Basic Accounting

Comprehensive Problem II

After considering the costs and benefits of your options, you finally decided to quit school and establish
your own business. You have entered into the following transactions from January 1 to March 31, 2015:

Jan. 1 Invested P455,000 cash and your personal computer worth P45,000 in your business. The
computer has a useful life of 3 years.
Jan. 1 Loaned P250,000 cash from the bank with your house as collateral. 2% annual interest will be
charged by the bank on this loan arrangement. The first interest payment is due on December
31 of this year.
Jan. 1 Purchased land for P230,000, paying 60% cash and the balance by issuing a note payable.
Jan. 1 Bought an equipment costing P50,000 for cash. You have ascertained that the equipment has a
useful life of 4 years and a salvage value of 10% of its cost.
Jan. 1 Hired 10 persons as your personal staff in your business. Each employee is entitled to P7,000
monthly salary.
Jan. 1 Purchased supplies worth P15,000 on account. The supplies are good for one year.
Jan. 15 Rendered services to your clients for P200,000. Your clients paid half the amount and the other
half was on account.
Jan. 15 Paid the mid-month salaries of your employees.
Jan. 31 Purchased a two-year insurance policy for P20,000.
Jan. 31 Accrued the month-end salaries of your employees to be paid in 3 days.
Feb. 2 Collected 40% of the balance from your customers on the services rendered on January 15.
Feb. 3 Paid the accrued salaries from last month.
Feb. 5 Paid the balance of the note payable that you issued to acquire the land on January 1.
Feb. 7 Rendered services to your clients for P80,000 on account. On the same day, one of your clients
gave you P3,000 in advance for services to be rendered next month.
Feb. 10 Paid your suppliers for the supplies purchased on January 1.
Feb. 15 Paid the mid-month salaries of your employees.
Feb. 20 Paid administrative expenses totaling P80,000.
Feb. 27 Collected the following from your customers: (1) the balance for the services rendered on
January 15, and (2) 50,000 on the services rendered on February 7.
Feb. 28 Accrued the month-end salaries of your employees to be paid in 2 days.
Mar. 1 One of your friends borrowed money from your business amounting to P35,000 to be paid
exactly one year from this date. You agreed to charge 5% annual interest to your friend.
Interest is payable every month-end.
Mar. 2 Paid the accrued salaries from the previous month.
Mar. 7 Rendered the services to the client who paid you in advance last month. An extra P1,000 was
billed and collected on the same day.
Mar. 10 Rendered services to your clients for P75,000 cash.
Mar. 15 Purchased a delivery truck for P80,000 cash. The delivery truck has a useful life of 10 years.
Mar. 15 Paid the mid-month salaries of your employees.
Mar. 28 Received P8,000 from a client as payment for services to be rendered next month.
Mar. 29 Paid administrative expenses totaling P60,000.
Mar. 31 Accrued the month-end salaries of your employees to be paid in 5 days.
Mar. 31 Collected interest from your friend who borrowed money from your business.
Mar. 31 Withdrew P10,000 from your business for personal use.

Using your basic accounting knowledge, do the following on separate sheets of paper and on a 10-
column worksheet:

1. Prepare the journal entries to record the aforementioned transactions.

2. Post the journal entries on the ledger accounts and obtain the balances of each account.
3. Prepare the unadjusted trial balance.
4. Prepare the necessary adjusting entries and the adjusted trial balance.
5. Prepare the income statement.
6. Prepare the closing entries to close the nominal accounts.
7. Prepare the balance sheet.

Prepared by: JACA