Workbook in FAR

Robles-Paguio (2024 Edition)

Chapter 3 – The Accounting Process

True or False

1. True 6. False 11. False 16. True 21. True

2. False 7. False 12. True 17. False 22. True
3. False 8. True 13. True 18. True 23. False
4. False 9. True 14. True 19. True 24. True
5. False 10. False 15. True 20. True 25. True

2. An adjusted trial balance is a listing of all the business accounts that are going to appear on the
financial statements after year-end adjusting journal entries are made.

3. Prepaid expenses are goods or services that have been paid for by a company but have not been
consumed yet.

4. An accounting cycle may or may not be equal to one calendar period.

5. The primary objective of the auditing activity is to state an opinion regarding the fairness of financial
statements.

6. When the trial balance is balanced, it does not prove the accuracy of the bookkeeping records.

7. Reversing entries should be made at the beginning of an accounting record.

10. To accrue means to record the expenses when this became due.

11. All asset accounts are real accounts.

17. A credit may signify an increase in an income/ a liability account.

23. A compound journal entry consists of two or more debits or two or more credits.

Financial Accounting Theory Questions

1. D 6. A 11. A 16. C 21. D 26. A

2. B 7. A 12. C 17. A 22. D
3. D 8. B 13. B 18. C 23. A
4. B 9. D 14. C 19. A 24. D
5. D 10. C 15. D 20. D 25. D

Practical Financial Accounting

A. 1. B Billing for electricity recorded as an accrual P 13,600

Cost of goods sold 300,000
Sales 350,000
Total value of economic events P 663,600

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B. 2. A Accrual of water consumption P (35,000)
Declaration of cash dividends (800,000)
Sales on account 350,000
Issuance of capital stock 400,000
Net effect on equity P (85,000)

3. C Sales on account (Accounts Receivable) P 350,000

Purchase of computer equipment (Computer Equipment) 350,000
Payment for computer equipment (Cash) (350,000)
Issuance of capital stock (Cash) 400,000
Net effect on assets P 750,000

C. 4. D Invoice Amount (250,000 x 85% x 97%) P 206,125

Value Added Tax (206,125 x 12%) 24,735
Accounts Receivable P 230,860

Journal Entry
Accounts Receivable 230,860
Sales 206,125
Output VAT Payable 24,735

5. B Refer to the journal entry in Item No. 4

D. 6. C Total cash received with Official Receipts P 115,450

Total cash received with Acknowledgement Receipts 500,000
Total debit to cash in the cash receipts books P 615,450

7. A Total sales invoice issued (SI No. 1120-1122) P 175,000

E. 8. A Cash
Beginning - Rent 12,000
Issuance of shares 100,000 Photocopying machine 40,000
Bank loan 30,000 Payment of suppliers 40,000
Collection from customers 30,000 Salaries and wages 14,000
Loan to president 40,000
End 14,000

F. 9. D Cash
Beginning 17,500 End 112,500
Cash sales 85,000
Proceeds from sale (equip) 10,000

10. D Cash P 112,500

Accounts receivable 93,000
Inventories (18,000 – 13,000) 5,000
Equipment 80,000
Total assets P 290,500

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G. 11. B Debit Credit
Unadjusted total P 552,900 P 897,900
Unreleased checks (85,000 – 35,000) 50,000 50,000
Erroneously recorded sales (561,000 –
156,000) 405,000
Unrecorded furniture and fixture 350,000
Share premium 285,000
Retained Earnings (Deficit) 100,000 (185,000)
Additional cost of goods sold (471,000 –
71,000) 400,000
Total P 1,452,900 P 1,452,900

H. 12. B Debit Credit

Cash (8,000 – 300 – 2,000 -200 + 750 – 2,000) P 4,250 P
Accounts receivable (1,000 – 750) 250
Supplies 200
Equipment (2,000 + 3,000) 5,000
Notes payable 3,000
Capital 8,000
Drawings 2,000
Services rendered 1,000
Rent expense 300
Totals P 12,000 P 12,000

I. 13. D Debit Credit

Bank Loan P P 14,000
Financial Asset at FVPL 6,500
Bill Payable 1,000
Unearned Revenue 3,500
Sundry Debtors 12,000
Outstanding salaries 2,500
Prepaid rent 2,000
Insurance expense 7,300
Owner’s investment 95,000
Rent and Rates Expense 400
Accumulated Depreciation - Equipment 14,000
Accrued Revenue 15,000
Machinery 25,000
Drawings 3,500
Equipment 40,000
Maintenance expense 5,000
Miscellaneous expense 4,800
Accrued expenses 1,500
Depreciation expense – Equipment 2,000
Unexpired insurance 8,500
Vendor’s payable 500
P 132,000 P 132,000

J. 14. B Journal Entry

Insurance expense 45,000
Prepaid insurance 45,000
(23,000 + 57,000 – 35,000)

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K. 15. C Journal Entry
Cash 5,000
Unearned revenue 5,000

16. B Journal Entry

Revenue 3,800
Unearned revenue 3,800
(5,000 – 1,200)

L. 17. C Journal Entry

Salaries expense 100,000
Salaries payable 100,000
(125,000 x 4/5 days)

M. 18. C Revenue Expense Net Income

Earned revenue P 86,000 P - P 86,000
Accrued revenue 125,000 - 125,000
Accrued wages - 29,000 (29,000)
Net effect P 211,000 P 29,000 P 182,000

N. 19. B

O. 20. B Fixed Salaries Commission For Accrual

Donna P 25,000 P 22,500 P -
Regine 37,500 62,500 25,000
Mikey 62,500 150,000 87,500
Accrued commission P 112,500

P. 21. B Prepaid insurance (360,000 x 6/12) P 180,000

Prepaid rent 1,000,000
Total prepayment P 1,180,000

Q. 22. C Assets (A) Liabilities (L) Equity (E)

A=L+E P 5,400,000 P 3,240,000 P 2,160,000
Dividends paid (1,080,000)
Increase in share capital 972,000
Net income 1,080,000
Balance, end P 3,132,000

R. 23. B Assets (A) Liabilities (L) Equity (E)

Beginning P 380,000
Net income 110,000
End P 880,000 P 390,000 P 490,000

S. 24. A Debit
Adjusted total P 1,591,600
Less: Expenses (185,000 + 157,000 + 13,300 + 115,000 + 78,600 +
14,000) (562,900)
Post-closing trial balance total P 1,028,700

OR

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 Credit
Adjusted total P 1,591,600
Less: Revenue (585,100)
Add: Net income (585,100 – 562,900) 22,200
Post-closing trial balance total P 1,028,700