STATEMENT OF CHANGES IN OWNER’S EQUITY

Compute the missing amounts.

Case A Case B Case C Case D

Case E
Beginning Capital P 200,000 P 150,000 P 325,000 P 400,000
5) _______
Additional Investment 50,000 20,000 40,000 4) _______
25,000
Net Income 30,000 18,000 3) ______ 50,000
50,000
Drawing 25,000 2) ______ 30,000 16,000
20,000
Ending Capital 1) ______ 140,000 390,000 458,000
230,000

Case F Case G Case H Case I

Case J.
Beginning Capital P 140,000 P 240,000 P 125,000 P 50,000 P
24,000
Additional Investment 60,000 - 8) ______ 16,000
4,000
Net Loss 30,000 7) ______ 40,000 20,000
30,000
Drawing 20,000 50,000 - 9) ______
2,000
Ending Capital 6) _______ 130,000 110,000 24,000
10) ______

ADJUSTING ENTRIES

At the end of the accounting period ending December 31 of the current year, the
following totals were obtained from the financial statements of Nelsie Kat, a well
known CPA practitioner.
ASSETS LIABILITIES OWNER’S EQUITY
P 1,210,000 P 487,500 P 722,500

The net profit for the current year ended was reported at P 524,200. In preparing
the financial statements, the following adjustments were omitted.
a) Unused supplies, P 1,200.
b) Estimated uncollectible accounts, P 4,300.
c) Furniture acquired on June 1 of the current year for P 32,000 has an estimated
salvage value of P 3,000 at the end of its useful life of 8 years.
d) Accrued salaries, P 6,000.
e) Unexpired insurance, P 10,500.
f) Accrued interest on note receivable, P 3,600.
g) Accrued interest on notes payable, P 4,300.
h) Unearned rental income, P 12,000.

Determine the adjusted amounts using the table shown below.

Net Total Total Total Owner’s

Income Assets Liabilities Equity
Reported ___________ ___________ ______________ ___________________
Amounts
Adjustment a) ___________ ___________ ______________ ___________________
Adjustment b) ___________ ___________ ______________ ___________________
Adjustment c) ___________ ___________ ______________ ___________________
Adjustment d) ___________ ___________ ______________ ___________________
Adjustment e) ___________ ___________ ______________ ___________________
Adjustment f) ___________ ___________ ______________ ___________________
Adjustment g) ___________ ___________ ______________ ___________________
Adjustment h) ___________ ___________ ______________ ___________________
Adjustment ___________ ___________ ______________ ___________________
Amounts

WORKSHEET

Check the column/s the accounts will be extended in the worksheet.

Income Statement Balance Worksheet

DR CR DR CR
1. Accrued Salaries ___________ ___________ ___________ ___________
2. Accrued Interest Income ___________ ___________ ___________ ___________
3. Unexpired Insurance ___________ ___________ ___________ ___________
4. Unearned Rental ___________ ___________ ___________ ___________
5. Impairment Loss ___________ ___________ ___________ ___________
6. Depreciation Expense ___________ ___________ ___________ ___________
7. Allow for Impairment Loss ___________ ___________ ___________ ___________
8. Accumulated Depreciation ___________ ___________ ___________ ___________
MULTIPLE CHOICES

1. Which of the following accounts is a liability?

a. Accrued Income c. Prepaid Expense

b. Accrued Expense d. Deferred expense

2. The owner’s equity is computed as follows:

a. Revenues less expenses c. Ending capital less beginning capital

b. Assets less liabilities d. Cash inflows less cash outflows

3. Which of the following is not included under the Operating Activities in the Cash
Flow Statement?

a. Expense paid in advance c. Payment of salaries

b. Collection of Accts. Receivables d. Payment of Mortgage payable

4. Which of the following is not included under the Investing Activities in the Cash
Flow Statement?

a. Purchase of office supplies c. Sale of old furniture

b. Purchase of furniture d. Collection of advances to employees

5. Which of the following is not included under the Financing Activities in the Cash
Flow Statement?

a. Long-term borrowing c. Additional investment of the owner

b. Short term borrowing d. Partial payment of equipment bought

6. Accounts receivable less Allowance for Impairment Loss equals

a. Carrying amount c. Net realizable value

b. Liquidation value d. Appraised value

7. Office Equipment less accumulated depreciation equal

a. Carrying amount c. Appraise value

b. Net realization value d. Liquidation value
8. If the debit in the adjustment entry is Prepaid Advertising, the corresponding
credit should be

a. Accrued Advertising c. Advertising Payable

b. Advertising Expense d. Deferred Advertising

9. In the adjusting entries,

a. Real accounts are affected. c. Real & nominal accounts are affected.
b. Nominal accounts are affected. d. Real & nominal accounts are not affected.

10. The worksheet is prepared to facilitate the preparation of the following except

a. Income Statement c. Balance Sheet

b. Statement of Changes in Equity d. Statement of Cash Flows

11. On December 31, the end of the accounting period, Maricall Center has an
outstanding Accounts Receivable of P 72,000 and an Allowance of Impairment
Loss balance of P 600 prior to the year-end adjustment. Bad debts are estimated
at 2% of the accounts receivable. How much is the bad debts expense to be
charged to Impairment Loss account?

a. P 840 b. P 1,428 c. P 1,440 d. P 2,040

12. Lydia Trucking Services has Accounts Receivable and Allowance for
Impairment Loss balances of P 40,000 and P 800, respectively. If the allowance is
to be increased to P 1,200, how much is the net realizable value?

a. P 39,600 b. P 39,200 c. P 38,800 d. P 38,000

13. A machine costing P 650,000 was acquired on February 1 of the current year.
It is estimated to have a useful life of 15 years with salvage value of P 50,000. The
end of the fiscal year is June 30 of the current year. How much depreciation is to
be charged for the current year?

a. P 13,333 b. P 16,667 c. P 36,667 d. P 40,000

14. On January 1 of the current year, the furniture account had a balance of P
24,000 with accumulated depreciation of P 2,400. On May 1 additional furniture
costing P 12,000 was bought. The furniture is depreciated at the rate 10% per
annum. What is the carrying amount (book value) of the furniture on December 1,
the end accounting period?

a. P 30,000 b. P 30,400 c. 32,400 d. P 34,000

15. On December 1, 200C, Rico, a tenant, paid P 18,000 to Puno, owner of the D’
Best Barber Shop, representing the rent for 3 months. Rent income was credited
on this date. What amount should be recognized as liability on December 31, the
end of the accounting period?

a. P 3,000 b. P 12,000 c. P 16,000 d. P 18,000

PROBLEMS
A. The following information is extracted from the general ledger of super
massage clinic on December 31, 200H, The end of its accounting period.

Case 1 : Cash P 24,200

Notes Payable 12,000
Due from Customers 13,450
Delivery Van 200,000
Office Equipment 48,000
Loan payable 40,000
Notes Receivable 8,000
Due to suppliers 21,000
Furniture & Fixtures 28,000

Case 2 : Cash P 68,000

Allow. For Impairment Loss 36,500
Unused Office supplies 1,200
Prepared Advertising 2,350
Unexpired Insurance 12,000
Furniture & Equipment 6,500
Accumulated Depreciation 76,000
Accounts Payable 7,600
Notes Payable 32,000
Accrued Interest Expense 16,500
Accrued Interest Income 1,200
Unearned Commission 2,340
Salaries Payable 11,000
Account Receivable 8,000
Rental Receivable 15,000
Repair Supplies 4,000

REQUIRED: For each case above compute the owner’s equity as at December 31,
200H.
B. The following information is available from the books of Nelson Trucking
Company as of June 30,200C, The end of its accounting period.

Nelson Capital, June 30, 200B P 500,000

Nelson Personal 25,000
Trucking Service Income 267,000
Rent 48,000
Repair & Maintenance 36,000
Utilities 12,450
Gas & Oil 76,000
Insurance 25,000
Rental Income 12,000
Taxes & License 8,450
Note : An additional investment of P 20,000 was made during the year.
REQUIRED: Prepare the statement of Changes in Owner’s Equity.

C. Show below is the preliminary trial balance of MAGINHAWA SERVICE CENTER for
the calendar year 200A.

E. Liwanag Capital P 85,000 Notes Receivable P 1,200

Office Equipment 12,000 Notes Payable 8,000
Accounts Payable 16,600 Interest Income 360
Cash 18,540 Tel. & Telegram Expense 1,250
Tools 21,540 Interest Expense 250
E. Liwanag Drawing 10,000 Postage & Stamps Expense 50
Accounts Receivable 21,460 Insurance Expense 4,100
Mortgage Payable 30,000 Car 84,700
Loan Payable 20,000 Utilities Expense 160
Service Income 78,560 Supplies Expense 3,150
Furniture & Fixtures 8,900 Massage Equipment 36,290
Salaries Expense 21,000 Rental Income 6,000

Required: Prepare the Income Statement, Statement of changes in owner’s

equity and balance sheet.
D. The following is the adjusted trial balance of LENMAR Service Company For the
fiscal year ending May 31,200B:

Cash P 40,860 Mortgage P

120,000
Note Receivable 4,000 M.Lanza Capital 75,000
Accounts Receivable 57,880 M.Lanza Drawing 20,000
Allow. For Impairment Loss 3,280 Service Income
204,500
Prepaid Advertising 10,000 Rental Income
22,000
Unexpired Insurance 6,000 Interest Income 40
Supplies Inventory 1,260 Salaries Expense
114,000
Interest Receivable 40 Rent Expense
30,000
Furniture & Fixtures 36,800 Utilities Expense
8,250
Accum. Dep’cn- fun & Fix 1,840 Supplies Expense 4,160
Office Equipment 50,000 Advertising Expense
40,000
Accum Dep’n Office Eqpmt. 2,500 Insurance Expense 24,000
Note payable 2,000 Taxes & License
12,000
Accounts Payable 24,250 Interest Expense 200
Utilities Payable 24,250 Impairment Loss
280
Interest Payable 10 Depreciation Furn. & Fixt.
840
Unearned Rental 2,000 Depreciation Office Eqpmt. 500

REQUIRED: Prepare the Income Statement, Statement of Changes in owner’s

equity and balance sheet.
I. Bong Lee, owner of Champion Forwarders, Follows the calendar year for reporting the result of
his operations. The following adjustments are to be made on December 31 of the current year prior
to the preparation of his financial statements.

1. The Supplies Expense in the trial balance showed a balance of P 12,160. On this date, P 3,160
worth of supplies remain unused.

2. The Advertising Expense of P 18,000 reported in the trial balance was paid on November 1 of
the current year. The amount represents the advertisement for 3 months in the news paper.

3. A one year fire insurance was taken on August 1 of the current year in the amount P 12,000. It
was charged to Insurance Expense.

4. A 30 day 6% note for P 2,400 was received from a customer dated December 15 of the current
year.

5. Salaries of the employees are paid every 15 days. Unpaid salaries on December 31 amounted to
P 15,650,

6. The Office Equipment showed a balance of P 164,000 with accumulated depreciation of P 7,000.
On July 1, an equipment costing P 24,000 was acquired. The equipment is depreciated at 5% per
annum.

7. There is an outstanding 60day 6% Note Payable amounting to P 14,000 dated December 1.

8. Furniture and fixtures having an estimated useful life of 10years with no salvage value showed a
balance of P 48,000 with accumulated depreciation of P 4.800.

9. A tenant pays his monthly rental of P 3,000 on the 15 th of each month. Rent income is credited.

10. The accounts receivable showed a balance of P 26,000 with Allowance for Impairment Loss of P
800. Is is estimated that 4% of the accounts receivable are uncollectible.

11. The office rental is P 24,000 per month payable in advance every 15 th of the month. Rent
Expense is debited.

12. P 10,000 of the Service Income reported in the trial balance is still unearned.

13. The Delivery Van acquired 2 years ago costing P 800,000 with accumulated depreciation of P
80,000 is to be depreciated at the rate 5% per annum.

14. The loan with the bank amounting to 120,000 taken on October 2 of the current year is
payable in 6 months with interest at 15% P.A.
15. On December 31, the bank statement showed a service charge of P 125. This has not ye been
recorded.

REQUIRED: Prepare the adjusting entries

J. The general ledger of M. Cerda Consulting Services shows the following

accounts as of June 30 of the current year before adjustments. The fiscal year
ends June 30.

Cash P 152,360 Office Supplies 18,850

Expense
Accounts 70,500 Insurance Expense 10,800
Receivable
Furniture and 150,000 Salary Expense 139,600
Equipment
Accumulated 30,000 Advertising 11,000
Depreciation Expense
Accounts Payable 66,000 Rent Expense 50,000
M. Cerda, Capital 247,350 Taxes and License 16,820
Expense
M. Cerda, Drawing 72.000 Utilities Expense 31,250
Consulting Fees 393,480 Miscellaneous Fees 13,650
Below are the data needed for adjustments:

1. Office rentals for May and June at P 5,000 per month were still unpaid at June
30.
2. Insurance paid on January 1was for a one year period.
3. Advertising for the month of June of P 1,000 was still unpaid.
4. One-half of the P 9,600 collected in advance on June 1 for consulting services is
applicable for the month of July of the next fiscal year.
5. Office supplies on hand at the end of June amounted to P 6,400.
6. The estimated life of the furniture and equipment is ten years without salvage
value.
REQUIRED:
1. Prepare and eight column worksheet for the fiscal year ended June 30.

K. The general ledger of Abeleda Law Office shows the following accounts at
December 31, of the current year before adjustments:

Cash P 62,350 Rent Expense 39,000

Accounts 40,780 Office Supplies 13,600
Receivable Expense
Furniture & 250,000 Salary Expense 165,800
Equipment
Accumulated 40,000 Advertising 5.500
Depreciation Expense
Accounts Payable 36,250 Insurance Expense 7,500
Abeleda, Capital 186,760 Travel Expense 25,950
Abeleda, Drawing 54,000 Utilities Expense 24,700
Professional Fess 438,800 Miscellaneous 12,630
Expense
Below are the data needed for adjustment:

1. P 10,200 professional fees were collected in advance on December 1. One third

is applicable for the month of January if the next accounting period.
2. On January 1, the balance of furniture & Equipment was P 200,000. On July 1,
Equipment worth P 50,000 was acquired. The Furniture and equipment are
estimated to have a useful life of ten years without salvage value.
3. Prepared rent on December 31 was P 3,000.
4. Insurance Premiums of P 2,000 PAID ON December 1 covers four month period
starting December 1.
5. Advertising expenses for the months of November and December were still
unpaid. The advertising expense contracted was P 600 per month.
6. Office Supplies on hand the end of December amounted to P 2,950.

REQUIRED: Prepared a ten column worksheet for the year ended December 31.