PROBLEM SET 1

General Instructions: Use LETER (short) bond paper.

1. Evaluate the effect of the following transactions upon the elements of the accounting equation. Use a
positive (+) sign for an increase, a negative (-) sign for a decrease and O if there is no effect.

EVENT Assets Liabilities Owner’s Equity

1 The owner invested cash in the business
2 Purchased office supplies on cash basis
3 Purchased a computer on credit
4 Billed a customer for services rendered
5 Purchased a delivery van
6 Received cash payment from customer
7 Obtained a bank loan
8 Paid monthly utility bills
9 The owner withdrew cash for personal use
10 Paid monthly rent
11 Settled an account with a supplier
12 Owner issued a company check to settle a personal debt

2. For the following transactions of Sweet Home Furniture Shop (owned by J Bond), indicate on the spaces
provided the account items to be debited (Dr) and credited (Cr). Answer to number 1 has already been
provided.

TRANSACTIONS Dr Cr
1 The owner invested P2,340,000.00 cash in the business CASH Owner, Capital
2 Purchased lumber from J. Bieber, P68,300.00 on credit
3 Collected P54,900.00 from previous accounts
4 Paid internet and power bills, P8,400.00
5 Billed S. Geronimo P11,500.00 for repair of dining set
6 Owner withdrew P24,000.00 for personal use
7 Sold two living room sets for P32,000.00, realized a profit of P5200.00
8 Received P8,000.00 for furniture repairs
9 Obtained a loan from Best Bank, P120,000.00
10 Paid salaries of production and office staff, P42,000.00
11 Paid the month's rent, P20,000.00
12 Received full payment of S. Geronimo account
3. The following sections are found in the balance sheet of A.I. Construction Company:

CA - Current Assets, NA - Noncurrent Assets, CL - Current Liabilities, NL - Noncurrent Liabilities

OE - Owner's Equity

Indicate appropriate symbol CA, NA, CL, NL, and OE to classify under which section the accounts listed
would appear. If the account does not appear in the balance sheet, write DNA.

Utilities Expense -

Notes payable -

Income from Equipment Sale -

Interest receivable -

Advances to Employees -

Interest payable -

Construction Supplies -

Office Supplies -

Witholding Taxes Payable -

Insurance Premium -

Accounts payable -

Transportation Equipment -

Owner, Capital -

Furniture and Fixtures -

Accrued Salaries Expense -

Equipment Rental revenue -

Construction Equipment -

Salaries Expense -

Cash -

Marketable Securities -

Mortgage payable -

Notes receivable -

Inventory -

Prepaid Rent -