CB Practice Problems

Practice problems

PROBLEM 1: Accounting Process

Cristina Mison owns and operates a store selling compact discs and tapes. She carries charge accounts for a few customers and offers cash discounts of 2/10, n/30 to encourage prompt payments. Described below are the transactions for January after she invested P500,000 cash, and P40,000 merchandise on January 1.12% VAT is included in all sales, purchases and freight invoices except list prices.

Jan. 4 Purchased compact discs from Octo Arts. Terms: P16,800 list price less trade

discounts of 2% and 1% balance 1/10, n/30.7 Purchased tapes from Villar Records at an invoice price of P8,960.

Terms: 2/10, n/30. FOB Shipping Point.8 P560 freight paid for Villar shipment.9 Sold tapes to That’s Entertainment, P7,840 on account.10 Compact discs invoiced at P784 were found defective and returned to

Octo Arts.15 Cash sales for the first half of the month amounted to P22,400.

Paid P4,000 in wages to the sales clerk and P3,000 to a part-time office clerk less 5% withholding tax.

16 Account sales to Music & Magic amounted to P6,720.17 Paid 50% of the amount owed to Villar Records.18 A cash customer who has purchased compact discs for P1,120 returned

them for being defective and got a cash refund.24 Music & Magic paid one-half of its account and was given the

corresponding discount.26 That’s Entertainment paid its account.28 Cash sales for the second half of the month P22,400.30 Paid Octo Arts in full of account.

Paid wages less deductions for 5% withholding tax, 3% SSS, 1.5% PhilHealth and 2% Pag-ibig.

Required:a. Journal entries to record the above transactions without explanations.b. Postings to subsidiary ledgers.c. Postings to T Account for Accounts Receivables and Accounts Payables.d. Reconcile the subsidiary ledger balances and the control account balances.

PROBLEM 2: Completion of the Accounting Process

The bookkeeper of Kenneth’s Toyland presented the following ledger accounts and their balances as of June 30, 2008, the end of the fiscal period:

Cash in Bank

487,288

Cash on Hand 75,200

Accounts Receivable

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112,000

Allowance for Bad Debts 4,000Notes Receivable 4,800

Merchandise Inventory, July 1 89,500

Prepaid Store Insurance 6,300

Store Furniture & Fixtures 16,000

Accumulated Depreciation - Store Furniture & Fixtures 500

Office Furniture & Fixtures 15,000

Accumulated Depreciation - Office Furniture & Fixtures 900

Accounts Payable 54,000

Notes Payable

180,000

Unearned Commission 2,400Withholding Taxes Payable 490SSS & EC Premiums Payable 522PhilHealth Premiums Payable 100Pag-ibig Premiums Payable 200

Alfonso, Capital

521,900

Alfonso, Personal 30,000

Sales

583,200

Sales Return & Allowances 5,020Sales Discount 2,880

Purchases

242,000

Freight In 6,000Purchase Returns and Allowances 3,000Purchases Discount 2,000Advertising Expense 9,000

Sales Salaries Expense 60,000

Office Salaries Expense 33,400

Rent Expense

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96,800

Taxes Expense 12,000

Utilities Expense 42,400

Interest Expense 600Interest Income 3,000SSS & EC Premiums Expense 6,424PhilHealth Premiums Expense 1,200Pag-ibig Premiums Expense 2,400

Additional data needed for adjustments:a) Increase the allowance for doubtful accounts to 5% of accounts receivable.b) The notes receivable from the customers consists of:

a. 30-day, 9% note for P4,000 dated June 10, 2008.b. 60-day P800 note dated June 5, 2008.

No interest has been collected on these notes.c) The business has paid on January 1, 2008 insurance premium for a two-year

policy effective on that date.d) The store furniture and fixtures are depreciated over a useful life of 5 years.

Of those on hand as of June 30, P6,000 were acquired only on June 1, 2008. The office furniture and fixture are to be depreciated at a rate of 20% per annum.

e) Sales salaries of P550 has accrued as of June 30.f) On May 1, 2008, the business paid for three-month advertising contract for

P900.g) The notes payable represents a 60-day, 18% note dated June 10, 2008 for

which no interest has yet been paid.h) The business received commission of P2,400 but only one-third of this has

been earned by the company.i) Merchandise unsold, per physical count of June 30, 2008, amounted to three-

fourth of the beginning inventory.j) Accrue 3% percentage tax on net sales for December amounting to 47,900.

Required:1. Prepare an eight-column worksheet.2. Prepare an income statement and a balance sheet. Three-fourth of rent and

utilities should be allocated to selling expense.3. Make the necessary closing entries.4. Prepare a post closing trial balance.5. Prepare the reversing entries.

PROBLEM 3: Financial Statement Analysis

Mr. Ramon Kwong, a businessman, was looking into some business ventures wherein he could possibly invest his money. He asked your help in evaluating the financial performance of two business ventures and gave you a copy of their income

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statements. Evaluate which of the two ventures is more profitable by computing for its operating ratio, profit ratio, and return on owner’s equity.

Venture A

Venture B

Revenue for account services

750,000

1,200,000

Revenue for cash services 1,250,000

300,000

Collection from account clients

500,000

200,000

Expenses incurred on account

150,000

650,000

Expenses incurred for cash

800,000

200,000

Average Owner's Equity 10,500,000

5,500,000

Question:Which venture is more profitable? Just by looking at the cash collections and payments, which venture is more liquid?


Arman Barzaga owns and operates the AB Meat Mat. He opened the business on January 1, 2008 selling beef, pork, chicken, canned goods and dairy products. The following balances for the five months of its operation are found in its general ledger and subsidiary ledger:

Cash on Hand P 75,000Cash in Bank 154,734Accounts Receivable 10,250Merchandise Inventory 173,800Prepaid Supplies 1,500Furniture & Equipment 17,655Delivery Jeep 215,200Accounts Payable 7,350Notes Payable dated May 15, 18%, 45 days 150,000Withholding Taxes Payable 2,990SSS and PH Premiums Payable 2,700Pag-ibig Premiums Payable 1,197Barzaga, Capital 471,148Barzaga, Drawing 20,000Sales 258,650Sales Discount 3,500

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Sales Returns & Allowances 2,500Purchases 64,210Freight In 1,105Purchase Returns & Allowances 3,000Purchase Discount 1,550Utilities Expense 1,810Repairs & Maintenance 3,755Taxes & Licenses Expense 3,000Sales Salaries Expense 59,850Input Tax 6,500Commission Expense 14,500Output Tax 15,800Rent Expense 75,000SSS and PH Premium Expense 8,516HDMF Premium Expense 2,000

Accounts Receivable:

Auring Cold Store P

1,450

Dated

May 25

Ben Sunga

2,500

April 12

Chit Grocery

3,750 May 5

Virgie Meat Mart

2,550

May 30

Accounts Payable: Joffre's Farm P 2,450 Dated May 29, 2/10, n/30 Josie's Chicken House 2,500 May 25, 2/15, n/30 Johnny's Piggery 2,400 May 25, 2/15, n/30

Open the subsidiary ledgers and place the balances of the customers’ and creditors’ accounts. Journalize the following transactions and make immediate postings to the subsidiary ledgers. Term of account sale is 2/10, n/30, for all customers. All collections are immediately deposited. All payments are made by check if over P5,000. VAT of 12% already included in all invoices.

June 1 Purchased beef from Joffre’s Farm, P2,464.Terms: 20% down, balance 2/10, n/30.

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3 Purchased chicken and eggs from Josie’s Chicken House, P3,360 list price.Terms: Cash less 5% trade discount.A helper got a cash advance of P150, to be deducted from his salary at the end of the month.

4 Sold goods to Auring Cold Store, P6,160 on account.5 Paid for gas and oil, P336.7 Sold goods to Myrna’s Variety Store, P15,680 and received a 15

day 18% promissory note.8 Chit Grocery paid for its account.

Paid BIR for the withholding tax, SSS, PhilHealth and HDMF for the premiums.

9 Virgie Meat Mart paid P1,500 to apply to its account.10 Cash sales to date, P14,000.12 Paid repairs and maintenance of jeep, P500.

Paid BIR for the VAT.14 Issued a credit memo to Myrna’s Variety Store for spoiled goods

returned worth P336.15 Paid Josie’s Chicken House in full with a check.18 Bought pork from Johnny’s Piggery, P3,080. Terms: 50% down,

balance 2/15, n/30. Freight of P150 FOB Destination.20 Cash purchases, P4,480.21 Ben Sunga issued a 30 day 10% promissory note for his account

which was past due.23 Myrna Variety Store paid for its note. Made a cash deposit.25 Delivered some goods to Chit Grocery on account, P2,240.28 Auring Cold Store paid its May account.29 Paid note to PNB which matures today.30 Paid for rent, P3,000 and utility, P850.

Cash sales to date, P13,440.Paid for salaries, P5,000 less withholding tax P300, SSS and Medicare premiums P200 and the cash advance.

Additional requirements:a. Open the general ledger and post the entries. Extract the balances and

prepare the trial balance as of June 30. Prepare a schedule of accounts receivable and accounts payable and reconcile with the control accounts.

b. From the trial balance, prepare financial statements assuming the goods on hand amounted to P60,685. Close Output Tax and Input Tax to VAT Payable. Utilities, rent and salaries are two-thirds selling expenses.

PROBLEM 5: Completion of Accounting Cycle

The following trial balance was taken from the books of Arthur Trading.

ARTHUR’S TRADING

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TRIAL BALANCEDecember 31, 2008

Debit Credit

Cash P 313,490

Accounts Receivable 35,350

Allowance for Bad Debts P

800

Merchandise Inventory, January 1

51,000

Supplies Inventory 2,650

Office Furniture and Fixtures 37,000

Accumulated Depreciation 4,300


Loans, Payable 200,000

Javier, Capital 163,500

Javier, Drawing 14,400

Sales 403,320

Sales Returns & Allowances 4,050

Purchases 190,600

Purchase Returns & Allowances

3,420

Delivery Expense 6,250

Rent Expense 70,020

Salaries Expense 63,000

Office Expense 3,240

Totals P 791,050

P

791,050

With the following additional information, prepare a ten-column worksheet and the closing entries:

1. It is estimated that 5% of the accounts receivable will be proven uncollectible.

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2. Depreciation for furniture and fixtures is 10%, P20,000 of which was just acquired on November 30.

3. Unused supplies amounted to P1,600.4. Loans payable was for a loan obtained on an 18%, 2-year note dated June 1,

2008 and due on June 1, 2010.5. Unsold goods amounted to P50,400 as of December 31.

Allocate one-fourth of rent to administrative expenses. There are two sales clerks and one office clerk receiving the same amount of salaries. One-fourth of supplies is administrative expense.

PROBLEM 6: Financial Statement Analysis

You are provided with the following information regarding current assets and current liabilities of a restaurant operations for two consecutive years.

Year 2008 Year 2007Current Assets

Cash P 17,765 P

12,778

Credit card receivables 2,815 2,442

Accounts receivables 420 580

Marketable securities 16,000 12,000

Inventories 7,100 6,100

Prepaid expenses 2,600 2,400

Total Current Assets P 46,700 P

36,300

Current Liabilities

Accounts payable P 12,400 P

10,410

Accrued expenses payable 6,200 3,760

Taxes payable 8,400 6,800

Interest payable 800 500

Current mortgage payable 9,900 11,200

Total Current Liabilities P 37,700

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P 32,670

Required:a) Using computations for the following, comment on the liquidity of the

restaurant: Working Capital, Current Ratio, Quick Ratio.b) Sales revenue for Year 2008 is P544,800. The composition of sales revenue is

cash 36%, credit card sales revenue 61.5%, and accounts receivable credit sales revenue of 2.5%. for the year 2008, comment on the efficiency of the collection using the following turnovers and days of collection period for the:

a. Credit card receivablesb. Accounts receivable

c) Cost of sales was P21,472. For year 2008, comment on the efficiency of holding and disposing the inventory using inventory turnover and holding period.


The following transactions occurred for a new resort prior to and during the first month of operations. Study the transactions shown below and record necessary journal entries. Prepare journal entries and postings to T accounts. The business is non-VAT.

a. Don Carmelo invested his land worth P300,000 in Boracay as well as P250,000 cash.

b. He paid P108,000 cash to put up the resort.c. He borrowed P300,000 on a mortgage payable at 8% interest.d. He paid P285,400 cash for resort improvements.e. Equipment was purchased for P48,000, paying P12,000 cash and the balance

owed on a note payable.f. Furnishings were purchased for P120,000 cash.g. Linen inventory was purchased for P7,894 cash.h. Supplies were purchased for P4,200 on account.i. Vending inventory was purchased for P540 cash.j. Room sales revenue during the month was P88,740; 95% cash and 5% credit

cards (use the title Credit Card Receivables).k. Vending sales revenue from vending machines was P8,800 cash.l. Wages of P31,200 cash were paid les 5% withholding tax, 3% SSS Premium,

2% Pag-ibig and 1% PhilHealth Premiums.m. He paid P3,200 on accounts payable.n. The owner paid P4,200 on an annual liability and casualty insurance policy.o. The owner paid P15,000 on mortgage payable plus one month interest.

After journalizing and posting the transactions, prepare a trial balance. Then prepare and complete an eight-column worksheet considering the following adjustments:

1. Estimated closing value for the linen inventory is P7,220.2. Wages earned by casual employees but unpaid are P4,160.3. One-twelfth on the prepaid insurance has been consumed.

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4. Interest owing, but not yet paid on the equipment note payable account is 1% of the balance owing at month-end.

5. Equipment has a 10-year life and a P3,000 residual value.6. Furnishings have an 8-year life and a P7,000 residual value.7. Building has a 20-year life and a P42,000 residual value.8. Supplies used during the first month are P533.

Problem 8: Recording Accounting Transactions

Cherry Lopez runs the Wear Ever Store which sells ladies’ wear. The company is VAT registered. All sales and freight are inclusive of 14% VAT. She carries charge accounts for a few customers. To encourage prompt payments, she offers cash discounts of 2/10, n/30. FOB Shipping Point. She invested on January 1 merchandise worth P200,000. She also invested P500,000 cash of which P400,000 was deposited with Citibank for the account of the business. The following are the transactions for the month of January:

2 Issued a check for rent deposit, P25,000.3 Purchased merchandise from Hongkong Wear $44,800. Terms: FOB Shipping

Point, 2/10, n/30 with prepaid freight of $280 added to the invoice. The exchange rate is P8 to a Hongkong Dollar. Add 12% VAT.

4 Purchased merchandise from Folks Wear, P39,200 less 2% and 1% trade discounts. Terms: FOB Shipping Point, 2/10, 1/15, n/30. Add 12% VAT to the gross invoice price.

5 Paid cash for freight of Folks Wear shipment, P1,440.6 Sold merchandise on account to Sari Store, P8,960. Freight collect, P504.7 Returned merchandise to Folks Wear who credited the account for P1800.11 Issued a check in payment of the Hongkong account.14 Summary of cash sales P14,000 less a 5% withholding tax.15 Paid cash for salaries P14,000 less a 5% withholding tax.16 Issued a check in payment of Folks Wear account.17 Received cash in full of Sari account. This was immediately deposited with Citibank.18 Sold merchandise for cash, P16,800. This was immediately deposited with Citibank.19 Cash refund to customers amounted to P12,320.20 Sold merchandise on account to Robinson’s P33,600 plus prepaid freight P1,456.21 Sold merchandise to Citibank creditcardholders, P9,520. (Considered as cash

sales. Use Cash in Bank account).22 Received merchandise returned by Robinson’s P4,704. VAT included.23 Service fee charged by Citibank, P1,125. (Use the title service charges and

decrease cash in bank).24 Paid for utilities in cash P5,650 and rent P15,000.25 Paid for salaries less 5% withholding tax, 3% SSS, 1.5% PhilHealth and 2% Pag-ibig.28 Issued a check in payment of the rent P12,500.30 A physical count of inventory showed P553,000 still unsold.

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Required:1. Journalize the transactions.2. Open the creditor’s and customers’ subsidiary ledger and post the entries.3. Post the entries to the control accounts – Accounts Receivable and Accounts

Payable T accounts. Prove the balances of the subsidiary ledgers against the control accounts.

PROBLEM 9: Completion of the Accounting Cycle

You have been engaged to prepare the financial statements for Credo’s Auto Supply at the close of its annual calendar year period on December 31, 2007. Its general ledger shows the following balances:

Cash on hand P 14,750

Cash in bank 375,275


Supplies Inventory 1,900

Merchandise Inventory, January 1 165,300

Prepaid Interest 6,000

Store Equipment 115,000

Office Furniture & Fixtures 59,000


Loans Payable 100,000

Credo, Capital 444,725

Credo, Personal 32,500

Sales 897,000

Sales Discount 16,800

Purchases 310,000

Purchases Discounts 880

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Sales Salaries Expense 91,600


Rent Expense 108,000

Additional data for adjustment:1. Merchandise on hand December 31, 2007 was 40% of the total available for

sale during the period. 2. Supplies used up amounted to P1,400 of which P400 was for office use.3. The estimated life of the store equipment is 10 years, P50,000 of which

represented Credo’s investment on January 1 of the current year with the balance acquired six months after.

4. The office furniture and fixtures has a depreciated rate of 20% per year.5. A note for 120 days was discounted at 18% by the bank on the loan obtained

from them on December 11, 2007.6. Rent Expense represents one and a half years rent paid on January 1, 2007.

One fourth of the space was for office use.7. Sales salaries incurred but not yet amounted to P450.8. Unpaid utility bills amounted to P3,500. One fourth of utilities was for office

use.

Required:1. Prepare a ten-column worksheet.2. Prepare an income statement using the functional presentation format.3. Prepare a properly classified balance sheet supported by a capital statement.4. Prepare the post closing trial balance.


Candle light was opened on July 1 by Maribel Lopez with a total investment of P250,000 of which P50,000 was in the form of candles and lamps and P200,000 in cash.

July 2 Purchased scented candles from pax Candles, P7,500. Terms: P2,500 down

balance 2/10, n/30.3 Purchased capiz shell decors from Divisoria Capiz Crafts distributor,

P10,000.Term: 3% com, n/30. FOB Shipping Point, Freight Collect.

4 Freight on capiz shipment paid in cash, P750.5 Cash sales amounted to P15,000.7 Sold to Manuela Shopping mart goods costing P9,000.

Terms: 4,000 down, balance 2/5, 1/10, n/30.8 Purchased office supplies from National Bookstore, P1,500. Terms:

COD

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10 Returned part of candles purchased from Pax which were found unsatisfactory,

P500.12 A customer returned merchandise and was given a cash refund of

P220.13 The account of Manuela was collected.15 Paid salaries in cash to office clerk, P2,500 and store helper, P3,500.17 Delivered goods to Kulasa Scents, P14,000. Terms: COD.18 Paid Divisoria Capiz Crafts P5,000 less the corresponding discount.19 Marivic Pena, a friend, bought goods with a list price of P5,500. Terms:

1% and 2% trade discounts, balance 2/10, n/30. FOB Shipping Point, Freight prepaid for

Pena P500.20 Paid Pax Candles in full of account.25 Collected 20% from Marivic.31 Paid 3% percentage tax on net sales.

Required:a. Journalize the above transactions completed during the month. The firm is

non-VAT registered. Input and Output Tax should not be recorded although all purchases and freight are VAT inclusive.

PROBLEM 11: Completion of the Accounting Process

The trial balance of Diana Margallo, Interior Decorator, for December 31, 2007 appears below:

Diana Margallo, Interior Decorator

Trial Balance

December 31, 2007

CashP186,00

0


Prepaid Rent 19,200

Equipment 177,500

Accumulated Depreciation - Equipment P5,500


Notes Payable 12,000

Margallo, Capital 300,000

Margallo, Drawings 19,000

Professional Fees 276,300

Salaries Expense 84,100

Supplies Expense 17,000

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TotalsP611,80

0P611,80

0

Additional data:a. Prepaid rent is for the period October 1, 2007 to May 31, 2008.b. Depreciation rate on the equipment is 5% per year. Scrap value of P35,000.c. Salaries incurred but unpaid as of December 31, P12,000.d. The note was issued on December 11 for 30 days at 12%.e. Provision for bad debt is 5% of the outstanding accounts of customers.f. Supplies on hand, P5,000

Required:a. Prepare a 10- column worksheet for the year ended December 31, 2007.b. Prepare the closing entries.c. Prepare the reversing entries.

PROBLEM 12: RECORDING & POSTING TRANSACTIONS

Record the following transactions of Vilma Music Center. 12% VAT is included in all sales, purchases and freight. Make immediate postings to the subsidiary ledgers. Post entries to accounts payable and accounts receivable general ledger and extract balances. Reconcile the balances of the subsidiary ledgers against the control accounts.

July 1 Vilma Reyes opened the Vilma Music Center with merchandise worth P80,000

and equipment with a current value of P150,000 which original value two years ago was P300,000. She still owes Music Magic Inc. P6,000 for this electronic equipment which was assumed by the business. Journal Voucher 1.

2 Vilma made an additional investment in cash, P250,000 of which P200,000 was immediately deposited with PCIB for the account of the store. OR No. 1. She made a policy of issuing checks for payments amounting to P5,000 or more.

5 Purchased goods from Sherwin Co. P22,400.Terms: 2/10, 1/15, n/30. Invoice No. 123. FOB Shipping Point, Freight Collect.

6 Paid WGA for freight, P1,400 on goods bought. Cash Voucher No. 1.

7 Issued a check for P5,000 and a 10-day note for P4,856 to Fine Furnishing for office tables and chairs bought.

8 Paid Sherwin Co. P5,000.

10 Ana Gonzalo bought goods from us, P19,600. Terms: 50% down, balance 2/10, n/30.

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12 Sold goods to A. Dimaano, P7,280. Terms: n/30

14 Cash purchases of merchandise from Beautiful Music, P39,200. Invoice No. 901.

15 Received a cash refund of P2,520 for goods returned to Beautiful Music.

18 Vilma withdrew cash in payment for a personal liability to Ms. Dizon, P5,000.

20 Ana Gonzalo issued a 10-day, 6% note in full settlement of her account.

22 A. Dimaano paid 1/3 of his account.Made a full payment for Sherwin.

23 Bought goods from Alpha Music to replenish stock, P14,560.Terms: 15 dasy, 18% note. Invoice No. 308.Dimaano paid the balance of his account.

28 Sold goods to Universal Bank for P44,800. Terms: 2/10, n/30. FOB Destination.

29 Cash sales summary of P56,000 including P24,640 PCIB bankcard sales. (Use Cash In Bank for the PCIB bankcards.)

30 Ana Gonzalo paid for the note.Paid freight of P280 on goods sold to Universal.

31 Salaries were paid, P15,000 less 5% withholding tax, 3% SSS, 1.5% PhilHealth and 2% HDMF.

PCIB charged a 3% service fee against the firm’s cash in bank for the PCIB bankcard sales.

PROBLEM 13: COMPLETION OF THE ACCOUNTING CYCLE

The following unadjusted trial balance was prepared for Maria Jasmine as of December 31, 2008:

Maria Jasmine, Park PlaceUnadjusted Trial Balance

December 31, 2008

Account No. Account Title Debit Credit

101 Cash in bank 200,000

102 Cash on hand 23,000

103 Accounts receivable

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176,000

103-A Allowance for bad debts 3,000

104 Prepaid insurance 4,800

120 Leasehold improvements 504,000

120-AAccumulated depreciation-leasehold improvements

42,000

121 Furniture and fixtures 30,000

12-AAccumulated depreciation-furnitures and fixtures

3,000

201 Accounts payable 35,000

202 14% Notes payable 400,000

203 SS & EC Premiums payable 534

204 Pag-ibig Premiums payable 200

205 Phil Health Premiums payable 176

206 Withholding taxes payable 1,516

207 Advances from tenants 15,000

301 Maria Jasmine, Capital 144,500

302 Maria Jasmine, Personal 85,500

401 Parking Fees Income 869,157

402 Interest Income 14,000

506 Office Supplies Expense 8,000

507 Pag-ibig Premiums Expense 2,200

508 Phil Health Premiums Expense 1,926

509 SS & EC Premiums Expense 12,657

510 Rent Expense 180,000

511 Salaries Expense 186,000

512 Taxes and Licenses 18,000

513 Utilities expense

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96,000

Totals

1,528,083

1,528,083

Maria Jasmine began business two years ago on January 1, 2007 leasing the basement of Jaka Towers. The building tenants are her regular customers, come of them paying in advance. The following are data available on December 31, 2008:

a. Salary of casual employee in the amount of P4,000 has been incurred as of December 31, 2008, but remains unpaid.

b. A count of the office supplies showed P1,400 remaining on hand as at December 31.

c. Two months parking fees were received in advance from five tenants on December 1, 2008.

d. Maria Jasmine made some improvements on the basement building on January 1, 2007. Her contract runs for ten years.

e. The company took out a twelve-month insurance policy effective April 1, 2008.

f. Maria Jasmine acquired P20,000 of the furniture and fixtures on January 1, 2007. Estimated useful life is five years, scrap value of P5,000. The balance was acquired on June 30, 2008 with an estimated life of 5 years, no scrap value.

g. The accountant maintains an allowance for doubtful accounts equal to five percent of the outstanding account balance.

h. The note issued to Philippine Bank was dated November 2, 2008 and is due January 31, 2009.

i. 3% percentage tax on December gross receipts of P193,800 is due and payable.

j. Accrue employer’s share on December payroll contributions for two employees whose monthly salary is P7,750 each.

Required:a. Prepare a 10-column working papers.b. Using the working paper as a basis, prepare the adjusting entries in good

form.c. Prepare properly classifies financial statements with supporting notes.d. Prepare the closing entries and the post-closing trial balance.

PROBLEM 14: RECORDING & POSTING TRANSACTIONS

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Parisian Furniture Palace, owned and operated by Ana Rey, engaged in the following transactions in September. All accounts are offered on terms of 2/10, n/30. Prepare journal entries, subsidiary ledger postings for customers’ accounts and suppliers’ accounts, general ledger postings to Accounts Receivable and Accounts Payable. Reconcile the balances of the subsidiary ledgers to the balances of the control accounts. A 12% VAT is included in all purchases, sales and freight. The company is VAT registered.

5 Purchased and furniture from Ang’s Furniture Mart P134,400. Terms: 2/10, n/30. FOB Shipping Point, Freight Collect.

8 Cash was paid for the freight of the furniture, P6,160.

10 Paid Ang’s Furniture 50% of its liability.

14 Sold to Danilo’s Apartelle furniture worth P69,440 on account.

15 Paid Ang’s Furniture in full of account.

16 Paid for shipment of furniture to Danilo’s Apartelle, P1,680.

17 P2,632 worth of furniture was returned for credit by Danilo’s Apartelle.

24 Danilo’s Apartelle paid its account in full.

25 Purchased furniture for office use from Hill Furnishings of Pamapanga, P101,360.Terms:50% down, balance 2/10, n/30. FOB Shipping Point, P5,600 Freight Prepaid.

29 Sold furniture to Mr. Ramos of Ayala Alabang P64,400. Terms: Down payment of P25,000, balance on account. FOB Destination.

30 Paid freight on Ramos shipment, P560.

31 Paid in full the account with Hill Furnishings.

PROBLEM 15: COMPLETION OF THE ACCOUNTING CYCLE

The following account balances appeared in the general ledger of Dr. Robin Rubio at the end of December 2008, the second year of his private medical practice:

Cash P

350,403

Accounts receivable

205,000

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Allowance for bad debts 7,550

Prepaid supplies 11,500

Library

155,000

Accumulated depreciation - Library 15,500

Office furniture and fixtures 96,000

Accumulated depreciation - office furniture and fixtures 2,000

Loans payable

200,000

Accounts payable 18,000

SS and EC premiums payable 200

HDMF premiums payable 100

PhilHealth premiums payable 75

Withholding taxes payable 427

Rubio, Capital

180,650

Rubio, Personal 42,000

Medical Fees Earned

729,000

HDMF premiums expense 1,100

PhilHealth Premiums expense 825

Salaries expense 72,000

Rent expense

110,000

SS and EC premiums expense 4,974

Taxes and licenses 9,000

Utilities expense 75,700

Interest expense

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Practice problems

20,000

Data for the adjustments follows:

a. Rent expense, which was regularly paid by the doctor, represents payment for the rent from January to November only.

b. The estimated annual depreciation of the property and equipment is 10% per year of its acquisition cost. The library is part of the doctor’s investment at the start of his practice on January 1, 2007 while the office furniture and equipment were acquired in two groups:

P48,000 was acquired August 1, 2007 and the balance was acquired six months after the first acquisition.

c. Included in the medical fees is P12,500 received in advance for surgical services to be rendered early next year.

d. Only P2,750 of the supplies has not been used up.

e. 3% taxes accrued at the end of the year for December gross receipts of P75,000.

f. Interest expense includes the 18% interest on a 200-day loan discounted when the loan was taken 60 days ago.

g. Received a bill from Meralco for electric consumption for the month of December, P3,500.

h. A provision for uncollectible accounts equal 5% of the outstanding receivables is deemed reasonable.

i. Employer’s payroll liabilities for Miss Lapid for the month of December have not been recorded.

Required:a. Prepare a 10-column worksheet as of December 31.b. Prepare financial statements with supporting notes.c. Journalize your adjustments.d. Journalize your closing entries based on the income statement in the

worksheet.e. Prepare a post-closing trial balance.f. Journalize the reversing entries.

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CB Practice Problems

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