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Short Problems

Chapters 1 and 2

1. During the year 2004, William Company had revenues of P87,500 and expenses of
P57,500. Total liabilities at year end amounted to P112,500, while the owner’s equity at
the start of the year was P37,500. Compute for the total assets at the end of the year.

2. Sharon Company had total assets of P375,000 and liabilities of P122,500 on January 1,
2005. After six months of business operations, the assets totaled P475,000 while
outstanding obligations amounted to P89,000. During the six-month period, the
proprietor withdrew cash of P37,500 and some store supplies valued at P1,250. During
the same period, the owner made additional investments of P61,250 cash and a second-
hand store equipment originally costing P62,500 but with a current fair market value of
only 60% of its original cost. Compute for the net income or net loss during the six-
month period.

3. Manny Pacman Boxing School reported the following information pertaining to the
business on December 31 of the current year:

Property, Plant, and Equipment (net P1,250,000

of depreciation)
Accounts Receivable 300,000
Prepaid Insurance 25,000
Unearned Boxing Revenue 100,000
Cash 625,000
Bank Loans Payable 275,000
Land 1,125,000
Accounts Payable 150,000
Unused Supplies 18,750
Marketable Securities 350,000
Salaries Payable 150,000

a. How much are the total assets of Pacman Boxing School on December 31?
b. What is the account of Manny Pacman’s Capital on December 31?

4. The following accounts appear in the trial balance of Kikay Company for the month of
May 31, 2005:
Debit Credit
Cash P2,300
Accounts Receivable 850
Office Supplies 800
Accounts Payable P2,150
Kikay, Capital 1,250
Service Revenue 2,150
Wages Expense 1,750
However, the following errors were made to some of the accounts in the trial balance
a. The cash account is overstated by P400.
b. Services rendered on account for P300 was not recorded at all.
c. A P500 debit to Accounts Payable was posted as P50.
d. Service Revenue of P100 was recorded as debit rather than credit.

What is the corrected debit and credit column total of Kikay Company’s trial balance?

5. Pasaway began the year 2004 with a cash of P43,000. In addition to earning a net income
of P25,000 and making an owner’s withdrawal of P15,000 for personal use, the owner
borrowed P60,000 from a local bank and purchased a brand new equipment for P90,000
with cash. Also, accounts receivable increased by P6,000 for services rendered on
account. Assuming there were no other company transactions, compute the amount of
cash on hand at the end of the year.

6. Hanah Pin started her own business. She does not know about the double entry
accounting system, but managed to keep track of the following information for a three-
month operation:

Cash invested in the business P50,000

Second-hand equipment invested 75,000
Cash received from customers 46,250
Accounts receivable 11,250
Salaries paid to her employees 3,750
Purchase of new computer 7,500
Supplies used and paid 750
Rent incurred but unpaid 1,250
Cash withdrawal for personal use 2,500

Ignore depreciation of fixed asset. Compute the net income of Hanah Pin for the three-
month period.

7. If Hanah Pin invested old furniture and fixtures to her business costing P12,500 but with
a current market value of only P8,750, what would be the balance of the owner’s equity
at the end of the three-month period?

8. Matam Puhin owns a company in Greenhills. It reported the following assets as of

December 31, 2004: Cash, P17,500; Accounts Receivable, P38,500; Inventory, P25,000;
Land, P100,000; Equipment, P77,500; Factory Building, P1,250,000. Total owner’s
equity is 2/3 of the total assets. The total liabilities are ½ of the total owner’s equity. The
accounts payable is 1/6 of the total liabilities. What is the balance of the accounts
9. On December 31, 2004, Paha Mak Company had total assets of P40,000 and total
liabilities of P10,000. During 2005, the company had service revenues amounting to
P35,000 and total expenses of P25,000. During the year, Paha Mak took P5,000 for his
personal use. Assuming that on December 31, 2005, the total assets of the company
amounted to P50,000, how much was the year-end total liability balance?

10. The following has been extracted from the records of Dok Leng after the first six months
of operation:

Dok Leng, Capital P112,500

Equipment (invested in the 12,500
Accounts Receivable 30,000
Service Revenue 61,250
Salaries and wages paid 8,750
Rent expense paid 5,000
Supplies purchased 6,250
Accounts receivable 3,125

Assuming that part of the purchase price of the supplies was paid in cash and that Dok
Leng invested both cash and equipment into the business, how much cash does Dok
currently have?

11. On October 1, 2001, Coconut Fuel Co. sold 100,000 gallons of heating oil to Kennot
Afford Co. at P0.75 per gallon. 50,000 gallons were delivered on December 15, 2001,
and the remaining 50,000 gallons were delivered on January 15, 2002. Payment terms
were: 50% due on October 1, 2001, 25% due on first delivery, and the remaining 25%
due on second delivery. What amount of revenue should Coconut Fuel Co. recognize
from this sale during 2001?

12. On August 1, 2002, Cover Me Blue Magazine had total assets of P65,000 and total
liabilities of P18,750. The business earned a net income of P21,250 for the month of
August but the owner withdrew P6,250. As of August 31, 2002, the owner determined
that total liabilities decreased by P8,750. By how much did total assets increase or
decrease in August of 2002?

13. Diamond Company began the year 2002 with cash of P21,500. In addition to earning a
net income of P12,500 and making an owner’s withdrawal of P7,500 for personal use,
Diamond borrowed P30,000 from the bank and purchased equipment for P45,000 with
cash. Also, accounts receivable increased by P3,000 and accounts payable decreased by
P4,500. Assuming there were no other company transactions, how much does the cash at
hand amount to at the end of the year?

14. Assume that Gerry Lobo is the sole proprietor of a computer software business. His
balance sheet on December 31, 1991 follows:
Software Styles
Balance Sheet
Assets Liabilities and owner's equity
Cash 500 Liabilities
Merchandise 2,000 Accounts Payable 1,750
Land 5,000 Notes Payable 15,000
Total liabilities 16,750
Building 12,000 Owner's Equity
Lobo, Capital 2,750
Total Assets 19,500 Total liabilities and owner's equity 19,500

On January 19, 1992, fire destroyed the facilities of Software Styles. The proprietor’s
capital account had a balance of P4,000 at the date of the fire (from added investment).
Also, at that date, the creditors said that the business owed them P2,500 for accounts
payable and P14,000 on notes. Cash held by the First National Bank in Lobo’s checking
account was P1,000 when the fire occurred; the rest of the cash was in the company vault
within the company facilities. The insurance company agreed to pay for the lost assets.
What was the amount of assets lost as of the date of the fire?

15. Joshua Ferrer put in P25M to form a new basketball team. The franchise was acquired on
January 1, 2001 at the cost of P25M of which P5M was paid immediately. A note was
signed with the league officials for the balance scheduled to be paid at the beginning of
each of the next four year (P5M per year). The team signed up 8 players, resulting in a
total annual salary commitment of P25M. Also, the team paid a total of P12.5M as
signing bonuses to the top four players to get them to sign with the team. How much in
total assets should the company report?

16. Assume the following amounts are taken from the financial statements of two different

Company A Company B
Total assets, 1/1/2001 P167,000 P140,000
Total assets, 12/31/2001 142,000 163,500
Total liabilities, 1/1/2001 79,000 50,750
Total liabilities, 12/31/2001 60,500 57,500

Company A had additional investments of P5,000, had no withdrawals, and had P148,250
in expenses as of the end of 2001. Company B had revenues for 2001 of P103,000 and
withdrawals of P11,250 for the period. Compute for the amount of revenues for Company
A and expenses for Company B.

17. Except for the net income and a P3,750 withdrawal and added investment of P1,000, no
other additions to or deductions from the capital have been made. The only other
accounts that were changed were those listed below. The amount of change for each
account is shown as a net increase or decrease.
Increase (Decrease)
Cash P2,375
Accounts Receivable (750)
Supplies 3,375
Accounts Payable (2,875)
Mortgage Payable 5,000

How much was the net income for this period?

18. In recording the transactions for the year ended September 30, 2002, Deluxe Prints
included the following:
a. Recorded purchase of supplies on credit amounting to P3,750 in September 10,
2002 but delivery was received on October 17, 2002.
b. Debited an expense account for the purchase on September 25 of a building worth
c. Credited sales revenue for P15,000 on September 15 to record receipt of cash for
services rendered on August 30, 2001.
d. Debited salaries expense for P7,500 for insurance coverage on office space of the
staff for the one-year period from September 30, 2002. The payment was made on
this date.

Give the effect of the above information to total assets and net income.