Short Problems - Chapters 1 And 2

Short Problems Chapters 1 and 2 1. During the year 2004, William Company had revenues of P87,500 and expenses of P57,500. Total liabilities at year end amounted to P112,500, while the owner’s equity at the start of the year was P37,500. Compute for the total assets at the end of the year. 2. Sharon Company had total assets of P375,000 and liabilities of P122,500 on January 1, 2005. After six months of business operations, the assets totaled P475,000 while outstanding obligations amounted to P89,000. During the six-month period, the proprietor withdrew cash of P37,500 and some store supplies valued at P1,250. During the same period, the owner made additional investments of P61,250 cash and a secondhand store equipment originally costing P62,500 but with a current fair market value of only 60% of its original cost. Compute for the net income or net loss during the sixmonth period. 3. Manny Pacman Boxing School reported the following information pertaining to the business on December 31 of the current year: Property, Plant, and Equipment (net of depreciation) Accounts Receivable Prepaid Insurance Unearned Boxing Revenue Cash Bank Loans Payable Land Accounts Payable Unused Supplies Marketable Securities Salaries Payable

P1,250,000 300,000 25,000 100,000 625,000 275,000 1,125,000 150,000 18,750 350,000 150,000

a. How much are the total assets of Pacman Boxing School on December 31? b. What is the account of Manny Pacman’s Capital on December 31? 4. The following accounts appear in the trial balance of Kikay Company for the month of May 31, 2005: Debit Credit Cash P2,300 Accounts Receivable 850 Office Supplies 800 Accounts Payable P2,150 Kikay, Capital 1,250 Service Revenue 2,150 Wages Expense 1,750

However, the following errors were made to some of the accounts in the trial balance above: a. The cash account is overstated by P400. b. Services rendered on account for P300 was not recorded at all. c. A P500 debit to Accounts Payable was posted as P50. d. Service Revenue of P100 was recorded as debit rather than credit. What is the corrected debit and credit column total of Kikay Company’s trial balance? 5. Pasaway began the year 2004 with a cash of P43,000. In addition to earning a net income of P25,000 and making an owner’s withdrawal of P15,000 for personal use, the owner borrowed P60,000 from a local bank and purchased a brand new equipment for P90,000 with cash. Also, accounts receivable increased by P6,000 for services rendered on account. Assuming there were no other company transactions, compute the amount of cash on hand at the end of the year. 6. Hanah Pin started her own business. She does not know about the double entry accounting system, but managed to keep track of the following information for a threemonth operation: Cash invested in the business Second-hand equipment invested Cash received from customers Accounts receivable Salaries paid to her employees Purchase of new computer Supplies used and paid Rent incurred but unpaid Cash withdrawal for personal use

P50,000 75,000 46,250 11,250 3,750 7,500 750 1,250 2,500

Ignore depreciation of fixed asset. Compute the net income of Hanah Pin for the threemonth period. 7. If Hanah Pin invested old furniture and fixtures to her business costing P12,500 but with a current market value of only P8,750, what would be the balance of the owner’s equity at the end of the three-month period? 8. Matam Puhin owns a company in Greenhills. It reported the following assets as of December 31, 2004: Cash, P17,500; Accounts Receivable, P38,500; Inventory, P25,000; Land, P100,000; Equipment, P77,500; Factory Building, P1,250,000. Total owner’s equity is 2/3 of the total assets. The total liabilities are ½ of the total owner’s equity. The accounts payable is 1/6 of the total liabilities. What is the balance of the accounts payable?

9. On December 31, 2004, Paha Mak Company had total assets of P40,000 and total liabilities of P10,000. During 2005, the company had service revenues amounting to P35,000 and total expenses of P25,000. During the year, Paha Mak took P5,000 for his personal use. Assuming that on December 31, 2005, the total assets of the company amounted to P50,000, how much was the year-end total liability balance? 10. The following has been extracted from the records of Dok Leng after the first six months of operation: Dok Leng, Capital Equipment (invested company) Accounts Receivable Service Revenue Salaries and wages paid Rent expense paid Supplies purchased Accounts receivable

in

the

P112,500 12,500 30,000 61,250 8,750 5,000 6,250 3,125

Assuming that part of the purchase price of the supplies was paid in cash and that Dok Leng invested both cash and equipment into the business, how much cash does Dok currently have? 11. On October 1, 2001, Coconut Fuel Co. sold 100,000 gallons of heating oil to Kennot Afford Co. at P0.75 per gallon. 50,000 gallons were delivered on December 15, 2001, and the remaining 50,000 gallons were delivered on January 15, 2002. Payment terms were: 50% due on October 1, 2001, 25% due on first delivery, and the remaining 25% due on second delivery. What amount of revenue should Coconut Fuel Co. recognize from this sale during 2001? 12. On August 1, 2002, Cover Me Blue Magazine had total assets of P65,000 and total liabilities of P18,750. The business earned a net income of P21,250 for the month of August but the owner withdrew P6,250. As of August 31, 2002, the owner determined that total liabilities decreased by P8,750. By how much did total assets increase or decrease in August of 2002? 13. Diamond Company began the year 2002 with cash of P21,500. In addition to earning a net income of P12,500 and making an owner’s withdrawal of P7,500 for personal use, Diamond borrowed P30,000 from the bank and purchased equipment for P45,000 with cash. Also, accounts receivable increased by P3,000 and accounts payable decreased by P4,500. Assuming there were no other company transactions, how much does the cash at hand amount to at the end of the year? 14. Assume that Gerry Lobo is the sole proprietor of a computer software business. His balance sheet on December 31, 1991 follows:

Assets Cash Merchandise Land Building Total Assets

500 2,000 5,000 12,000 19,500

Software Styles Balance Sheet 31-Dec-91 Liabilities and owner's equity Liabilities Accounts Payable Notes Payable Total liabilities Owner's Equity Lobo, Capital Total liabilities and owner's equity

1,750 15,000 16,750 2,750 19,500

On January 19, 1992, fire destroyed the facilities of Software Styles. The proprietor’s capital account had a balance of P4,000 at the date of the fire (from added investment). Also, at that date, the creditors said that the business owed them P2,500 for accounts payable and P14,000 on notes. Cash held by the First National Bank in Lobo’s checking account was P1,000 when the fire occurred; the rest of the cash was in the company vault within the company facilities. The insurance company agreed to pay for the lost assets. What was the amount of assets lost as of the date of the fire? 15. Joshua Ferrer put in P25M to form a new basketball team. The franchise was acquired on January 1, 2001 at the cost of P25M of which P5M was paid immediately. A note was signed with the league officials for the balance scheduled to be paid at the beginning of each of the next four year (P5M per year). The team signed up 8 players, resulting in a total annual salary commitment of P25M. Also, the team paid a total of P12.5M as signing bonuses to the top four players to get them to sign with the team. How much in total assets should the company report? 16. Assume the following amounts are taken from the financial statements of two different companies:

Total assets, 1/1/2001 Total assets, 12/31/2001 Total liabilities, 1/1/2001 Total liabilities, 12/31/2001

Company A P167,000 142,000 79,000 60,500

Company B P140,000 163,500 50,750 57,500

Company A had additional investments of P5,000, had no withdrawals, and had P148,250 in expenses as of the end of 2001. Company B had revenues for 2001 of P103,000 and withdrawals of P11,250 for the period. Compute for the amount of revenues for Company A and expenses for Company B. 17. Except for the net income and a P3,750 withdrawal and added investment of P1,000, no other additions to or deductions from the capital have been made. The only other accounts that were changed were those listed below. The amount of change for each account is shown as a net increase or decrease.

Cash Accounts Receivable Supplies Accounts Payable Mortgage Payable

Increase (Decrease) P2,375 (750) 3,375 (2,875) 5,000

How much was the net income for this period? 18. In recording the transactions for the year ended September 30, 2002, Deluxe Prints included the following: a. Recorded purchase of supplies on credit amounting to P3,750 in September 10, 2002 but delivery was received on October 17, 2002. b. Debited an expense account for the purchase on September 25 of a building worth P212,500. c. Credited sales revenue for P15,000 on September 15 to record receipt of cash for services rendered on August 30, 2001. d. Debited salaries expense for P7,500 for insurance coverage on office space of the staff for the one-year period from September 30, 2002. The payment was made on this date. Give the effect of the above information to total assets and net income.