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
trade
7
8
9
10
15
16
17
18
24
26
28
30

Purchased compact discs from Octo Arts. Terms: P16,800 list price less
discounts of 2% and 1% balance 1/10, n/30.
Purchased tapes from Villar Records at an invoice price of P8,960.
Terms: 2/10, n/30. FOB Shipping Point.
P560 freight paid for Villar shipment.
Sold tapes to Thats Entertainment, P7,840 on account.
Compact discs invoiced at P784 were found defective and returned to
Octo Arts.
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.
Account sales to Music & Magic amounted to P6,720.
Paid 50% of the amount owed to Villar Records.
A cash customer who has purchased compact discs for P1,120 returned
them for being defective and got a cash refund.
Music & Magic paid one-half of its account and was given the
corresponding discount.
Thats Entertainment paid its account.
Cash sales for the second half of the month P22,400.
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 Kenneths Toyland presented the following ledger accounts and
their balances as of June 30, 2008, the end of the fiscal period:
Cash in Bank
Cash on Hand
Accounts Receivable
Allowance for Bad Debts
Notes Receivable

487,288
75,200
112,000
4,000
4,800
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Merchandise Inventory, July 1
Prepaid Store Insurance
Store Furniture & Fixtures
Accumulated Depreciation - Store Furniture & Fixtures
Office Furniture & Fixtures
Accumulated Depreciation - Office Furniture & Fixtures
Accounts Payable
Notes Payable
Unearned Commission
Withholding Taxes Payable
SSS & EC Premiums Payable
PhilHealth Premiums Payable
Pag-ibig Premiums Payable
Alfonso, Capital
Alfonso, Personal
Sales
Sales Return & Allowances
Sales Discount
Purchases
Freight In
Purchase Returns and Allowances
Purchases Discount
Advertising Expense
Sales Salaries Expense
Office Salaries Expense
Rent Expense
Taxes Expense
Utilities Expense
Interest Expense
Interest Income
SSS & EC Premiums Expense
PhilHealth Premiums Expense
Pag-ibig Premiums Expense

89,500
6,300
16,000
500
15,000
900
54,000
180,000
2,400
490
522
100
200
521,900
30,000
583,200
5,020
2,880
242,000
6,000
3,000
2,000
9,000
60,000
33,400
96,800
12,000
42,400
600
3,000
6,424
1,200
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.
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Practice problems
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 threefourth 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
statements. Evaluate which of the two ventures is more profitable by computing for
its operating ratio, profit ratio, and return on owners equity.

Revenue for account services

Revenue for cash services
Collection from account clients
Expenses incurred on account
Expenses incurred for cash
Average Owner's Equity

Venture A
750,000
1,250,000
500,000
150,000
800,000
10,500,000

Venture B
1,200,000
300,000
200,000
650,000
200,000
5,500,000

Question:
Which venture is more profitable? Just by looking at the cash collections and
payments, which venture is more liquid?
PROBLEM 4: Accounting Process
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
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Practice problems
following balances for the five months of its operation are found in its general
ledger and subsidiary ledger:
Cash on Hand
Cash in Bank
Accounts Receivable
Merchandise Inventory
Prepaid Supplies
Furniture & Equipment
Delivery Jeep
Accounts Payable
Notes Payable dated May 15,
18%, 45 days
Withholding Taxes Payable
SSS and PH Premiums Payable
Pag-ibig Premiums Payable
Barzaga, Capital
Barzaga, Drawing
Sales
Sales Discount
Sales Returns & Allowances
Purchases
Freight In
Purchase Returns & Allowances
Purchase Discount
Utilities Expense
Repairs & Maintenance
Taxes & Licenses Expense
Sales Salaries Expense
Input Tax
Commission Expense
Output Tax
Rent Expense
SSS and PH Premium Expense
HDMF Premium Expense

Accounts Receivable:
Auring Cold Store
Ben Sunga
Chit Grocery
Virgie Meat Mart

1,450
2,500
3,750
2,550

75,000
154,734
10,250
173,800
1,500
17,655
215,200
7,350
150,000
2,990
2,700
1,197
471,148
20,000
258,650
3,500
2,500
64,210
1,105
3,000
1,550
1,810
3,755
3,000
59,850
6,500
14,500
15,800
75,000
8,516
2,000

Dated

May 25
April 12
May 5
May 30
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Accounts Payable:
Joffre's Farm
Josie's Chicken House
Johnny's Piggery

2,450
2,500
2,400

Dated

May 29, 2/10, n/30

May 25, 2/15, n/30
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
3

4
5
7
8
9
10
12
14
15
18
20
21
23
25
28
29
30

Purchased beef from Joffres Farm, P2,464.

Terms: 20% down, balance 2/10, n/30.
Purchased chicken and eggs from Josies 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.
Sold goods to Auring Cold Store, P6,160 on account.
Paid for gas and oil, P336.
Sold goods to Myrnas Variety Store, P15,680 and received a 15
day 18% promissory note.
Chit Grocery paid for its account.
Paid BIR for the withholding tax, SSS, PhilHealth and HDMF for
the premiums.
Virgie Meat Mart paid P1,500 to apply to its account.
Cash sales to date, P14,000.
Paid repairs and maintenance of jeep, P500.
Paid BIR for the VAT.
Issued a credit memo to Myrnas Variety Store for spoiled goods
returned worth P336.
Paid Josies Chicken House in full with a check.
Bought pork from Johnnys Piggery, P3,080. Terms: 50% down,
balance 2/15, n/30. Freight of P150 FOB Destination.
Cash purchases, P4,480.
Ben Sunga issued a 30 day 10% promissory note for his account
which was past due.
Myrna Variety Store paid for its note. Made a cash deposit.
Delivered some goods to Chit Grocery on account, P2,240.
Auring Cold Store paid its May account.
Paid note to PNB which matures today.
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.

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Practice problems

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.
ARTHURS TRADING
TRIAL BALANCE
December 31, 2008

Cash
Accounts Receivable
Allowance for Bad Debts
Merchandise Inventory, January 1
Supplies Inventory
Office Furniture and Fixtures
Accumulated Depreciation
Accounts Payable
Loans, Payable
Javier, Capital
Javier, Drawing
Sales
Sales Returns & Allowances
Purchases
Purchase Returns & Allowances
Delivery Expense
Rent Expense
Salaries Expense
Office Expense
Totals

Debit
313,490
35,350

Credit

800

51,000
2,650
37,000
4,300
15,710
200,000
163,500
14,400
403,320
4,050
190,600
3,420

6,250
70,020
63,000
3,240
791,050

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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Practice problems
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 2007

Current Assets
Cash
Credit card receivables
Accounts receivables
Marketable securities
Inventories
Prepaid expenses
Total Current Assets

17,765
2,815
420
16,000
7,100
2,600
46,700

12,400
6,200
8,400
800
9,900
37,700

12,778
2,442
580
12,000
6,100
2,400
36,300

Current Liabilities
Accounts payable
Accrued expenses payable
Taxes payable
Interest payable
Current mortgage payable
Total Current Liabilities

10,410
3,760
6,800
500
11,200
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 receivables
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Practice problems
b. 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.
PROBLEM 7: Accounting Process
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.
2.
3.
4.
5.
6.
7.
8.

Estimated closing value for the linen inventory is P7,220.

Wages earned by casual employees but unpaid are P4,160.
One-twelfth on the prepaid insurance has been consumed.
Interest owing, but not yet paid on the equipment note payable account is 1%
of the balance owing at month-end.
Equipment has a 10-year life and a P3,000 residual value.
Furnishings have an 8-year life and a P7,000 residual value.
Building has a 20-year life and a P42,000 residual value.
Supplies used during the first month are P533.

Problem 8: Recording Accounting Transactions

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Practice problems
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
3

Issued a check for rent deposit, P25,000.

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 Robinsons 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 Robinsons 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.
Required:
1. Journalize the transactions.
2. Open the creditors 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.

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Practice problems

PROBLEM 9: Completion of the Accounting Cycle

You have been engaged to prepare the financial statements for Credos 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
Cash in bank
Accounts Receivable
Supplies Inventory
Merchandise Inventory, January 1
Prepaid Interest
Store Equipment
Office Furniture & Fixtures
Accounts Payable
Loans Payable
Credo, Capital
Credo, Personal
Sales
Sales Discount
Purchases
Purchases Discounts
Sales Salaries Expense
Utilities Expense
Rent Expense

14,750
375,275
64,000
1,900
165,300
6,000
115,000
59,000
7,500
100,000
444,725
32,500
897,000
16,800
310,000
880
91,600
89,980
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 Credos 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:
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Practice problems
1.
2.
3.
4.

Prepare
Prepare
Prepare
Prepare

a ten-column worksheet.
an income statement using the functional presentation format.
a properly classified balance sheet supported by a capital statement.
the post closing trial balance.

PROBLEM 10: Accounting Process

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
down
3
P10,000.

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

balance 2/10, n/30.
Purchased capiz shell decors from Divisoria Capiz Crafts distributor,

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

Freight on capiz shipment paid in cash, P750.
Cash sales amounted to P15,000.
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
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.
4
5
7

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

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Practice problems
The trial balance of Diana Margallo, Interior Decorator, for December 31, 2007
appears below:
Diana Margallo, Interior Decorator
Trial Balance
December 31, 2007
Cash

P186,00
0

Accounts Receivable

71,200

Prepaid Rent

19,200

Equipment

177,500

Accumulated Depreciation - Equipment

P5,500

Accounts Payable

18,000

Notes Payable

12,000

Margallo, Capital

300,000

Margallo, Drawings

19,000

Professional Fees

276,300

Salaries Expense

84,100

Supplies Expense

17,000

Utilities Expense

37,800
P611,80
0

Totals

P611,80
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.
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Practice problems

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.

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.

Purchased goods from Sherwin Co. P22,400.

Terms: 2/10, 1/15, n/30. Invoice No. 123. FOB Shipping Point, Freight Collect.

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

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

Paid Sherwin Co. P5,000.

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

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 firms 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 Place
Unadjusted Trial Balance
December 31, 2008
Account
No.

Account Title

Debit

101

Cash in bank

200,000

102

Cash on hand

23,000

103

Accounts receivable

176,000

103-A

Allowance for bad debts

Credit

3,000

104

Prepaid insurance

4,800

120

Leasehold improvements
Accumulated depreciation-leasehold
improvements

504,000

30,000

12-A

Furniture and fixtures

Accumulated depreciation-furnitures and
fixtures

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
207

Withholding taxes payable

Advances from tenants

1,516

120-A
121

42,000

3,000

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Practice problems
15,000
301

Maria Jasmine, Capital

144,500

302

Maria Jasmine, Personal

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

96,000

Totals

1,528,08
3

85,500

1,528,08
3

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
Page 15 of 18

Practice problems
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 employers 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
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 Angs Furniture Mart P134,400. Terms: 2/10,
n/30. FOB Shipping Point, Freight Collect.

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

10

Paid Angs Furniture 50% of its liability.

14

Sold to Danilos Apartelle furniture worth P69,440 on account.

15

Paid Angs Furniture in full of account.

16

Paid for shipment of furniture to Danilos Apartelle, P1,680.

17

P2,632 worth of furniture was returned for credit by Danilos Apartelle.

24

Danilos Apartelle paid its account in full.

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Practice problems
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
Accounts receivable
Allowance for bad debts
Prepaid supplies
Library
Accumulated depreciation - Library
Office furniture and fixtures
Accumulated depreciation - office furniture and fixtures
Loans payable
Accounts payable
SS and EC premiums payable
HDMF premiums payable
PhilHealth premiums payable
Withholding taxes payable
Rubio, Capital
Rubio, Personal
Medical Fees Earned
HDMF premiums expense
PhilHealth Premiums expense
Salaries expense
Rent expense
SS and EC premiums expense
Taxes and licenses
Utilities expense
Interest expense

350,403
205,000
7,550
11,500
155,000
15,500
96,000
2,000
200,000
18,000
200
100
75
427
180,650
42,000
729,000
1,100
825
72,000
110,000
4,974
9,000
75,700
20,000

Data for the adjustments follows:

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Practice problems
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 doctors 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.

Employers 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.

Page 18 of 18