CHAPTER 6

CASH TO ACCRUAL ACCOUNTING/ SINGLE ENTRY SYSTEM

PROBLEMS

6-1 (Brainy Company)

Capital, end
Assets P609,000
Less liabilities 138,000 P471,000
Capital, beginning
Assets P485,000
Less liabilities 94,000 391,000
Increase in capital P 80,000
Additional investments ( 70,000)
Withdrawals 120,000
Profit P130,000

6-2
a. 38,900 + 13,480 – 48,200 = 4,180
b. 1,160,000 + 980,000 – 700,000 = 1,440,000 collections;
1,440,000 + 1,660,000 + 30,000 – 1,200,000 = 1,930,000
c. 210,000 + 80,000 – 40,000 – 206,000 = 44,000
d. 440,000 – 80,000 + 100,000 + 54,000 – 30,000 = 484,000

6-3 (Text Company)

Requirement 1
Capital, end
Assets P352,800
Less liabilities (including P8,000 unrecorded purchase) 123,500 P229,300
Capital, beginning
Assets P293,200
Less liabilities 117,800 175,400
Increase in capital P 53,900
Withdrawals 20,000
Net income P 73,900

Requirement 2
Text Company
Statement of Comprehensive Income
For Year Ended December 31, 2009
Sales (net of P21,000 returns) – Schedule 1 P725,000
Cost of goods sold:
Merchandise inventory, January 1 P 97,200
Purchases (net of P13,000 returns) – Schedule 2 551,200
Merchandise inventory, December 31 (105,800) 542,600
Gross profit on sales P182,400
Other income 8,000
Operating income – Schedule 3 (114,000)
Operating income P 76,400
Interest expense ( 2,500)
Profit P 73,900

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Chapter 6 – Cash to Accrual/ Single Entry System

Schedule 1 – Sales
Receipts from customers P697,500
Accounts receivable, beginning ( 59,400)
Accounts receivable, ending 76,100
Accounts written off 10,800
Sales returns 21,000
Gross sales P746,000
Schedule 2 – Purchases
Payments to trade creditors P536,600
Accounts payable, beginning ( 63,300)
Accounts payable, ending 69,900
Unrecorded purchases 8,000
Purchase returns 13,000
Gross purchases P564,200
Schedule 3 – Operating expenses
Bad debts expense P 10,800
Depreciation expense (85,000 + 20,000 – 95,500) 9,500
Other operating expenses:
Payments for operating expenses P94,100
Prepaid expenses, beginning 6,000
Prepaid expenses, ending ( 7,500)
Accrued expenses, beginning ( 4,500)
Accrued expenses, ending 5,600
Total operating expenses P 114,000

6-4 (Best Fastfood)

Best Fastfood
Statement of Comprehensive Income
For Six Months Ended December 31, 2009

Sales P2,100,000
Cost of sales:
Purchases P1,850,000
Less Inventory, end 450,000 1,400,000
Gross profit P 700,000
Depreciation expense ( 24,000)
Other operating expenses ( 556,000)
Net income P 120,000
Best Fastfood
Balance Sheet
December 31, 2008
Assets Liabilities and Capital
Current Assets Current Liabilities
Cash P 24,000 Accounts payable P230,000
Accounts receivable 200,000 Bank loan 200,000
Inventory 450,000 Total current liabilities P430,000
Total current Assets P674,000
Non-current Assets Tom Cruz, Capital
Equipment P400,000 Initial investment P500,000
Less accum. Depr 24,000 376,000 Add profit 120,000 620,000
Total assets P1,050,000 Total liabilities and capital P1,050,000

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Chapter 6 – Cash to Accrual/ Single Entry System

Computation of cash balance:

Cash receipts from:
Initial investment by owner P 300,000
Collections from sales 1,900,000
Bank loan 500,000 P2,700,000
Less cash payments for:
Purchases P1,620,000
Bank loan 300,000
Equipment 200,000
Cash operating expenses 556,000 2,676,000
Cash balance, end P 24,000

6-5.1 (Kenny Rogers Corporation)

(Cash Basis)
Kenny Rogers Corporation
Income Statement
For the Years Ended December 31, 2008 and 2007
2008 2007
Revenues P 515,000 P295,000
Expenses 272,000 225,000
Net Income P 243,000 P 70,000
2008 sales = P160,000 + 355,000 = 515,000
2007 sales = 295,000
2008 expenses = 67,000 + 160,000 + 45,000 = 272,000
2007 expenses = 185,000 + 40,000 = 225,000

(Accrual Basis)
Kenny Rogers Corporation
Income Statement
For the Years Ended December 31, 2008 and 2007
2008 2007
Revenues P445,000 P485,000
Expenses 255,000 277,000
Net Income P190,000 P208,000
2008 sales = 355,000 + 90,000 = 445,000
2007 sales = 295,000 + 160,000 + 30,000 = 485,000
2008 expenses = 40,000 + 160,000 + 55,000 = 255,000
2007 expenses = 185,000 + 67,000 + 25,000 = 277,000

6-6 (Jill and Jenni)

Jill and Jenni
Income Statement
For the Year Ended December 31, 2009
Cash Basis Accrual Basis
Sales P750,000 P1,057,500
Cost of Sales ( 892,500) ( 637,500)
Salaries Expense ( 96,000) ( 126,000)
Rent Expense ( 60,000) ( 20,000)
Other Operating Expenses ( 84,000 ) (104,000)
Profit P(382,500) P 170,000

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Chapter 6 – Cash to Accrual/ Single Entry System

6-7 (Atty. D Macapanalo)

Atty. D Macapanalo
Income Statement
For the Year Ended December 31, 2009
Professional Fees P 1,242,200
Expenses 727,300
Profit P 514,900

Professional Fees
2009 Collection P1,250,000
Fees Receivable, January 1 ( 52,000)
Fees Receivable, December 31 47,000
Unearned Fees, January 1 26,200
Unearned Fees, December 31 ( 29,000)
Professional Fees, Accrual Basis P 514,900

Expenses
2009 Payments P 722,400
Accrued expenses, January 1 ( 18,000)
Accrued expenses, December 31 21,500
Prepaid expenses, January 1 6,400
Prepaid expenses, December 31 ( 5,000)
Expenses, accrual basis P 727,300

6-8 (Jack and Jill Company)

Jack and Jill Company
Statement of Comprehensive Income
For the Year Ended December 31, 2009
Sales P 7,440,000
Cost of sales 4,670,000
Gross Profit P 2,770,000
Other operating income
Gain on sale of automobile 20,000
Total income P 2,790,000
Operating expenses
Depreciation 298,667
Others 1,003,600
Total expenses 1,302,667
Profit before interest 1,487,733
Interest expense 104,000
Profit P 1,383,733

Jack and Jill Company

Statement of Changes in Equity
For the Year Ended December 31, 2009
Jack Jill
Equity, January 1 P1,750,000 P1,815,000
Withdrawals (500,000) (250,000)
Share in profit 691,867 691,866
Equity, December 31 P1,941,867 P2,256,866

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Chapter 6 – Cash to Accrual/ Single Entry System

Jack and Jill Company

Statement of Financial Position
December 31, 2009
Assets
Current Assets
Cash P 736,000
Accounts receivable 1,782,500
Allowance for bad debts (60,000 – 17,500) (42,500)
Receivable from employees 30,000
Deposit on merchandise purchases 75,000
Merchandise inventory 3,750,000
Prepaid insurance 8,000
Total current assets P 6,339,000
Non-current Assets
Property, plant and equipment
Furniture and fixtures P 220,000
Accumulated depreciation – furniture and fixtures (87,000)
Automobiles 940,000
Accumulated depreciation - automobiles (421,667)
Total property, plant and equipment P 651,333
Total Assets P 6,990,333
Liabilities
Current Liabilities
Accounts Payable P 1,875,000
Accrued Expenses 16,600
Bank loan, including accrued interest 900,000
Total current liabilities P 2,791,600
Equity
Jack P 1,941,867
Jill 2,256,866
Total partners’ equity 4,198,733
Total liabilities and partners’ equity P 6,990,333

Sales
Collections in 2008 (6,500,000 -60,000) P6,440,000
Accounts receivable, end (1,800,000 – 17,500) 1,782,500
Write off 17,500
Accounts receivable, January 1, 2009 ( 800,000)
Sales P7,440,000
Purchases
Payments to merchandise creditors P4,500,000
Accounts payable, end 1,875,000
Returned merchandise (to be applied to future purchases) ( 75,000)
Accounts payable, beginning (1,380,000)
Net purchases P4,920,000
Cost of sales
Inventory, beginning P3,500,000
Net purchases 4,920,000
Inventory, end ( 3,750,000)
Cost of sales P4,670,000

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Chapter 6 – Cash to Accrual/ Single Entry System

Depreciation expense
On old furniture and fixtures (P220,000/10) P 22,000
On old automobiles (P780,000 – 280,000)/ 3 166,667
On new automobile 440,000 / 3 x 9/12 110,000
Depreciation expense P 298,667

Expenses other than depreciation

Payments for selling and general expenses P1,000,000
Prepaid insurance, beginning 15,000
Prepaid insurance, end ( 8,000)
Accrued expenses, beginning ( 20,000)
Accrued expenses, end 16,600
Expenses other than depreciation P1,003,600

Interest Expense
On bank loan obtained on 01/02/06 and paid 05/02/06 P 32,000
Accrued on bank loan obtained on 05/01/06 72,000
Total interest expense P 104,000

MULTIPLE CHOICE QUESTIONS

Theory
MC1 D MC6 B
MC2 A MC7 C
MC3 C MC8 A
MC4 A MC9 A
MC5 D MC10 C
Problems
MC11 D 210,000 – 50,000 = 160,000 capital, end; 260,000 – 60,000 = 200,000
capital beginning; 160,000 – 200,000 = 40,000 decrease in capital + 50,000
– 12,000 = 78,000 net loss.
MC12 A (80,000–4,000) + (120,000– 6,000+ 40,000 – 30,000) = 200,000
MC13 D 800,000 + 320,000 + 124,000 – 240,000 – 96,000 = 908,000
MC14 B 189,000 + 12,000 – 8,000 + 36,000 + 7,000 – 10,500 = 225,500
MC15 A 30,000 + 3,000 – 21,000 = 12,000 + 60,000 – 58,000 = 14,000
MC16 D 600,000 + 400,000 – 200,000 + 300,000 – 150,000 = 950,000
MC17 D 794,000 + 51,000 – 45,000 = 800,000
MC18 A 715,000 – 144,000 – 96,000 – 7,000 = 468,000 + 60,000 – 33,000 =
495,000
MC19 A 800,000 – (144,000/45%) = 480,000
MC20 B 890,000 – 270,000 – 600,000 – 60,000 + 130,000 = 90,000
MC21 D 310,000 + 85,000 + 4,000 + 66,000 = 465,000
MC22 B 280,000 + 67,000 + 5,000 = 352,000
MC23 C 352,000 – 5,000 – 21,700 = 325,300
MC24 C 45,000 + 3,500 + (200,000 x 2%) + (4,000/20% = 20,000 x 5%) = 53,500
MC25 A 45,000 + 280,000 + 140,000 – 110,000 = 355,000 + 10,000 + 50,000 –
60,000 = 355,000
MC26 C 800,000 – 96,000 + 124,000 + 320,000 – 908,000 = 240,000
MC27 B 2,000,000 + 960,000 + 100,000 + 800,000 + 120,000 + 320,000 – 400,000
– 1,600,000 + 1,200,000 + 2,000,000 = 5,500,000

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