INFIMAC February 2, 2010

Exercise#2 Solution

Case 1
T Accounts

Enter the following transactions in T accounts drawn on ordinary notebook paper. Label each debit and
credit with the letter identifying the transaction.

a On June 8, the corporation opened a bank account in the name of its new business, Bluegrass
Company, by making a bank deposit of P82,000 cash.
b On June 12, land was acquired for P36,000 cash.
c On June 14, a prefabricated building was purchased from E-Z Built Corporation at a cost of
P40,800. A cash payment of P10,200 was made and a note payable was issued for the
balance.
d On June 20, office equipment was purchased at a cost of P7,100. A cash down payment of
P1,100 was made, and it was agreed that the balance should be paid within 30 days.
e On June 26, P3,400 of the amount due E-Z Built Corporation was paid.

Answer:

Cash Land
6/8 a) 82,000 b) 36,000 6/12 6/12 b) 36,000
c) 10,200 6/14
d) 1,100 6/20
e) 3,400 6/26
31,30 36,00
0 0

Building Equipment
6/14 c) 40,800 6/20 d) 7,100

40,80 7,100
0

Notes Payable Accounts Payable

6/26 e) 3,400 c) 30,600 6/14 d) 6,000 6/20

27,200 2,600

Capital Stock
a) 82,000 6/8

82,000

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 INFIMAC February 2, 2010
Exercise#2 Solution

Case 2
Journalizing and Posting

Bono and Associates is a corporation composed of a handful of certified public accountants.

The corporation provides audit services to different businesses. The business transactions
during September while the new venture was being organized are listed below.

Sept. 1 The corporation sold P32,000 worth of capital stocks.

Sept. 10 Purchased a small office building located on a large lot for a total price of P91,200, of
which P48,000 was applicable to the land and P43,200 to the building. A cash payment
of P18,240 was made and a note payable was issued for the balance of the purchase
price.
Sept. 15 Purchased a microcomputer system from Computer Stores, Inc., for P4,680 cash.
Sept. 19 Purchased office furniture, filing cabinets, and a typewriter from Davidson Office Supply
Company at a cost of P3,960. A cash down payment of P720 was made, the balance to
be paid in three equal installments due September 28, October 28, and November 28.
The purchase was on open account and did not require signing of a promissory note.
Sept. 26 A P140 monitor in the microcomputer system purchased on September 15 stopped
working. The monitor was returned to Computer Stores, Inc., which promised to refund
the P140 within five days.
Sept. 28 Paid Davidson Office Supply Company P1,080 cash as the first installment due on the
account payable for office equipment.
Sept. 30 Received P140 from Computer Stores, Inc., in full settlement of the account receivable
created on September 26.

1. Prepare journal entries to record the above transactions. Select the appropriate account titles
from the following chart of accounts:

Cash 101 Office Equipment 501

Accounts receivable 201 Notes payable 601
Land 301 Accounts payable 701
Building 401 Capital Stock 801

2. Post each transaction to the appropriate ledger accounts using the running balance format.
3. Prepare a Trial Balance for September 30, xxxx

Answer:
1. General Journal

General Journal J1
Date Account Titles and Explanation Ref Debit Credit
19__
Sept 1 Cash 101 32,000
Capital Stock 801 32,000
Invested on capital stocks

10 Land 301 48,000

Building 401 43,200
Cash 101 18,240
Notes payable 601 72,960
Bought land and building for P18,420 cash and
the rest on notes payable

Sept 15 Office equipment 501 P4,680

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 INFIMAC February 2, 2010
Exercise#2 Solution

Cash 101 P4,680

Bought office equipments

19 Office equipment 501 3,960

Cash 101 720
Accounts payable 701 3,240
Bought office equipments for P720 cash and the
rest on credit

26 Accounts receivable 201 140

Office equipment 501 140
Returned an office equipment with refund

28 Accounts payable 701 1,080

Cash 101 1,080
Paid Davidson Office Supply Company for
equipment bought

30 Cash 101 140

Accounts receivable 201 140
Received refund for returned equipment

2. General Ledger

Cash No. 101

Date Explanation Ref Debit Credit Balance
2005
Sept. 1 J1 32,000.00 32,000.00
10 J1 18,240.00 13,760.00
15 J1 4,680.00 9,080.00
19 J1 720.00 8,360.00
28 J1 1,080.00 7,280.00
30 J1 140.00 7,420.00

Accounts Receivable No. 201

Date Explanation Ref Debit Credit Balance
2005
Sept. 26 J1 140.00 140.00
30 J1 140.00 -

Building No. 301

Date Explanation Ref Debit Credit Balance
2005
Sept. 10 J1 43,200.00 43,200.00

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 INFIMAC February 2, 2010
Exercise#2 Solution

Land No. 401

Date Explanation Ref Debit Credit Balance
2005
Sept. 10 J1 48,000.00 48,000.00

Office Equipment No. 501

Date Explanation Ref Debit Credit Balance
2005
Sept. 15 J1 4,680.00 4,680.00
19 3,960.00 8,640.00
26 140.00 8,500.00

Notes Payable No. 601

Date Explanation Ref Debit Credit Balance
2005
Sept. 10 J1 72,960.00 72,960.00

Accounts Payable No. 701

Date Explanation Ref Debit Credit Balance
2005
Sept. 19 J1 3,240.00 3,240.00
28 J1 1,080.00 2,160.00

Capital Stock No. 801

Date Explanation Ref Debit Credit Balance
2005
Sept. 1 J1 32,000.00 32,000.00

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 INFIMAC February 2, 2010
Exercise#2 Solution

2. Trial Balance

Bono and Associates Corp.

Trial Balance
September 30, xxxx

Debit Credit
Cash 7,420.00
Accounts receivable 0.00
Land 43,200.00
Building 48,000.00
Office Equipment 8,500.00
Notes payable 72,960.00
Accounts payable 2,160.00
Capital Stock 32,000.00
107,120.0
0 107,120.00

Chapter 3 5