APPLICATION PROBLEM

STEPS IN THE ACCOUNTING CYCLE

Transactions for the month of December 2015 are as follows:

Rey Millora opened an account with Union Bank under Rey's Laundromat business name in
1-Dec P1,500,000. He also invested a computer worth P100,000 with a fair market value of P90,0
2 Paid municipal taxes of P5,500 including his license to operate.

Bought a P900,000 condominium for his office paying P500,000 down payment and signing
5 Bank payable in 10 years for the balance.
7 Bought furniture on credit from Furniture World, P45,000.
8 Returned P7,000 worth of furniture bought due to wrong specifications.
9 Bought cash register P24,000 paid in cash.
10 Paid furniture and fixtures purchased on account.
11 Bought P5,600 office supplies paid in cash.

Bought a P600,000 van from Jade Motors for use in the business. Terms: 25% cash, 40% thr
12 and the balance on account.

Made an additional investment of P800,000 and equipment worth P60,000 with an unpaid b
13 Baguio Trading. The business will assume the liability.
14 Returned damaged supplies worth P880.
15 Withdrew P85,000 cash and office supplies worth P500 for personal use.
16 Paid the salary of the office secretary, P10,600.
17 Paid utilities, P3,200.
18 Collected laundry services from various customers, P220,000.

Rendered laundry services on account to the following customers: Gabriel - P30,000; Micha
19 P10,000; Uriel - P5,000.
20 Paid repairs, P3,000.

Collected from laundry services rendered last December 19 from the following customers: G
30 - P10,000; Daniel - P8,000; Uriel - P4,000.
Additional information for adjustment:
1 Depreciation Expense for the properties follow:

Office Condominium
Equipment
Furniture and Fixtures
Vehicle

Estimated
2015
Cost
Useful Life
Depreciation
900,000
20
3,750
184,000
5
3,067
38,000
5
633
600,000
5
10,000

2 Bad debts expense is estimated at P1,000.

3 Accrued interest on mortgage and notes payable, P5,700.
4 Unpaid salaries, P7,600.
5 Supplies used up, P2,500.
The company's Chart of Accounts follow:
Account Code
Account Title
101
Cash
102
Accounts Receivable
102a
Allowance for Bad Debts
103
Office Supplies
201
201a
202
202a
203
203a
204
204a

Office Condominium
Accumulated Depreciation
Equipment
Accumulated Depreciation
Furniture and Fixtures
Accumulated Depreciation
Vehicle
Accumulated Depreciation

301
302
303
304
305

Accounts Payable
Notes Payable
Interest Payable
Salaries Payable
Mortgage Payable

401
402

Millora, Capital
Millora, Personal

- Office Condominium
- Equipment
- Furniture and Fixtures
- Vehicle

501

Laundry Service Income

601
602
603
604
605
606
607
608

Bad Debts Expense

Depreciation Expense
Taxes and Licenses
Salaries Expense
Utilities Expense
Repairs and Maintenance
Supplies Expense
Interest Expense

Requirements:
1 Journalize the December transactions using a general journal and the
account titles given in the chart of accounts.
2 Post the journal entries to the General Ledger.
3 Extract the balances of each account in the General Ledger and
prepare a trial balance.
4 Prepare the necessary adjusting journal entries.
5 Using the trial balance and the adjusting journal entries,
prepare a worksheet.
6 From the worksheet, prepare the following:
a. Statement of income
b. Statement of changes in equity
c. Statement of financial position
7 From the postings to cash account in the general ledger,
prepare a Statement of Cash Flows.
8 Post the adjusting journal entries and extract the adjusted balances
of the accounts
9 Using the worksheet, prepare the closing entries.
10 Post the closing entries to thee ledger and extract the new
balances of each account affected
11 Prepare a post-closing trial balance
12 Prepare reversing entries

13 Post reversing entries to the general ledger and extract the new
balances of the accounts affected

ows:

ndromat business name in the amount of

a fair market value of P90,000.

down payment and signing a mortgage with Metro

ations.

. Terms: 25% cash, 40% thru a 30-day, 10% note,

h P60,000 with an unpaid balance of P10,000 to

onal use.

s: Gabriel - P30,000; Michael - P20,000; Daniel -

m the following customers: Gabriel - P5,000; Michael

ce Condominium

niture and Fixtures

General Journal
Date

Particulars

Dr

Dr

General Journal
Date

Particulars

General Journal
Date

Particulars

Dr

General Journal
Date

Particulars

Dr

Page 1
Cr

Page 2
Cr

Page 3
Cr

Page 4
Cr

GENERAL LEDGER
CASH
Date

Particulars

Date

Particulars

Dr

Date

Particulars

ACCOUNTS RECEIVABLE
f

Dr

Date

Particulars

ALLOWANCE FOR BAD DEBTS

Date

Particulars

Dr

Date

Particulars

Date

Particulars

OFFICE SUPPLIES
Date

Particulars

Dr

OFFICE CONDOMINIUM
Date

Particulars

Dr

Date

Particulars

ACCUMULATED DEPRECIATION - OFFICE CONDOMINIUM

Date

Particulars

Date

Particulars

Dr

Date

Particulars

Date

Particulars

EQUIPMENT
Dr

ACCUMULATED DEPRECIATION - EQUIPMENT

Date

Particulars

Date

Particulars

Dr

Date

Particulars

FURNITURE AND FIXTURES

f

Dr

Date

Particulars

ACCUMULATED DEPRECIATION - FURNITURE AND FIXTURES

Date

Particulars

Dr

Date

Particulars

Date

Particulars

VEHICLE
Date

Particulars

Dr

ACCUMULATED DEPRECIATION - VEHICLE

Date

Particulars

Dr

Date

Particulars

ACCOUNTS PAYABLE
Date

Particulars

Dr

NOTES PAYABLE

Date

Particulars

Date

Particulars

Dr

Date

Particulars

Date

Particulars

Date

Particulars

INTEREST PAYABLE
Date

Particulars

Date

Particulars

Dr

SALARIES PAYABLE
Dr

MORTGAGE PAYABLE
Date

Particulars

Dr

Date

Particulars

Date

Particulars

MILLORA, CAPITAL
Date

Particulars

Dr

MILLORA, PERSONAL
Date

Particulars

Dr

Date

Particulars

INCOME AND EXPENSE SUMMARY

Date

Particulars

Dr

Date

Particulars

LAUNDRY SERVICE INCOME

Date

Particulars

Dr

Date

Particulars

BAD DEBTS EXPENSE

Date

Particulars

Dr

Date

Particulars

DEPRECIATION EXPENSE
Date

Particulars

Dr

Date

Particulars

TAXES AND LICENSES

Date

Particulars

Dr

Date

Particulars

SALARIES EXPENSE
Date

Particulars

Dr

Date

Particulars

UTILITIES EXPENSE
Date

Particulars

Dr

Date

Particulars

REPAIRS AND MAINTENANCE

Date

Particulars

Dr

Date

Particulars

SUPPLIES EXPENSE
Date

Particulars

Date

Particulars

Dr

Date

Particulars

INTEREST EXPENSE
Dr

Date

Particulars

101
f

Cr

102
f

Cr

102a
f

Cr

103
f

Cr

201
f

UM

Cr

201a
f

Cr

202
f

Cr

202a
f

Cr

203
f

Cr

URES

203a
f

Cr

204
f

Cr

204a
f

Cr

301
f

Cr

302

Cr

303
f

Cr

304
f

Cr

305
f

Cr

401
f

Cr

402
f

Cr

403
f

Cr

501
f

Cr

501
f

Cr

602
f

Cr

603
f

Cr

604
f

Cr

605
f

Cr

606
f

Cr

607
f

Cr

608
f

Cr

SUBSIDIARY LEDGERS
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER OR CUSTOMERS' CARD
CUSTOMER'S NAME:
Date
Particulars

Dr

Cr

Balance

CUSTOMER'S NAME:
Date
Particulars

Dr

Cr

Balance

CUSTOMER'S NAME:
Date
Particulars

Dr

Cr

Balance

CUSTOMER'S NAME:
Date
Particulars

Dr

Cr

Balance

ACCOUNTS PAYABLE SUBSIDIARY LEDGER OR SUPPLIERS' CARD

SUPPLIER'S NAME:
Date
Particulars

Dr

Cr

Balance

SUPPLIER'S NAME:
Date
Particulars

Dr

Cr

Balance

SUPPLIER'S NAME:
Date
Particulars

Dr

Cr

Balance

SUPPLIER'S NAME:
Date
Particulars

Dr

Cr

Balance

OMERS' CARD

RS' CARD

Rey's Laundromat
TRIAL BALANCE
DECEMBER 31, 2012
Amounts in Philippine Peso
Dr

Rey's Laundromat
ACCOUNTS RECEIVABLE SCHEDULE
December 31, 2015
Amounts in Philippine Peso

Rey's Laundromat
ACCOUNTS PAYABLE SCHEDULE

Cr

December 31, 2015

Amounts in Philippine Peso

Rey's Laundromat
Worksheet
DECEMBER 31, 2012
Amounts in Philippine Peso
Unadjusted Trial Balance
Dr
Cr

Adjustments
Dr
Cr

Adjusted Trial Balance

Dr
Cr

Statement of Income
Dr
Cr

Statement of Financial
Position
Dr
Cr

Rey's Laundromat
Statement of Income
For the month ended December 31, 2012
Amounts in Philippine Peso

Rey's Laundromat
Statement of Changes in Equity
For the month ended December 31, 2012
Amounts in Philippine Peso

Rey's Laundromat
Statement of Financial Position
December 31, 2012
Amounts in Philippine Peso

LIABILITIES AND EQUITY

Rey's Laundromat
Statement of Cash Flows
For the month ended December 31, 2012
Amounts in Philippine Peso

Rey's Laundromat
POST-CLOSING TRIAL BALANCE
DECEMBER 31, 2012
Amounts in Philippine Peso
Dr

Cr