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Problem Solving

Problem 3 provides
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0% found this document useful (0 votes)
287 views32 pages

Problem Solving

Problem 3 provides
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Problem 1

Accounting has its own vocabulary and basic relationships. Match the accounting
terms at left with the corresponding definition or meaning at right.

H 1. Debit
A 2. Expense
C 3. Net income
D 4. Ledger
J 5. Posting
I 6. Normal balance
B 7. Payable
F 8. Journal
G 9. Receivable
E 10. Owner's Equity

Problem 2
A friend named by Jay Barlow has asked what effect certain transactions will have on his
company. Time is short, so you cannot apply the detailed procedures of journalizing and posting. Instead
you must analyze the transactions without the use of a journal. Barlow will continue the business only
if he can expect to earn monthly net income of at least $5,000. The following transactions occurred
this month;
a. Barlow deposited $5,000 cash in a business bank account, and the corporation issued ordinary shares
to him
b. Borrowed $5,000 cash from the bank and signed a note payable due within 1 year.
c. Paid $1,300 cash for supplies
d. Purchased advertising in the local newspaper for cash $1,800
e. Purchased office furniture on account, $4,400
f. Paid the following cash expenses for 1 month; employee salary, $2,000; office rent $ 1,200
g. Earned revenue on account, $7,000
h. Earned revenue and received $2,500 cash
i. Collected cash from customers on account, $1,200
j. Paid on account , $1,000

Requirements
1. Set up the following T-accounts: Cash, Accounts Receivable, Supplies, Furniture, Accounts Payable,
Notes Payable, Share Capital, Service Revenue, Salary Expense, Advertising Expense, and Rent Expense
2. Record the transactions directly in the accounts without using a journal. Key each transaction by letter
3. Prepare a trial balance for Barlow Networks, Inc., at the current date. List expenses with the largest
amount first, the next largest amount second, and so on
4. Compute the amount of net income or net loss for the first month of operations. Why or why not
would you recommend that Barlow continue in business?

1. Set up the following T-accounts: Cash, Accounts Receivable, Supplies, Furniture, Accounts Payable,
Notes Payable, Share Capital, Service Revenue, Salary Expense, Advertising Expense, and Rent Expense
ASSETS

Cash
Debit
a. $5,000.00 c.
b. $5,000.00 d.
h. $2,500.00 f.
i. $1,200.00 f.
j.
Bal. $6,400.00

Account Receivable
Debit
g. $7,000.00 i.
Bal. $5,800.00

Supplies
Debit
c. $1,300.00
Bal. $1,300.00

Furniture
Debit
e. $4,400.00
Bal. $4,400.00

Bal.

2. Record the transactions directly in the accounts without using a journal. Key each transaction by letter

cash
explanation
a issuance of common stock

b borrowig from bank

h receipt for revenue earned provided

i receipt of cash on accounts

ending balance

accounts Receivable
explanation

g services on account

ending balance
supplies
explanation
c purchased for cash

ending balance

furniture
explanation
e purchased on account

ending balance

accounts payable
explanation
j payment on

notes payable
explanation

common stock
explanation

service revenue
explanation

salary expense
explanation
f paid expense in cash
ending balance

3. Prepare a trial balance for Barlow Networks, Inc., at the current date. List expenses with the largest
amount first, the next largest amount second, and so on
Account Title
Cash
Account Receivable
Supplies
Furniture
Accounts Payable
Notes Payable
Share Capital
Service Revenue
Salary Expense
Advertising Expense
Rent Expense
TOTAL

4. Compute the amount of net income or net loss for the first month of operations. Why or why not
would you recommend that Barlow continue in business?

Barlow should not continue the business.


Net Income of $4,500 calculated above is lower than Barlow’s expectation of minimum monthly Net Income of
• The Net Income calculated above does not include charge for depreciation on Furniture, which will reduce the
• Barlow will also have to pay interest on the Notes Payable, which will cause Net Income to reduce further.
Problem 3
Presented below is the unadjusted trial balance of the Kapamilya Information Systems C
for the year ended Dec. 31, 2020

Cash
Notes Receivable
Accounts Receivable
Office Supplies
Land
Building
Accumulated Depreciation - building
Equipment
Accumulated Depreciation - equipment
accounts Payable
Uneraned Consulting Revenues
K, Capital
K, Withdrawals
Consulting Revenues
Salaries Expense
Repairs Expense
Miscellaneous Expense
Totals

Additional information
a. Office supplies on hand as at Dec. 31, 2020 is 21,000
b. one-third of the unearned revenues has been earned as at Dec 31, 2020
c. Depreciation for the year amounted to 38,000 for the building and 123,000 for the equipment
d. Salaries in the amount of 14,000 have accrued at year-end
e. The notes eceivable were accepted from several customers. The notes were issued on Sept. 1, 2020
and will be settled together with a 20% interest on May 31, 2022

Required:
1. Establish a ledger for each of the account in the unadjusted trial balance
2. Journalize and post the adjusting entries
3. Prepare a worksheet
4. Prepare an income statement, a statement of changes in equity and a balance sheet.

1. Establish a ledger for each of the account in the unadjusted trial balance
SL NO DATE
a Dec-31

b Dec-31

c Dec-31

d Dec-31

e Dec-31

2. Journalize and post the adjusting entries

Cash
Notes Receivable
Accounts Receivable
Office Supplies
Land
Building
Accumulated Depreciation - building
Equipment
Accumulated Depreciation - equipment
accounts Payable
Uneraned Consulting Revenues
K, Capital
K, Withdrawals
Consulting Revenues
Salaries Expense
Repairs Expense
Miscellaneous Expense
Office Supplies-expense
depreciation expense building
depreciation expense equipment
salaries payable
interest receivable
interest revenue

3. Prepare a worksheet

Counting revenues
interest revenue
less:

net income

4. Prepare an income statement, a statement of changes in equity and a balance sheet.


Assets
current assets

total current asset


property plant and equipment

Total property, plant and equipment


total assets
liabilities
total liabilities
owners equity

total owners equity

net changes in owners equity


A. The cost of operating a bjsiness, a decrease in
shareholders' equity
B. always a liability
C. Revenues-Expenses
D. Grouping of accounts
E. Assets-Liabilities
F. Record of transactions
G. Always an asset
H. Left side of an account
I. Side of an account where increases are recorded
J. Copying data from the journal to the ledger

tions will have on his


izing and posting. Instead
tinue the business only
ansactions occurred

on issued ordinary shares

e rent $ 1,200

ure, Accounts Payable,


xpense, and Rent Expense
each transaction by letter
penses with the largest

ons. Why or why not

ure, Accounts Payable,


xpense, and Rent Expense
= LIABILITIES

Accounts Payable
Credit
$1,300.00 j.
$1,800.00 Bal.
$2,000.00
$1,200.00 Notes Payable
$1,000.00

Bal.

Credit
$1,200.00

Credit

Credit

urnal. Key each transaction by letter

explanation debit explanations


issuance of common stock 5000 c payment for supplies

borrowig from bank 5000 d paid advertising expense

receipt for revenue earned provided 2500 f paid for salary expense
f paid rent expense
receipt of cash on accounts 1200
j payment on account
ending balance 6400

explanation debit explanations

services on account 7,000 i cash collected on account

ending balance 5,800


explanation debit explanations
purchased for cash 1,300

ending balance 1,300

explanation debit explanations


purchased on account 4,400
4,400
ending balance

explanation debit explanations


1000 e purchased furniture on ac

ending balance

explanation debit explanations


b signed note against borro
ending balance

explanation debit explanations


a issued against cash
ending balance

explanation debit explanations


g
h earned revenue on accoun
earned revenue in cash
ending balance

explanation debit explanations


paid expense in cash 2,000
ending balance 2,000

ate. List expenses with the largest

Barlow Networks, Inc.


Trial Balance
Current Date
Account Title Debit
Cash $6,400.00
Account Receivable $5,800.00
Supplies $1,300.00
Furniture $4,400.00
Accounts Payable
Notes Payable
Share Capital
Service Revenue
Salary Expense $2,000.00
Advertising Expense $1,800.00
Rent Expense $1,200.00
TOTAL $22,900.00

of operations. Why or why not

Amount
revenue
service revenue 9,500
total revenue 9,500
expenses
salary expense 2,000
advertising expense 1,800
rent expense 1,200
total expenses 5,000

net income 4,500

tation of minimum monthly Net Income of $5,000 to be earned.


eciation on Furniture, which will reduce the Net Income further.
will cause Net Income to reduce further.
nce of the Kapamilya Information Systems Company

Kapamilya Information Systems Company


Unadjusted Trial Balance
Dec. 31, 2020

d 123,000 for the equipment

otes were issued on Sept. 1, 2020

nd a balance sheet.

ref
office supplies expens
office supplies

unearned revenue
consulting revenue

depreciation expense-building
depreciation expense equipment
accumulated depreciation building
accumulated depreciation equipment

salaries expense
salaries payable

interest receivable
interest revenue

Accounts
salaries expense
repairs expense
miscellaneous expense
office supplies expense
depreciation expense building
depreciation expense equipment

nd a balance sheet.

current assets
cash
notes receivable
accounts receivable
interest receivable
unearned consulting revenue
office supplies
total current asset
property plant and equipment
land
building
equipment
accumulated depereciation building
accumulated depereciation equipment
Total property, plant and equipment
total assets

accounts payable
salaries payable
total liabilities

K.capital
net income
total owners equity
less:k withdrawal
net changes in owners equity
Debit . Credit
$1,000.00 e. $4,400.00
$3,400.00

Debit Credit
b. $5,000.00
$5,000.00

credit
1,300

1,800

2,000
1,200

1,000

credit

1,200
credit

credit

credit
4,400

3,400

credit
5000
5000

credit

5,000
5,000

credit

7,000
2,500
9,500

credit
Credit

$3,400.00
$5,000.00
$5,000.00
$9,500.00

$22,900.00
45,000.00
360,000.00
156,000.00
63,000.00
300,000.00
1,590,000.00
254,000.00
2,150,000.00
612,000.00
213,000.00
450,000.00
2,655,000.00
600,000.00
2,108,000.00
875,000.00
116,000.00
37,000.00
6,292,000.00 6,292,000.00

debit credit
42,000
42,000

150,000
150,000

38,000
123,000
38,000
123,000

14,000
14,000

24,000
24,000

Kapamilya Information Systems Company


Unadjusted Trial Balance
Dec. 31, 2020

Unadjusted Trial Balance adjustments


debit credit debit credit
45,000.00
360,000.00
156,000.00
63,000.00 42,000
300,000.00
1,590,000.00
254,000 38,000
2,150,000.00
612,000 123,000
213,000
450,000 150,000
2,655,000
600,000.00
2,108,000 150,000
875,000.00 14,000
116,000.00
37,000
42,000
38,000
123,000
14,000
24,000
24,000
6,292,000 6,292,000 391,000 391,000

2,258,000
24,000 2,282,000

889,000
116,000
37,000
42,000
38,000
123,000 1,245,000
1,037,000

45,000
360,000
156,000
24,000
300,000
21,000
906,000

300,000 300,000
1,590,000
2,150,000 3,740,000
292,000
735,000 1,,027,000
3,013,000
3,919,000

213,000
14,000
227,000

2,655,000
1,037,000 3,692,000
3,919,000
600,000 600,000
3,092,000
+ OWNER'S EQUITY

Share Capital
Debit
Bal. $5,000.00

Service Revenue
Debit

Bal. $9,500.00

Salary Expense
Debit
f. $2,000.00
Bal. $2,000.00

Advertising Expense
Debit
d. $1,800.00
Bal $1,800.00

Rent Expense
Debit
f. $1,200.00
Bal $1,200.00
tion Systems Company
d Trial Balance

Adjusted trial balance income statement


debit credit debit
45,000
360,000
156,000
21,000
300,000
1,590,000
292,000
2,150,000
735,000
213,000
300,000
2,655,000
600,000
2,258,000
889,000 889,000
116,000 116,000
37,000 37,000
42,000 42,000
38,000 38,000
123,000 123,000
14,000
24,000
24,000
6,491,000 6,491,000 1,245,000
Credit
a. $5,000.00

Credit
g. $7,000.00
h. $2,500.00

Credit

Credit

Credit
Balance sheet Changes in owners equity
debit credit debit credit
45,000
360,000
156,000
21,000
credit 300,000
1,590,000
292,000
2,150,000
735,000
213,000
300,000
2,655,000 2,655,000
600,000 600,000
2,258,000
889,000
116,000
37,000
42,000
2,258,000 38,000
123,000
14,000
24,000
24,000
5,246,000 4,209,000 1,845,000 4,937,000
1,037,000 3,092,000
5,246,000 5,246,000

24,000
2,282,000
1,037,000

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