Property & Equipment (Schedule 3) 422
Total Assets P614
Liabilities & Owner's Equity
Current Liabilities (Schedule 4) P469.5
Jasmine, Capital 144.5
Total Liabilities & Capital P614.00

Schedule 3
Leasehold Improvements P504
Less Accumulated Depreciation 105 P399

Furniture & Fixtures P30

Less Accumulated Depreciation 7 23
Total P422

Schedule 4
Notes Payable P 400.0
Accounts Payable 35.0
Advances from tenants 7.5

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 Interest Payable 8.0
Taxes Payable 19.5
Witholding Taxces Payable 4.0
Salaries Payable 4.0
SS and EC Witholding Taxes Payable 3.0
HDMF Payable 2.0
PhilHealth Payable 2.0
Total P485.5

Parking Fees P659.

Interest Income 14.0
Income Summary P673.0

Income Summary 587.5

Depreciation-Leasehold Improvements P 63
Depreciation-Furniture & Fixtures 4
Salaries 190
Rent 180
Utilities 96
Taxes 19.5
Bad Debts 6
SSS and EC 4
HDMF 4
Phil Health 4
Insurance 2
Supplies 7
Interest Expense 8

Income Summary 85.5

Jasmine Capital 85.5

Jasmine Capital 85.0

Jasmine Drawings 85.0

Return on Capital 85.5/ (144+144.23/2)= 59% Profitable

Current Ratio (192/469.5 = .408:1 Not liquid
Equity ratio (144.5/614) = .235:1 high financing, assets are more financed by liabilities with a debt ratio of
.765:1

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