NAME: MANULAT, WARREN CARLO G.

SECTION: BSMA 1-1

EXERCISE 1
1-1.

Asset Liabilities Equity Income Expenses

2019 END 640,000 180,000 460,000
2020 DURING 200,000 160,000 (60,000) 560,000 (460,000)
2020 END 840,000 340,000 400,000 560,000 (460,000)
1. P640,000 – 180,000 = P 460,000 is the owner’s equity on December 31, 2019. In
order to get this amount, I subtracted the total assets to the liabilities since Equity is
the difference between assets and liabilities.

2. Net income for the year 2020 is P 560,000 – 460,000 = P 100,000. To get the net
income, we have to diminish the total revenues to the total expenses and that’s how
I got my answer.

3. The total liabilities on December 31, 2020 is :

P 180,000 + 160,000 = P 340,000
I got this answer by adding the total liabilities at the beginning of the year (end of
2019) and the liabilities gained during the year 2020 that resulted into the ending
amount of liabilities.

4. OE at Dec 31 2020 = 400,000 + (560,000 – 460,000) = P 500,000

To find the owner’s equity, we have to add the equity the total revenues then
subtract the total expenses.

1-2.
 Assets Liabilities Equity Income Expenses
140,000 10,000 140,000 100,000 (7000)
100,000 (20,000)
(7000) (12,000)
(20,000) (10,000)
(12,000)
30,000
(30,000)
Total: 201,000 10,000 140,000 100,000 (49,000)

5. 140,000 +100,000 – 49,000 = P 191,000 (owner’s equity on March 31, 2020)

In order to get my owner’s equity, I had to add the equity to the income and subtract
the total expenses which resulted into the amount of P 191,000.

6. Total assets March 31, 2020 = P 201,000 = 140k + 100k – 7k – 20k -12k – 30k + 30k
To get the total assets, I added/subtracted all the amounts on the asset column

7. Total liabilities on March 31, 2020 = P 10,000

This is the only liability recorded according to the given details which is the bill for
advertising for the month of March

8. Net income March 2020 = P 51,000 = 100k – 7k -20k – 12k- 10k

To compute the total net income for the month of March 2020, I subtracted all the
recorded expenses to the total revenue.
1-3.
Assets Liabilities Owner’s
Equity
Beginning 334,000
During 232,000 (54,000) 286,000
Ending 620,000

Answer: Beginning Equity = P 334,000

In order to arrive to my answer, I first entered all the given data to the table. Then, I
added the assets during the year and the liabilities so that I can find the equity during the year.
Since the ending owner’s equity is given, I subtracted it to the equity during the year so that I
can find out what is the amount of the beginning owner’s equity.
1-4.
 ASSETS LIABILITIES OWNER’S EQUITY
X X/3 680,000

2X/3 = 680,000
2X = 2,040,000 1,020,000/3
X= P 1,020,000 = TOTAL ASSETS = P 340,000 = TOTAL LIABILITIES
The first thing I did is to find the total amount of assets which is represented by letter X. Since
2/3 of the assets is 680,000, I equated it so that I can find the value of X which turned out to
be 1,020,000. Now since the OE is 2/3 of assets, it is expected that the Liabilities should be the
1/3 of assets so that the equation will remain equal. The, I substituted the amount of total
assets then divided it by 3 in order to get the total liabilities.

1-5.
Owner’s Equity, January 1 P 220,000
Add: Additional Investment 94,000 P 314,000
Less: Owner’s Withdrawal (56,000) P 258,000
Add: Net Profit 76,000
Owner’s Equity, December 31 P 334,000
Note: Total Revenues – Total Liabilites = Net Profit/Loss
P 308,000 – 232,000 = P 76,000 (Net Profit)

Owner’s Equity, December 31 = P 334,000

1-6.
REVENUE EXPENSES
490,000 48,000
160,000 140,000
650,000 188,000
Total Revenue – Total Expenses = Net Income
P 650,000 – 188,000 = P 462,000 = Net Income
ASSETS LIABILITIES OWNER’S EQUITY
 2019 END 520,000 105,000 415,000
2020 DURING 150,000 (20,000) - Net Loss
35,000 – Add’l Inv.
(60,000) – Drawings
= (45,000)
2020 END 670,000 300,000 370,000
1-7.
Answer: Beginning Balance of Liabilities = P 105,000
1-8.
JERRY WEST, CPA
Trial Balance (Solution with Corrections)
December 31, 2020
DEBIT CREDIT
Cash P 28,400
(1) 2,700
Accounts Receivable 22,310
(1) (2,700)
Supplies 30,000
(2) (23,400)
Office Equipment 50,000
(2) 23,400
Accounts Payable P 46,600
(5) 540
Jerry West, Capital 90,000
Jerry West, Drawing 8,000
(6) 5,000
Professional Fees 42,660
(3) 8,010
Salaries Expense 24,000
(4) 6,000
(6) (5,000)
Advertising Expense 9,100
(8) (5,000)
Rent Expense 4,000
Utilities Expense 5,000
(7) 5,000
Miscellaneous Expense 1,000
JERRY WEST, CPA
 Trial Balance
December 31, 2020
DEBIT CREDIT
Cash P 31,000
Accounts Receivable 19,610
Supplies 6,600
Office Equipment 73,400
Accounts Payable P 47,140

Jerry West, Capital 90,000

Jerry West, Drawing 13,000
Professional Fees 50,670
Salaries Expense 25,000
Advertising Expense 4,100
Rent Expense 4,000
Utilities Expense 10,000
Miscellaneous Expense 1,000
TOTALS P 187, 810 P 187,810

1-9.
1. P 43,200/12 = P 3,600/ month
P 3,600 x 7 months (June 1, 2020 – December 31, 2020) = P 25,200 (earned)
P 3,600 x 5 months (January 1, 2021 – May 31, 2021) = P 18,000 (unearned)

Liability Method:
Original Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 1 Cash P 43,200

JUNE
Unearned Subscription Fees P 43,200
To record payment received for 1-
year subscription from client
 Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Unearned Subscription Fees P 25,200

DEC
Subscription Fees P 25,200

Revenue Method:
Original Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 1 Cash P 43,200

JUNE
Subscription Fees P 43,200
To record payment received for 1-year
subscription from client

Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Cash P 43,200

DEC
Unearned Subscription Fees P 43,200

2. Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

XXXX 31 Salaries Expense P 37,800

JAN
Salaries Payable P 37,800
12,600 x 3 days ( Jan 29,30,31) = P 37,800
Note: Jan 28 is not included because it is
Sunday.
3. Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Account Receivable P 42,000

DEC
Service Revenue P 42,000
To record accrued revenue

4. Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Depreciation Expense – Building P 50,400

DEC
Accumulated Depreciation - Building P 50,400

Solution:
(1,410,000 – 150,000)/25 = P 50,400

5. (a)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Supplies Expense P 9,905

DEC
Supplies P 9,905
P 14,125 – 4,220 = P 9,905 (used portion)

(b)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Prepaid Insurance P 35,100

DEC
Insurance Expense P 35,100
P 46,800 x 9/12 = P 35,100 (unused portion)
(c)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Rent Expense P 11,250

DEC
Prepaid Rent P 11,250
P 27,000 x 2.5/6 = P 11,250 (used portion)

(d)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Prepaid Taxes P 21,600

DEC
Taxes Expense P 21,600
P 64,800 x 4/12 = 21,600 (unused portion)

(e)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Prepaid Advertising P 42,720

DEC
Advertising Expense P 42,720
111,072 x 20/52 = P 42,720 (unused portion)

(f)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Depreciation Expense – Equipment P 15,040

DEC
 Accumulated Depreciation – Equipment P 15,040
(235,200 - 9,600)/15 = P 15,040

(g)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Depreciation Expense – Automobile P 39,375

DEC
Accumulated Depreciation - Automobile P 39,375
(P 720,000 – 90,000) x 6mo/96mo = P 39,375

6. (a)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Rent Revenue P 32,000

DEC
Unearned Rent Revenue P 32,000
48,000 * 4mo/6mo = P 32,000

(b)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Unearned Commissions P 14,625

DEC
Commission Income P 14,625
35,100 * 5/12 = P 14,625

(c)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT
 2021 31 Unearned Service Fees P 198,000
DEC
Service Fees P 198,000
264,000 x 9/12 = P 198,000

(d)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Subscriptions Income P 5,850

DEC
Unearned Subscriptions Income P 5,850
14,040 x 5/12 = P 5,850

(e)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Salaries Expense P 54,000

DEC
Salaries Payable P 54,000
90,000 x 3d/5d = P 54,00

(f)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2021 31 Accounts Receivable P 14,100

DEC
Service Fees P 14,100
To record accrued income

1-10.
1.
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Prepaid Insurance P 63,000

DEC
Insurance Expense P 63,000
72,000 x 21mo/24mo = P 63,000

2.
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Rent Income P 45,500

DEC
Unearned Rent Income P 45,500
58,500 x 7mo/9mo = P 45,500

3.
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Depreciation Expense – Machinery P 136,250

DEC
Accumulated Depreciation – Machinery P 136,250
[(78,000 x 10/12) x 25%] + [(558,000-
78,000) x 25%] = 136,250

4.
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Accounts Receivable P 18,000

DEC
Commission Income P 18,000
To record accrued income
5.
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Supplies Expense P 8,000

DEC
Supplies P 8,000
To record consumed supplies

6.
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Unearned Subscriptions P 30,400

DEC
Subscriptions Income P 30,400
76,000 x 40% = P 30,400

7.
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Interest Expense P 2,250

DEC
Interest Payable P 2,250
360,000 x 9% x 25d/360d = P 2,250

8.
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Fees Collected in Advance P 360,000

DEC
Fees Earned P 360,000
600,000 x 60% = P 360,000
 9.
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Interest Receivable P 4,500

DEC
Interest Income P 4,500
300,000 x 12% x 45d/360d = P 4,500

10.
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Insurance Expense P 43,750

DEC
Prepaid Insurance P 43,750
(60,000 x 10/24) + (45,000 x 5/12)
25,000 + 18,750

1-11.
Sales Beginning Net End COGS Gross Operating Net
Inventory Purchase Inventory Profit Expenses Income/Loss
175,000 A. 60,000 85,000 60,000 B. 85,000 90,000 C. 28,000 62,000
D. 268,000 62,000 E. 164,000 68,000 158,000 110,000 40,000 70,000
280,000 72,000 217,000 F. 109,000 G. 180,000 100,000 H. 151,000 (51,000)
440,000 90,000 I. 200,000 110,000 J. 180,000 K. 260,000 170,000 90,000

A. COGS + EI – NET PURCHASES = BEG. INVENTORY

85,000 + 60,000 – 85,000 = P 60,000

B. Sales – Gross Profit = COGS

175,000 – 90,000 = P 60,000

C. GROSS PROFIT – NET INCOME = OPERATING EXPENSES

90,000 – 62,000 = P 28,000

D. COGS + GROSS PROFIT = SALES

 158,000 + 110,000 = P 268,000

E. COGS + EI – BEG INV. = NET PURCHASE

158,000 + 68,000 - 62,000 = P 164,000

F. BEG. INV + NET PURCHASE – COGS = ENDING INV.

72,000 + 217,000 – 180,000 = P 109,000

G. Sales – Gross Profit = COGS

280,000 – 100,000 = P 180,000
H. GROSS PROFIT + NET LOSS = OPERATING EXPENSES
100,000 + 51,000 = P 151,000

I. COGS + EI – BEG. INV = NET PURCHASE

180,000 + 110,000 – 90,000 = P 200,000

J. SALES – GROSS PROFIT = COGS

440,000 – 260,000 = P 180,000

K. OPERATING EXPENSES + NET INCOME = GROSS PROFIT

170,000 + 90,000 = P 260,000
1-12.
1. (Outstanding A/R x 10%) – Allowance or bad debts = Amount of Adjustment
(43,000 x 10%) – 760 =?
4,300 – 760 = P 3,540

2. 700,000 x 10% = P 7,000 is the amount to be credited on Allowance for Bad Debts
Account.
1-13.
1.
(a)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Bad Debt Expense P 26,600

DEC
 Allowance for Bad Debts P 26,600
(356,800 x 5%) + 8,760 = P 26,600

(b)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Bad Debts Expense P 48,760

DEC
Allowance for Bad Debts P 48,760
40,000 + 8,760 = P 48,760

(c)
Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Allowance for Bad Debts P 10,000

DEC
Accounts Receivable P 10,000
To record written off in accounts receivable

Adjusting Entry:
DATE DESCRIPTION DEBIT CREDIT

2020 31 Bad Debts Expense P 53,440

DEC
Allowance for Bad Debts P 53,440
[(356,800 – 10,000) x 10%] + 18,760(P8,760 +
10,000 Debits of ABD) = P 43,440

2.
(a)
BLONDIE COMPANY
December 31, 2020
Trial Balance
 Account Receivable P 356,800
Less: Allowance for Bad Debts (26,600) P 330,200

(b)
BLONDIE COMPANY
December 31, 2020
Trial Balance

Account Receivable P 356,800

Less: Allowance for Bad Debts (48,760) P 308,040

(c)
BLONDIE COMPANY
December 31, 2020
Trial Balance

Account Receivable P 356,800

Less: Allowance for Bad Debts (53,440) P 303,360