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Exercises
Exercise 1
Exercise 2
a. P200,000
b. P260,000
Exercise 3
b. NC, NC, NC
c. +, +, NC
d. NC, NC, NC
e. , NC,
f. +, NC, +
g. , NC,
Exercise 4
a. BS g. IS
b. OE h. OE
c. IS i. BS
d. IS j. OE
e. BS k. BS
f. BS
2 Chapter 7
Exercise 5
Exercise 6
Exercise 7
March 1. Even should be recorded. Transaction has take place with the
exchange of values.
Exercise 8
a. Liability g. Liability
b. Asset h. Asset
c. Expenses i. Asset
d. Revenue j. Asset
e. Expense k. Liability
f. Asset l. Asset
Exercise 9
a. Credit g. Credit
b. Debit h. Debit
c. Debit i. Debit
d. Credit j. Debit
e. Debit k. Credit
f. Debit l. Debit
Exercise 10
September 6
September 16
Cash 9,000
Accounts receivable 9,000
Exercise 11
a. (+)
b. (+)
c. (0)
d. ()
e. (0)
f. ()
g. (0)
h. (+)
4 Chapter 7
Exercise 12
1. e
2. b
3. d
4. c
5. a
Exercise 13
Exercise 14
Exercise 15
JANNY COMPANY
Statement of Cash Flows
For the Month Ended January 31, 2007
Increase in cash.........................................................................................
P43,000
Cash balance, January 1, 2007..................................................................56,000
Cash balance, January 31, 2007................................................................ P99,000
Exercise 16
BEIGE, INC.
Income Statement
For the Month Ended March 31, 2007
Revenues......................................................................................................................
P85,000
Expenses.......................................................................................................................
50,000
Net income....................................................................................................................
P35,000
The cash received from bank loans is a positive cash flowfinancing activityin
the statement of cash flows, but is not included in the income statement. Similarly,
dividends paid to stockholders are a negative cash flowfinancing activityin the
statement of cash flows, but are not included in the income statement.
6 Chapter 7
Exercise 17
ANDALASA COMPANY
Income Statement
For the Month Ended August 31, 2007
Service revenues...........................................................................................................
P100,000
Expenses.......................................................................................................................
75,000
Net income....................................................................................................................
P25,000
The following four items represent cash flows, but are not revenues or expenses
that should be included in the income statement:
Investment by stockholders
Loan from bank
Payments to long-term creditors
Purchase of land
Exercise 18
a. Pay a liability
b. Investment by owner
Revenue transaction
c. Purchase of asset on account
Borrow money
d. Purchase of asset for cash
Sale of asst for cash
Collection of account receivable
e. Withdrawal by owner
Expense transaction
Exercise 19
Exercise 20
Exercise 21
___________
1
Net income (x) = P450,000
Revenues expenses
= net income
P2,100,000 expenses
= P450,000
Expenses = P1,650,000
2
Assets liabilities = OE
Assets = P150,000
3
P600,000 + Investments (y) +
P1,100,000 P1,000,000 = P900,000
Investments = P200,000
Exercise 22
Requirement (1)
Classification of Events
Feb. 4 C 11 C
5 A 12 B
6 A 18 A
7 A 25 A
10 C 28 A
Requirement (2)
Analyzing and Summarizing Business Transactions of a Service Entity 9
OWNERS
ASSETS LIABILITIES EQUITY
Type of
Lorenzo Owners
Accounts Office Accounts Cabrera, Equity
Date Cash Receivable Supplies Furniture Payable Capital Transaction
Feb. 4*
5 600,000 600,000 Owner
investment
Bal. 600,000 600,000
6 (3,000) 3,000
Bal. 597,000 3,000 600,000
7 70,000 70,000
Bal. 597,000 3,000 70,000 70.000 600,000
10*
11*
12*
18 40,000 40,000 Service
revenue
Bal. 597,000 40,000 3,000 70,000 70,000 640,000
25 (10,000) (10,000) Rent expense
Bal. 587,000 40,000 3,000 70,000 70,000 630,000
28 (20,000) (20,000) Withdrawal
Bal. 567,000 40,000 3,000 70,000 70,000 610,000
______
* Not a transaction of the business.
Exercise 23
Requirement (1)
ASSETS LIABILITIES
Requirement (2)
Personal items not reported on the balance sheet of the business:
c. Personal residence (P1,700,000) and mortgage payable (P1,200,000)
d. Personal cash (P100,000)
e. Personal accounts payable (P18,000)
Exercise 24
10 Chapter 7
Requirement (1)
Lua Lim, Realtor
Balance Sheet
March 31, 2007
ASSETS LIABILITIES
Cash P 90,000 Accounts payable P 60,000
Office supplies 10,000 Note payable 330,000
Franchise 150,000 Total liabilities P 390,000
Furniture 120,000 OWNERS EQUITY
Land 700,000 Mitch Chua, capital 680,000
Total liabilities and
Total assets P1,070,000 owners equity P1,070,000
Requirement (2)
Personal items not reported on the balance sheet of the business:
a. Personal cash (P50,000)
b. Personal residence (P900,000) and mortgage payable (P650,000)
f. Personal account payable (P9,500)
Exercise 25
Owners
+ Assets = Liabilities Equity
Accounts Office Account
+ =+ Receivabl Equipmen Notes s Share
+ + Cash e Trucks t Payable Payable Capital
Dec. 31
Balances P 95,000 P 89,000 P580,000 P 38,000 P200,000 P 52,000 P550,000
(1) 27,000 + 27,000
P 68,000 P 89,000 P580,000 P 65,000 P200,000 P 52,000 P550,000
(2) + 40,000 + 40,000
P108,000 P 49,000 P580,000 P 65,000 P200,000 P 52,000 P550,000
(3) 32,000 32,000
P 76,000 P 49,000 P580,000 P 65,000 P200,000 P 20,000 P550,000
(4) +100,000 +100,000
P176,000 P 49,000 P580,000 P 65,000 P300,000 P 20,000 P550,000
(5) 150,000 + 305,000 +155,000
P 26,000 P 49,000 P885,000 P 65,000 P455,000 P 20,000 P550,000
(6) +200,000 +200,000
Balances P226,000 P 49,000 P885,000 P 65,000 P455,000 P 20,000 P750,000
Analyzing and Summarizing Business Transactions of a Service Entity 11
Test Material
Description of transactions:
Owners Equity
Assets = +Liabilities
Office Notes Accounts
+ +
Cash +
Land Building Equipment += Payable+ Payable Share Capital
(4) + 100,000
Requirement (1)
Analysis of Transactions
OWNERS
ASSETS LIABILITIES EQUITY
Type of
Katrina Owners
Accounts Accounts Morales, Equity
Date Cash Receivable Supplies Land Payable Capital Transaction
Bal. 12,500 15,000 120,000 80,000 67,500
a) 200,000 200,000 Owner investment
Bal. 212,500 15,000 120,000 80,000 267,500
b) 7,000 7,000 Service revenue
Bal. 219,500 15,000 120,000 80,000 274,500
c) (80,000) (80,000)
Bal. 139,500 15,000 120,000 274,500
d) 10,000 10,000
Bal. 139,500 15,000 10,000 120,000 10,000 274,500
e) 10,000 (10,000)
Bal. 149,500 5,000 10,000 120,000 10,000 274,500
f) 10,000 10,000 Owner investment
Bal. 159,500 5,000 10,000 120,000 10,000 284,500
g) 24,000 24,000 Service revenue
Bal. 159,500 29,000 10,000 120,000 10,000 30,850
h) (10,000) (9,000) Rent expense
(1,000) Advertising exp.
Bal. 149,500 29,000 10,000 120,000 10,000 298,500
i) 1,500 (1,500)
Bal. 151,000 29,000 8,500 120,000 10,000 298,500
j) (18,000) (18,000) Owner withdrawal
Requirement (2)
Morales Interiors
Income Statement
For the Month Ended September 30, 2007
Revenues:
Service revenue (P7,000 + P24,000) P31,000
Expenses:
Rent expense P9,000
Advertising expense 1,000
Total expenses 10,000
Net income P21,000
Requirement (3)
14 Chapter 7
Morales Interiors
Statement of Owners Equity
For the Month Ended September 30, 2007
Requirement (4)
Morales Interiors
Balance Sheet
September 30, 2007
ASSETS LIABILITIES
1. Showing you how to account for the two sides of every transaction.
2. Showing you how to prepare the financial statements in order to measure
how well the business performed (net income or net loss) and where it
stands financially (assets, liabilities, and owners equity).
Note: Students may answer in various other ways. There is no single correct
answer.