LAGRIMAS, SARAH NICOLE S.

BSMA 2-7

Problem 14-3
Required: Prepare an income statement for 2016 and a statement of financial position on December 31,
2016.

Total Assets: 1,590,000

Less: total liabilities 460,000

Capital – January 1 1,130,000
Cash balance – January 1 200,000
Add: Deposits 3,930,000
Total 4,130,000
Less: Check drawn 3,360,000
Bank service charge 10,000 3,370,000
Cash balance – December 31 760,000
Accounts payable – January 1 250,000
Add: Purchases 2,280,000
Total 2,530,000
Less: Purchase returns 70,000
Payments 2,200,000 2,270,000
Accounts Payable – December 31 260,000
Salaries paid 400,000
Accrued salaries – December 31 15,000
Total 415,000
Less: Accrued salaries – January 1 10,000
Salaries Expense 405,000
Supplies paid 75,000
Add: Prepaid supplies – January 1 40,000
Total 115,000
Less: Prepaid supplies – December 31 20,000
Supplies expense 95,000

Note payable – January 1 200,000

Less: payment 120,000
Notes payable – December 31 80,000
Accounts receivable – December 31 450,000
Accounts collected 1,720,000
Accounts written off 30,000
Total 2,200,000
Less: Accounts receivable – January 1 420,000
Sales on account 1,780,000
Allowance for doubtful accounts – January 1 20,000
Add: Doubtful accounts expense (squeeze) 60,000
Total 80,000
Less: Accounts written off 30,000
Allowance for doubtful accounts – December 31 50,000
Total deposits 3,930,000
Less: Accounts receivable collected 1,720,000
Cash sales 2,210,000
Add: Sales on accounts 1,780,000
Total sales 3,990,000
Depreciation (350,000 x 10%) 35,000
Sales 3,990,000
Cost of sales: 700,000
Merchandise inventory – January 1
Purchases 2,280,000
Less: Purchases returns 70,000 2,210,000
Goods available for sale 2,910,000
Less: Merchandise inventory – December 31 650,000 2,260,000
Gross income 1,730,000

Expenses:
405,000
Salaries
Supplies 95,000
Taxes 45,000
Other expenses 245,000
Doubtful accounts 60,000
Depreciation 35,000
Bank service charge 10,000
Miscellaneous expense 35,000 930,000
Net income 800,000

Camry Company Statement of Financial Position

December 31, 2016 Assets
Current assets:
Liabilities and Equity
Current liabilities:
Cash 760,000
Accounts receivable, net (50,000) 400,000
Merchandise inventory 650,000
Prepaid supplies 20,000 1,830,000
Noncurrent assets:
Equipment 350,000
Less: Accumulated depreciation 135,000 215,000
Total Assets 2,045,000
Accounts payable 260,000
Notes payable 80,000
Accrued salaries payable 15,000 355,000
Equity:
Capital – January 1 1,130,000
Add: Net income 800,000
Total 1,930,000
Less: Drawings 240,000 1,690,000
Total liabilities and equity 2,045,000

Problem 13-2
Required: Prepare an income statement, a statement of financial position and adjusting entries to
convert the records from cash basis to accrual basis.
Aris Marval Income Statement December 31, 2016
Professional fees
5,250,000
Deduct expenses:
Rent 1,300,000
Supplies 850,000
Accumulated depreciation 250,000
Interest expense 90,000
Other expenses 750,000 (3,240,000)
Net Income
2,010,000
Aris Marval Statement of Financial Position
December 31, 2016 Assets
Current assets:
Liabilities and Equity
Current liabilities:
Cash 1,500,000
Accounts receivable 750,000
Office supplies (unused) 250,000
Total Current Assets 2,500,000
Noncurrent assets:
2,500,000
Furniture and Equipment
Less: Accumulated depreciation 375,000
Total non-current assets 2,125,000
Total assets 4,625,000

Note payable 1,000,000

Accrued interest payable 90,000
Accrued rent expense 100,000 1,190,000
Equity:
Capital – January 1 2,275,000
Add: Net income 2,010,000
Total 4,285,000
Less: Drawings (850,000) 3,435,000

Total liabilities and equity 4,625,000

Adjusting Entries: DEBIT CREDIT
1. Depreciation expense (2,500,000/10 years) 250,000
Capital (1/2 x 250,000) 125,000
B. Accumulated depreciation 375,000
2. Interest expense (1.000.000 × 12% x 9/12) 90,000
Accrued interest payable 90,000
3. Accounts receivable 750,000
Professional fees 750,000

Professional fees 500,000

Capital 500,000
4. Rent 100,000
Accrued rent payable 100,000
5. Office supplies unused 250,000
Supplies 250,000

Supplies 300,000
Capital 300,000

Problem 13-3 Required:

1. Prepare adjusting entries on December 31, 2016.
Adjusting Entries: DEBIT CREDIT
1. Sales 200,000
Retained eamings 200,000
2. Accounts receivable 250,000
Sales 250,000
3. Retained eamings 350,000
Purchases 350,000

Purchases 280,000
Accounts payable 280,000
4. Retained eamings 70,000
Expenses 70,000

Expenses 100,000
Accrued expenses 100,000
5. Merchandise Inventory, January 1, 2019 150,000
Retained earnings 150,000

Merchandise inventory, December 31, 2019 210,000

Income summary 210,000
6. Advances to supplier 100,000
 Accumulate depreciation - equipment 100,000
8. Depreciation - building 300,000
Retained eamings 300,000
Accumulated depreciation - building 600,000
9. Doubtful accounts (10% × 250,000) 25,000
Allowance for doubtful accounts 25,000
10. Interest expense (900,000 × 12% × 4/12) 36,000
Accrued interest payable 36,000

2. Prepare an income statement for the year ended December 31, 2016.
Zamboanga Company Income statement
Year ended December 31, 2016
Sales 4,090,000
Cost of sales:
Merchandise inventory – January 1 150,000
Purchases 1,830,000
Goods available for sale 1,980,000
Less: Merchandise inventory – December 31 210,000 1,770,000
Gross income 2,320,000
Expenses:
Expenses 1,530,000
Depreciation – equipment 20,000
Depreciation – building 300,000
Doubtful accounts 25,000
Interest expense 36,000 1,911,000
Net income P 409
,000
3. Prepare a statement of financial position on December 31, 2016.
Zamboanga Company Statement of Financial Position Year ended December 31, 2016
Assets
Current assets:
Cash 1,500,000
Accounts receivable, net allowance 225,000
Advances to supplier 100,000
Merchandise inventory 210,000 2,035,000
Noncurrent assets:
Land 800,000
Building 1,500,000
Less: Accumulated depreciation 600,000 900,000
Furniture and equipment 200,000
Less: Accumulated depreciation 30,000 170,000 1,870,000
Total assets P
3,905
,000
Liabilities and Equity
Current liabilities:
Accounts payable 280,000
Accrued expenses 100,000
Accrued interest payable 36,000 416,000
Noncurrent liability:
Mortgage payable 900,000
Equity:
Share capital 2,000,000
Retained earnings 589,000 2,589,000
Total liabilities and equity P3,905,000
Retained Earnings Computation
Adjusted retained earnings – January 1 180,000
Net income 409,000
Retained earnings – December 31 P589,000