Problem 3.

(Requirement 1) Bank Reconciliation Statement

Everest Company
Bank Reconciliation Statement
August. 31, 2017

Unadjusted Bank Balance 38,810.00

Add: Deposit in Transit 8,430.00
Total 47,240.00
Less: Outstanding Checks
# 750150 438.70
# 750152 681.30
# 750157 1,404.50
# 750159 6,508.00
# 750160 732.50
# 750162 495.00 10,260.00
Adjusted Bank Balance 36,980.00

Unadjusted Book Balance 38,120.00

Book (2210-2120) 90.00
Total 38,210.00
SC 550.00
NSF Check 680.00 1,230.00
Adjusted Book Balance 36,980.00
Problem 3.2 (Requirement 1) Bank Reconciliation Statement
GH Company
Bank Reconciliation Statement
October. 31, 2017

Unadjusted Bank Balance 67,770.70

Add: Deposit Transit 4,000.00
Total 71,770.70
Less: Outstanding Checks #159179 310.00
Adjusted Bank Balance 71,460.70

Unadjusted Book Balance 73,331.00

Add: Error(s) in Check number
#159180 90.00
Total 73,421.00
Less:NSF check 552.30
Service Charges 141.00
Error(s) in Check Number )
# 159159 990.00
# 158173 270.00 1,953.30
Adjusted Book Balance 71,467.70
 Problem 3.3

(Requirement a) Bank Reconciliation

Francis Trading Company
Bank Reconciliation Statement
June. 30, 2017

Unadjusted bank balance 6,970.00

Add: Deposit in Transit 18,500.00
Total 25,470.00
Less: Outstanding checks
No. 211350 570.00
No. 211354 1,120.00
No. 211355 1,250.00 2,940.00
Bank Error 2,500.00
Adjusted Bank Balance 20,030.00

Unadjusted book balance 17,940.00

Add: Error in Check no. 211346 2,700.00
Total 20,640.00
Less: NSF Check 530.00
Bank Service Charge 80.00 610.00
Adjusted Book Balance 20,030.00

Problem 3.3 (Requirement b) Adjusting entries

DEBIT CREDIT
Cash 2,700.00
Accounts Payable 2,700.00

Accounts Receivable 530.00

Cash 530.00

Miscellaneous Expense 80.00

Cash 80.00
 Problem 3.4

a.) Ending Capital (3220,000-800,000) 2,420,000.00

Beginning Capital (3,000,000-1,060,000) 1,940,000.00
Total 480,000.00
Add: Withdrawals 200,000.00
Total 680,000.00
Less: Additional Investment 300,000.00
Net Income 380,000.00

b.) Notes Receivable, Ending 300,000.00

Accounts Receivable Ending 1,000,000.00
Collection of Notes Receivable 480,000.00
Collection of Accounts Receivable 1,500,000.00
Sales Returns 160,000.00
Sales Discounts 50,000.00
Uncollectible Accounts Receivable 60,000.00
Total 3,550,000.00
Notes Receivable, Beginning 200,000.00
Accounts Receivable, Beginning 800,000.00 1,000,000.00
Credit Sales 2,550,000.00
Cash Sales 400,000.00
Gross Sales 2,950,000.00

c.) Notes Payable End 240,000.00

Accounts Payable End 520,000.00
Payments of Notes Payable 640,000.00
Payments of Accounts Payable 760,000.00
Purchase Return 40,000.00
Purchase Discount 50,000.00
Total 2,250,000.00
Less: Notes Payable Beg. 360,000.00
Accounts Payable Beg. 600,000.00 960,000.00
Credit Purchases 1,290,000.00
Cash Purchases 30,000.00
Gross Purchases 1,320,000.00
 Problem 3.4

d) Interest Paid 80,000.00

Interest Payable End 20,000.00
Total 100,000.00
Interest Payable Beg. 40,000.00
Interest Expense 60,000.00

e) Rent Collected 40,000.00

Unearned Rent Beg. 60,000.00
Total 100,000.00
Unearned Rent Beg. 20,000.00
Rent Income 80,000.00

f) Equipment Beg. 600,000.00

Purchases 200,000.00
Total 800,000.00
Equipment End 640,000.00
Book Value Of Equipment sold 70,000.00 710,000.00
Depreciation 90,000.00

g) Proceeds From Sale 60,000.00

Book Value Of Equipment Sold
(70x100,000) 70,000.00
Loss On Sale (10,000.00)
 Problem 3.4

h) Statement of Comprehensive Income

Joy Enterprises
Income Statement
For the Year Ended December 31, 2017

Sales 2,950,000
Less: Sales Return 160,000
Sales Discount 50,000 210,000
Net Sales 274,000
Less: Cost of Sales
Beginning Inventory 800,000
Add: Purchases 1,320,000
Less: Purchase Returns 40,000
Purchase Discount 50,000 90,000 1,230,000
Goods Available for Sale 2,030,000
Ending Inventory 480,000 1,550,000
Gross Profit 1,190,000
Less: Operating Expenses (670,000+60000) 730,000
Depreciation expense 90,000 820,000
Net Profit from Operation 370,000
Add: Rent Income 80,000
Total 450,000
Less: Loss on Sale 10,000
Interest Expense 60,000 70,000
Net Income 380,000
 Problem 3.4

i) Statement of Financial Position

Joy Enterprises
Statement of Financial Position
December. 31, 2017

ASSETS
Current Assets
Cash 800,000
Notes Receivable 300,000
Accounts Receivable 1,000,000
Inventory 480,000
Total Current Assets 2,580,000
Non Current Assets
Equipment 730,000
Accumulated Depreciation 90,000 640,000
Total Assets 3,220,000

LIABILITIES AND OWNER'S EQUITY

Current Liabilities
Notes Payable 240,000
Accounta Payable 520,000
Interest Payable 20,000
Noncurrent Liabilities
Unearned Rent Income 20,000
Total Liabilities 800,000
J. Marcelo Capital 2,420,000
Total Liabilities and Owner's Equity 3,220,000
 Problem 3.5

(Requirement a) Net income/ Net loss

Darlene Trading
Income Statement
For the year ended December 31, 2017

Sales 2,725,000.00
Less: Sales Return 80,000.00
Sales Discount 20,000.00 100,000.00
Net Sales 2,625,000.00
Less: Cost of Sales
Purchases 1,732,000.00
Less: Purchase Return 70,000.00
Purchase Discount 22,000.00 92,000.00
Total 1,640,000.00
Less: Increase In Ending Inventory 320,000.00 1,320,000.00
Gross Profit 1,305,000.00
Add: Interest Income 75,000.00
Total Income 1,380,000.00
Less: Expenses
Doubtful Accounts 5,000.00
Depreciation Expense 120,000.00
Insurance Expense 50,000.00
Other Expenses 690,000.00 865,000.00
Net Income 515,000.00
 Problem 3.5

(Requirement b) Total Sales

Sales on Account 1,480,000.00
Notes receivable 480,000.00
Sales discounts 20,000.00
Accounts Written off 5,000.00
Sales Returns and allowances 80,000.00
(120,000.00)
280,000.00
Sales on Account(Gross) 2,225,000.00
Cash Sales 500,000.00
2,725,000.00

(Requirement c) Total Purchases

Purchase On Account 750,000.00
320,000.00
22,000.00
100,000.00
200,000.00
70,000.00
Purchases On Account(gross) 1,462,000.00
Cash Purchases 270,000.00
1,732,000.00

(Requirement d) Insurance expense

Insurance Paid 30,000.00
Add: Decrease in Prepaid Insurance 20,000.00
Total 50,000.00

(Requirement e) Interest Income

Interest Received 55,000.00
Less: Increase In Interest receivabl 20,000.00
Total 35,000.00

(Requirement f) Depreciation on Equipment

Depreciation Expense 200,000.00
Equipment Purchased (80,000.00)
Less: Increased in Equipment 120,000.00
 Problem 3.6

(Requirement) Bank Reconciliation Statement

Bank Reconciliation Statement

December. 31, 2017

Unadjusted Balance Per Bank 110,820.00

Add: Deposit in Transit 10,920.00
Understatement in Recording Deposit (2000 - 200) 1,800.00 12,720.00
Total 123,540.00
Less: Outstanding Check 13,650.00
Adjusted Balance Per Bank 109,890.00

Unadjusted Balance Per Book 113,240.00

Add: Bank Collection 1,200.00
Total 114,440.00
Less: Bank Service Charges 1,850.00
Understatement in recording Check (3000 - 300) 2,700.00 4,550.00
Adjusted Balance Per Book 109,890.00
 Problem 3.7

No. 1
(Requirement a) Gross Sales
Cash Basis Accrual Basis
Cash Sales 375,000 Cash Sales 375,000
Collection From Customers 2,250,000 Credit Sales 200,000
2,625,000 2,250,000
40,000
7,500
-207,500 2,290,000
2,665,000
(Requirement b) Gross Purchases
Cash Basis Accrual Basis
Cash Purchases 225,000 Cash Purchases 225,000
Payments to Creditors 1,350,000 Credit Purchases 270,000
1,575,000 1,350,000
30,000
-150,000 1,500,000
1,725,000

(Requirement c) Interest Income

Cash Basis Accrual Basis
Interest Received 30,000 Interest Received 30,000
Accrued Interest Receivable 30,000
60,000

(Requirement d) Rent Income

Cash Basis Accrual Basis
Rental Collection 150,000 Rental Collection 150,000
Unearned Rent Income 7,500
157,500

(Requirement e) Interest Expense

Cash Basis Accrual Basis
Interest Paid 50,000 Interest Paid 50,000
Accrued Interest Payable 30,000
80,000

(Requirement f) Salaries and Wages

Cash Basis Accrual Basis
Salaries/ Wages Paid 550,000 Salaries/ Wages Paid 550,000
Salaries And Wages 40,000
590,000

(Requirement g) Advertising Expense

Cash Basis Accrual Basis
Advertising Expense Paid 75,000 Advertising Expense Paid 75,000
Prepaid Advertising 1,350,000
1,425,000
(Requirement h) Depreciation Expense
Cash Basis Accrual Basis
Prior PPE Balance 100,000 Prior PPE Balance 100,000
Acquisition in 2017 300,000 Acquisition in 2017 300,000
400,000 400,000
Divided by 10 Divided by 10
40,000 40,000
 Problem 3.7

ABC Trading
No. 2 Income Statement
For The Year Ended December 31, 2017
(Cash Basis)

Sales 2,625,000
Less: Cost of Sales
Inventory 12-31-16 50,000
Purchases 1,732,000
Goods Available for Sale 1,782,000
Less: Inventory 12-31-17 (300,000) 1,482,000
Gross Margin 1,143,000
Less: Operating Expense
Salaries and Wages 550,000
Depreciation Expense 40,000
Advertising Expense 75,000 665,000
Operating Income 478,000
Other Income/ Expense
Interest Income 30,000
Interest Expense (50,000) (20,000)
Net Income 458,000
 Problem 3.8

(Requirement 1) Adjusting Entries

Date Description PR Debit Credit

a Sales 200,000
Jose Zulu, Capital 200,000

Accounts Receivable 250,000

Sales 250,000

b Jose Zulu, Capital 30,000

Sales 30,000

c Jose Zulu, Capital 140,000

Purchases 140,000

Purchases 175,000
Accounts Payable 175,000

d Advances to Supplies 50,000

Purchases 50,000

e Jose Zulu, Capital 140,000

Operating Expense 140,000

Operating Expense 175,000

Accrued Expenses 175,000

f Merchandise Inventory 12-31-16 350,000

Jose Zulu, Capital 350,000

Merchandise Inventory 12-31-17 420,000

Income Summary 420,000

g Depreciation Expense 120,000

Jose Zulu, Capital 120,000
Accumulated Depreciation- bldg. 160,000
Accumulated Depreciation- eqpt 80,000

h Doubtful Accounts 12,500

Allowance for Doubtful Accounts 12,500

I Interest Expense 30,000

Accrued Interest Payable 30,000
(500,000 x 12% x 6/12)
 Problem 3.8

(Requirement 2) Statement of Comprehensive Income

Zulu Enterprise
Statement of Comprehensive Income
For The Year Ended December 31, 2017
Sales 2,580,000.00
Cost of Sales:
Merchandise Inventory 1-1-17 350,000.00
Add: Purchases 1,185,000.00
Total Goods Available for Sale 1,535,000.00
Less: Merchandise Inventory 12-31-1 -420,000.00 1,115,000.00
Gross Margin 1,465,000.00
Expenses:
Operating expense 785,000.00
Depreciation Expense 120,000.00
Doubtful Accounts 12,500.00 917,500.00
Operating Income 547,500.00
Less: Interest Expense 30,000.00
Net Income 517,500.00
 Problem 3.8

(Requirement 3) Statement of Financial Position

Zulu Enterprise
Balance Sheet
December 31. 2018
Assets
Current Assets
Cash 750,000
Account Receivable 250,000
Less: Allowance for Doubtful Account 12,500 237,500
Merchandise Inventory 420,000
Advances to Supplier 50,000 1,457,500
Non Current Assets
Land 400,000
Building 800,000
Less: Accumulated Depreciation 160,000 640,000
Equipment 200,000
Less: Accumulated Depreciation 80,000 120,000 1,160,000
Total Assets 2,617,500

Liabilities & Owners Equity

Current Liabilities
Account Payable 175,000
Accrued Expenses 175,000
Accrued Interest Payable 30,000 380,000
Non Current Liabilities
Bank Loan 500,000
Total Liabilities 880,000
Owner's Equity
Jose Zulu, Capital 1,737,500
Total Liabilities & Owners Equity 2,617,500
 Problem 3.9

(Requirement) Effects of errors in:

Income Statement Balance Sheet

2016/Retained
2016 2017 2017/R.E
Earnings
a -5,500.00 5,500.00 -5,500.00 NE
b 8,000.00 -8,000.00 8,000.00 NE
c -10,000.00 10,000.00 -10,000.00 NE
d -15,000.00 15,000.00 -15,000.00 NE
e NE NE NE NE
f -3,000.00 3,000.00 -3,000.00 NE
g 2,500.00 -2,500.00 2,500.00 NE
h 6,000.00 -6,000.00 6,000.00 NE
I 5,000.00 -5,000.00 5,000.00 NE
j -25,000.00 25,000.00 -25,000.00 NE
k 10,000.00 20,000.00 10,000.00 20,000.00
l NE NE NE NE
 Problem 3.10

(Requirement a) Net income

2016 2017
Reported Net Income 250,000.00 300,000.00
Errors Made 1 -30,000.00 30,000.00
2 12,500.00 -12,500.00
3 -10,000.00 10,000.00
4 -3,000.00 3,000.00
5 4,000.00 -4,000.00
6 -3,500.00 3,500.00
7 2,500.00 -2,500.00
8 2,000.00 -2,000.00
9 -5,000.00
10 -1,750.00
Corrected Net Income 217,750.00 325,500.00
 Problem 3.10

(Requirement b) Correcting entries

1. Books Have Not Been closed

a John Rambo, Capital 5,000.00
Accumulated Depreciation 5,000.00

b John Rambo, Capital 1,750.00

Allowance for Doubtful Account 1,750.00

c Sales 12,500.00
Accounts Receivable 12,500.00

d Accounts Payable 10,000.00

Purchases 10,000.00

2. Books Have Been Closed

a John Rambo, Capital 5,000.00
Accumulated Depreciation 5,000.00

b John Rambo, Capital 1,750.00

Allowance for Doubtful Account 1,750.00

c John Rambo, Capital 12,500.00

Accounts Receivable 12,500.00

d Accounts Payable 10,000.00

John Rambo, Capital 10,000.00
 Problem 3.11

(Requirement 1) Correcting Entries Assuming 2017 Books were Closed Debit Credit

a Paul Capital ( 10,000 x 40%) 4,000.00

Phil Capital ( 10,000 X 60%) 6,000.00
Accumulated depreciation 10,000.00

b Paul Capital ( 36,000 x 40%) 14,400.00

Phil Capital ( 36,000 X 60%) 21,600.00
Merchandise Inventory 36,000.00

c Interest Receivable 4,000.00

Paul Capital ( 4,000 x 40%) 1,600.00
Phil Capital ( 4,000 X 60%) 2,400.00

(Requirement 2) Correcting Entries Assuming 2017 Books Still Open

a Paul Capital ( 10,000 x 40%) 4,000.00
Phil Capital ( 10,000 X 60%) 6,000.00
Accumulated depreciation 10,000.00

b Income Summary 36,000.00

Merchandise Inventory 36,000.00

c Interest Receivable 4,000.00

Interest Income 4,000.00
 Problem 3.12

17. Times
1. Current Ratio = 825,000 = 2.46:1 = 600,000 = 17.14%
interest Earned
335,000 35,000

2. Quick Ratio = 515,000 = 1.54:1

335,000

3. AR Turnover = 4,325,000 = 10.3

420,000

4. Day's Sales In AR = 360 = 35 days

10

5. Inventory Turnover = 2,412,000 = 8.18

295,000

6. Day's Sales in Inventory = 360 = 44 days

8

7. Gross Profit Ratio = 1,912,500 = 44.22%

4,325,000

8. Return on Sales = 420,000 = 9.71%

4,325,000

9. Return on Assets = 420,000 = 11.99%

3,502,500

10. Return on Equity = 420,000 = 15.61%

2,690,000

11. Earnings per Share = 420,000 = 42/ share

10,000

12. Price-earning Ratio = 42 = 64.62%

65

13. Dividend per Share = 200,000 = 20/ share

10,000

14. Dividend Yield = 20 = 30.77%

65

15. Payout Ratio = 20 = 47.62%

42

16. Debt Ratio = 835,000 = 22.97%

3,635,000
 Problem 3.13

a. Current Ratio = 992,000 = 4.13:1

240,000

b. No. of times bond interest earned = 102,000 = 102,000 = 8.5

(300,000 x 4%) 12,000

c. No. of days sales in Inventories = 360 = 128 days

3

Inventory turnover = 900,000 = 3

320,000

d. Book value per share = 400,000 + 720,000 - 88,000 - 200,000 - (200,000 x 7%) = 818,000 = 41
20,000 share 20,000

e. Rate of return on common stockholder= 65,000 - 14,000 = 34.98%

818,000
 Problem 3.14

a. Working Capital = 575,000 - 200,000 = 375000.00

b. Net Monetary Asset = 355,000 - 200,000 = 155000.00

c. Current Ratio = 575,000 / 200,000 = 2.88:1

d. Acid Test ratio = 355,000 / 200,000 = 1.78:1

e. Cash Flow Operation from to Current Liabilities

= 70,000 / 200,000 = 0.35

f. Inventory Turnover = 750,000 / 235,000 = 3.19

g. Gross Profit Rate = 250,000 / 1,000,000 = 0.25

h. Book Value Per Share = 600,000 / 30,000 = 20.00

I. Ratio of Net Income to Net Sales = 90,000 / 1,000,000 = 0.09

j. Net Earnings per Share = 90,000 / 30,000 = 3.00

k. Rate of Return on Invested Capital = 90,000 / 345,000 = 0.26

l. Cash Flow from Operation to total Liabilities = 70,000 / 320,000 = 0.22

m. Ratio of SHE to Total Liabilities = 600,000 / 320,000 = 1.88

* Cash Flow from Operations 90,000

20,000
-60,000
30,000
5,000
-20,000
5,000
70,000
 Problem 3.15

a. Cash
Total Current Asset
Account Receivable 160,000.00
Inventory -42,000.00
-60,000.00
58,000.00
b. Account Receivable
360days / 36days = 10 Receivable Turnover
420,000 / 10 = 42,000.00

c. Inventory
80,000 x 0.75 = 60,000.00

d. Total Current Asset

80,000 x 2 = 160,000.00
 Problem 3.16

Percentage
2016 2017 Peso Change Change
Sales 100,000 1) 120,000 2) 20,000 20%
Cost of Sales 3) 60,000 63,000 3,000 4) 5%
Gross Profit 5) 40,000 6) 57,000 7) 17,000 8) 43%
Expenses 30,000 9) 42,000 10) 12,000 11) 40%
Net Profit 12) 10,000 13) 15,000 14) 5,000 50%
 Problem 3.17

Sales 1 204,008 2 100%

Less:Sales Returns 3 0 10 0%
Net Sales 4 200,000 5 100%
Cost of Sales 6 140,000 70%
Gross Profit 7 60,000 8 30%
Expenses 9 25,000 10 12.50%
Net Profit 35,000 18%
 Problem 3.18

a Current Liabilities
15625 x 125% = 19,531
-15,625
3,906.25

b Quick Assets
15625 x125% = 19,531.25

c Current Assets
19531.25 + 171875 = 191,406.25

d Net Working Capital

191406.25 - 3906.25 = 187,500.00

e Current Rates
191406.25 / 3906.25 = 49.10
 Problem 3.19

(Requirement a) Net Profit

Sales 47,500,000 Sales 950000 x 5 = 4,750,000

Cost of Sale -4,600,000 Cost of Sales 1150000 x 4 = 4,600,000
Expenses -80,000
Net Profit 70,000
 Problem 3.20

a Dividend Pay-out Ratio

3888 / 11.04 = 0.352

b Earnings Price Ratio

11.04 /20 = 0.552

c Time Interest Earned

92000 / 5000 = 18.400

Computation
Dividend Per Share= 19.44% x 20 3.888

Earnings Per Share = 55200 / 5000 11.040

EBIT = 55200 / 60% 92000.00

Interest Expense = 100000 x 5% 5000.00
 Problem 3.21

Compute for the petty cash balance December 31. 2017

Currency and coins 7,000

Check drawn payable to petty cash custodian 4,000
Petty Cash Balance 11,000
 Problem 3.22

(Requirement a) Cash Shortage

Computation
Currency and coins 8,200
Petty cash vouchers 12,760 (8460 +3,460 + 840)
Petty cash accounted 20,960

Petty cash fund per ledger 25,000

Cash shortage 4,040

(Requirement b) Entry to replenish the petty cash fund

Postage expense 8,460.00

Office supplies expense 3,460.00
Transportation expense 840.00
Cash over and short 4,040.00
Cash 16,800.00