True or False

1. False – No effect to equity.

2. False – Temporary withdrawal, not permanent.
3. True
4. False – Recorded at gross.
5. False – Switch endorser and endorsee.
6. True
7. False – Liquidity
8. False – Credit on income summary.
9. True
10. False – Not always.
11. False
12. False
13. False
14. False
15. False
16. False
17. True
18. False
19. False
20. True

Problem Solving
1.
Principal (80,000 x .70) ₱56,000
Interest (56,000 x .12 x 90/360) 1,680
Maturity value ₱57,680

Maturity value ₱57,680

Discount (SQUEEZE) (1081.50)
Net proceeds ₱56,598.50

Maturity value ₱57,680

Discount period 45/360
Discount rate (SQUEEZE) .15
Discount ₱1081.50

2.
Basic pay (8 x 400 x 20) ₱64,000
Overtime pay (2 x 4 x 400 x 1.3) 4,160
Gross pay ₱68,160

3.
Gross pay (68,160/2) ₱34,080
SSS (350)
Philhealth (275)
Pag-ibig (100)
Withholding Tax (SQUEEZE) (10,006.50)
Net pay ₱23,348.50

4.
Capital, beg. (100,500 – 42,700) ₱57,800
Additional investment 20,000
Net Income 30,000
Withdrawals (SQUEEZE) (24,120)
 Capital, end. (100,500 x 1.3 – 42,700 x 1.1) ₱83,680

5.
Allowance for doubtful accounts (146,400 – ₱140,600
5,800)
Divided by: Accounts receivable 703,000
% uncollectible 0.20
% collectible (1 – 0.2) 0.80

6.
Note Receivable P 75000
Add: Interest 2125
Maturity Value 77125
Multiply by: Period 40/360
Discount rate 0.15
Discount P 1285.42

7.
Maturity Value P 77125
Interest Expense 1285.42
Proceeds P 75839.58

8.
Total revenues P 319000
Total expenses (235364)
Net income P 83636

9.
Office Equipment P 250000
Less: Accumulated Depreciation 48000 P 202000
Furnitures and Fixtures 120000
Less: Accumulated Depreciation 14000 106000
TOTAL P308000

10.
Balance of inventory P 5280
Total inventory 2520
Amount of adjustment P 2760

11.
Units delivered 5000
Units on hand (3500)
Units sold 1500
Multiply by selling price P 350
Multiply by commission rate 0.2
Commission Income P 105000

12.
Depreciation of the old asset P 36000
Equipment Depreciation ((150000-6000)/10)*6/12 7200
Total depreciation for the fiscal year P 43200
 13.
Required rate of bad debts 0.05
Required allowance 26000
Credit balance (2000)
Additional allowance for bad debts P 24000

14.
Customer Amount % Doubtful Total
One 50,000 0.15 P 7,500
Two 90,000 0.1 9,000
Three 35,000 0.2 7,000
Four 100,000 0.05 5,000
Req. Allowance for doubtful accounts, Dec. 31 P 28,500
Less: Allowance for doubtful accounts, Jan. 1 15,500
Doubtful Accounts Expense P 13,000
15.
Equipment Partial Solutions Increase (Decrease)
A whole CV to be expensed on its last year (1,600,000.00)
B gain on sale = (2,400,000 x 2) - 2,400,000 2,400,000.00
C annual depreciation = 4,800,000 / 4 (1,200,000.00)
D annual depreciation = 8,000,000 / 8 (1,000,000.00)
Net Effect (1,400,000.00)

16-17.

Additional Investment P 10,000

Repayment of Loan (5,000)
Owner’s Drawing (2,000)
Cash Flow from Financing Activities P 3,000

Cash paid for purchase of equipment P (22,000)

Cash from sale of land 12,000
Cash flow from Investing Activities P (10,000)

18.
Equity, end P 110,000
Net Income (40,000)
Withdrawals 5,000
Equity, beg P 75,000
Assets, beg (150,000)
Liabilities, beg P 75,000
Multiply by: Ratio (75,000/150,000) 0.50
Current Liabilities P 37,500

Martha Repair Service Center

Income Statement
For the Year Ending December 31, 2013
Note
Service Income P 970,000
Other Income 1 46,500
Total Income P 1,016,500
Expenses
Salaries Expense P 162,000
Depreciation Expense
66,000
SSS and Philhealth Premiums Expense
65,000
Supplies Expense
44,000
Utilities Expense
34,000
Doubtful Accounts Expense
23,000
Interest Expense
12,000 (406,000)

Net Income P 610,500

Martha Repair Service Center

Statement of Changes in Owner's Equity
For the Year Ending December 31, 2013
Martha, Capital - January 1 P 480,000
Add: Net income 610,500
Sub-total P 1,090,500
Less: Martha, Drawing (50,000)
Martha, Capital - December 31 Php 1,040,500

Martha Repair Service Center

Statement of Financial Position
December 31, 2013
ASSETS Note
Current Assets
Cash P 686,750
Trade and Other Receivables 2 290,200
Prepaid Expenses 3 110,000
Total Current Assets P 1,086,950

Non-Current Assets
Property, Plant and Equipment 4 990,000

TOTAL ASSETS P 2,076,950

LIABILITIES AND OWNER'S EQUITY

Current Liabilities
Trade and Other Payables 5 P 316,450

Non-Current Liabilities
Mortgage Payable P 400,000
Notes Payable (due after 4 years) 320,000
Total Non-Current Liabilities 720,000
Total Liabilities P 1,036,450

Owner's Equity
Martha, Capital 1,040,500

TOTAL LIABILITIES AND OWNER'S EQUITY P 2,076,950

Martha Repair Service Center

Statement of Cash Flows
For the Year Ending December 31, 2013
Cash flows from operating activites
Receipts
Cash collections from customers P 630,000
Interest income 16,000
Dividends income 13,000
Rent income 16,000
Payments
For operating expenses (375,000)
Interest expense (12,000)
Net cash from operating activities P 288,000

Cash flows from investing activites

Receipt
From sale of furniture P 3,500
Payment
For purchase of office equipment (42,000)
Net cash used by investing activities (38,500)

Cash flows from financing activites

Receipt
Proceeds from bank loan P 468,000
Payments
For principal of loan (266,000)
Cash withdrawal by owner (50,000)
Net cash from financing activities 152,000

Net increase/decrease in cash P 401,500

Cash balance - January 1 285,250
Cash balance - December 31 P 686,750

Note 1 Other Income

Dividends Income P 13,000
Gain on Sale of Equipment 1,500
Interest Income 16,000
Rent Income 16,000
Total Other Income P 46,500
Note 2 Trade and Other Receivables
Accounts Receivable P 130,000
Allowance for Doubtful Accounts (34,000) P 96,000
Notes Receivable 190,000
Advances to Employees 2,500
Accrued Rent Income 1,700
Total Trade and Other Receivables P 290,200

Note 3 Prepaid Expenses

Prepaid Insurace P 28,000
Prepaid Interest 24,000
Supplies 58,000
Total Prepaid Expenses P 110,000

Note 4 Property, Plant and Equipment

Buildings 670,000
Less: Accumulated Depreciation (65,000) P 605,000
Furniture and Fixtures 90,000
Less: Accumulated Depreciation (15,000) 75,000
Office Equipment 340,000
Less: Accumulated Depreciation (30,000) 310,000
Total Property, Plant and Equipment P 990,000

Note 5 Trade and Other Payables

Accounts Payable P 150,450
SSS and Philhealth Premiums Payable 54,000
Pag-ibig Contributions Payable 38,000
Unearned Interest Income 32,000
Withholding Taxes Payable 42,000
Total Trade and Other Payables P 316,450