EXERCISE #5

1. The following are selected transactions of Tele Performer, a call center, for the past year.

June 1 Andrew Ahmad invests P200,000 cash of which P150,000 was deposited in the
current account of the business which he opened with BPI.
June 2 He also invested a computer acquired at a cost of P55,000 a few months ago
on which there is an outstanding liability of P25,000 due to ACER. This liability is to
be assumed by the business.
June 5 Invested furniture and fixtures which were acquired a year ago for P20,000
but with a current market value of P10,000
Dec 5 Withdrew a piece of furniture which was invested last June 5 and listed in
the books as P2,500. It has an accumulated depreciation of 10%.

Required. Prepare the entries to record the above transactions.

ANSWER:

PROBLEM #1

JUN. 01

Cash ₱50,000

Cash in Bank - BPI ₱150,000

Andrew Ahmad, Capital ₱200,000

JUN. 02

Office Furniture & Equipment ₱55,000

Accounts Payable ₱25,000

Andrew Ahmad, Capital ₱30,000

JUN. 05

Furniture & Fixtures ₱10,000

Andrew Ahmad, Capital ₱10,000

2. Calculate the amount to be recorded as the cost of the machine given the

following payments:

a. Gross purchase price 750,000 on credit

b. Rebate for early payment 2%

c. Assembly cost 150,000

d. Cost of platform 25,000

e. Repair of a faulty connection 1,500

ANSWER:

PROBLEM #2

Gross Price ₱750,000

Rebates (₱15,000)

Assembly Cost ₱150,000

Cost of Platform ₱25,000

Cost of Machinery ₱910,000

3. Make three entries using the information in no. 2: a) acquisition b) payment c)

additional expenditures for assembly and platform d) additional expenditure for repair of
faulty connection

ANSWER:

PROBLEM #3

Machinery ₱735,000

Accounts Payable ₱735,000

Accounts Payable ₱735,000
Cash ₱735,000

Machinery ₱175,000

Cash ₱175,000

Repair Expense ₱1,500

Cash ₱1,500

CASE STUDY:

a. Rebecca Melgar opened a repair shop a year ago. She is now planning to sell it for
193,500 and presented to you a list of balances. You asked your friend, who is a consultant
for advice and he presented the following study to you.

BOOK VALUE CURRENT MARKET

VALUE

Office Furniture 50,000 45,000

Office Equipment 150,000 135,000

Office Supplies 5,000 3,000

Prepaid Insurance 3,000 -

Accounts Payable 3,500 3,500

Notes Payable 10,000 10.000

Interest Payable 1,200

Question:

1. Will you buy it at a price stated by Melgar?

ANSWER: Yes, because it is essential as a businesswoman to take risks. It is also indeed a

great investment to start a repair shop with an amount of ₱193,500. (number 2 below)
2. What is the minimum amount that you will be willing to pay Ms. Melgar?

ANSWER: ₱193,500.