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# Comprehensive Handout in Basic Accounting Part 1 2013

## Extreme Reviewer in Accounting 1A&B Part I

ACCOUNTS RECEIVABLE

1. X Co. started its operations on the year 2011. The Balance sheet of X Co. shows an
ending balance in its accounts receivable of P232,000. Total sales for the year was
P3,275,000 of which P2,125,000 is Cash Sales. The company has written-off P3,150
worthless accounts but subsequently recovered P1,650. Sales discount for the year is
1% of sales. Sales return and allowances was P8,000.
How much is the total collections of X Co. from its sales? (Cash and Credit sales)

2. Yamamoto Co. has a beginning balance of P117,000 in its accounts receivable ledger.
Its ending balance shows a balance of P1,590,900. Total sales for the year were partly
composed of cash and credit of which 40% is cash sales. Collections on account was
P4,321,800 net of 2% discount. The company has written-off P7,250 of its account and
recovery for the year was P11,150.
How much is the total net sales for the year?

3. The beginning balance of Sam Co.’s accounts receivable was P2,125,000. The following
transactions happened during 2013:
Sales on account - P830,000
Total collections of sales for the year – P3,360,000
Cash sales – P1,433,000
Collections on account previously written-off in prior years – P79,000
What is the amount of accounts receivable to be shown in the statement of
financial position for the year ended 2013?

4. Ericka Co. had just recently released its financial statement. Its statement of financial
performance shows a sales of P2,415,000 while its statement of financial position shows
a cash balance of P3,995,000 of which part of it was collection from cash sales
amounting to P324,000. The company has recovered P6,200 of its accounts receivable.
The net realizable value as of December 31, 2012 and December 31, 2013 was
P620,000 and P347,900 respectively while its allowance for doubtful accounts as of
January 1, 2013 and December 31, 2013 shows a balance of P18,000 and P9,700
respectively. The bad debt expense for 2013 was P10,000.
How much did the company collected on its sales on account?

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Comprehensive Handout in Basic Accounting Part 1 2013

## Past due Amount %Collectible

not due P250,000 99%
1-30 days 394,000 98%
31-60 days 158,000 95%
61-120 466,000 80%
121-180 514,000 65%
over 180 days ? 50%

## The company has an ending balance in its Accounts receivable amounting to

P2,654,000 as of the year ended December 31, 2013.
If the Allowance for bad debts as of January 1, 2013 amounts to P705,160 and the
company has written-off P14,920.
How much is the bad debts expense for the year 2013?

## 6. The following was shown in AJ Co. financial statements:

Accounts Receivable (12/31/13) P3,172,000
Total Sales 2,850,000
Collections on cash sales 1,325,000
Sales return 12,750
The company estimates its bad debts at 2% of net sales.
How much is the bad debts expense for the year 2013?
What is the ending balance of allowance for bad debts?

7. JPIA Co. has a beginning balance in its accounts receivable amounting to P237,680
while its allowance for doubtful accounts amounting to P11,831.20. It has sales of
P1,235,000. Collections amounts to P768,000. Write-off amounts to P23,150. Recovery
of P15,750.
The company estimates its bad debts at 1% of accounts receivable end.
How much is the bad debts expense during the year?

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Comprehensive Handout in Basic Accounting Part 1 2013

DEPRECIATION

8. Manabat Co. purchased equipment last August 1, 2008. The equipment has a useful life
of 17 years. The carrying value of the equipment as of December 31, 2015 was
P3,536,250.
How much is the depreciation per year?
What is the carrying value of the equipment for the year ended December 31,
2019?

9. Yoona Co. purchased machinery last April 1, 2009 with a useful life of 20 years. The
Accumulated depreciation for the year ended December 31, 2020 was P5,422,625.
How much did Yoona Co. pay to acquire the machinery?
What is the accumulated depreciation for the year ended December 31, 2026?

10. Son Ye Jin Co. bought equipment on May 1, 2010. It has a book value of P3,919,500
and a scrap value of P50,000 as of the fiscal year ended March 31, 2017. Its estimated
economic life is 16 years.
What is the depreciation expense per year?
What is the carrying value as of March 31, 2020?

11. Yoshida Co. acquired a building at a cost of P7,500,000 on October 1, 2005. As of May
31, 2013, it has a carrying value of P5,200,000.
What is the total useful life of the building?

12. Mariko Co. ordered machinery through snail-mail last March 5, 2013 from Bernardino
Co. at a cost of P6,000,000 with a useful life of 30 years. The latter received the order on
May 3, 2013. It was shipped last June 13, 2013 and was delivered until August 2, 2013.
The company also paid for the following:
 freight and other handling charge amounting to P200,000
 insurance while still in transit amounting to P50,000
 installation cost amounting to P150,000
 cost of testing and trial run necessary for preparing the machine for its intended
use in the amount of P125,000
 initial estimate of cost of dismantling and removing the machinery on which it is
located for which the entity has a present obligation in the amount of P75,000
 fees paid to consultants for advice on the acquisition of the machinery in the
amount of P220,000
 cost of safety rail and platform surrounding the machine in the amount of
P65,000
 cost of water device to keep the machine cool in the amount of P15,000.
The machinery was idle for three months and was actually used on Nov 7, 2013.
At the end of its useful life, the machinery can be sold at a proceeds of P90,000.

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Comprehensive Handout in Basic Accounting Part 1 2013

## What is the total cost of machinery?

What is the depreciable cost of the machinery?
What is the depreciation expense for the year 2013?

13. Portia Company purchased a computer hardware on July 1, 2012 for P400,000 The
economic life and residual value are estimated to be 5 years and P40,000 respectively.
The straight line method is used. In January 2013, due to advances in technology, the
company adjusted its estimate to a three-year total life and residual value of P10,000.
What is the depreciation expense for 2013?

## 14. On January 1, 2009, Anthony Company purchased for P132,000 a machine to be

depreciated by the straight-line method over an estimated useful life of eight years,
without salvage. On January 1, 2012, Arden determined that the machine has a useful
life of six years from the date of acquisition without salvage value. An accounting change
was made in 2012 to reflect this data.
What is the accumulated depreciation balance at December 31, 2012, after the

15. The Jessica Co. acquired a drilling machine on October 1, 2008 at a cost of P25,000
and depreciated it at a 25 % per annum on a straight line basis. On October 1, 2010,
P5,000 was spent on an upgrade to the machine in order to improve its efficiency and
increase the inflow of economic benefits over the machine’s remaining life.
What depreciation expense should be recognized in profit or loss for the year
ended September 30, 2011?

## DEFERRALS (PREPAID AND UNEARNED)

16. CPAR co. purchased a life insurance on November 1, 2012. The life insurance is valid
for 24 years. The balance of prepaid insurance for the year ended December 31, 2018 is
P267,500.
What amount did the company paid for the insurance on November 1, 2012?

17. Tiffany Hwang rented a dormitory last July 1, 2013 at a cost of P91,000. The balance of
the prepaid rent as of the fiscal year October 31, 2015 is P74,667.
How many years was the term of the rent?

18. Jeanne Co. has a beginning and ending balance of P115,000 and P100,000 respectively
on its supplies account. During the year, the company purchased additional supplies
amounting to P32,000.
Using the asset method, what amount will be adjusted to expense account?
Using the expense method, what amount will be adjusted to expense account?

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Comprehensive Handout in Basic Accounting Part 1 2013
payment of rent of their tenants that is good for 6 years. The balance of the liability
account of Chua Co. as of December 31, 2011 was P256,667.
What amount was initially received by Chua Co. as an advance payment for the
rent?

## 20. Pongyang Co. had the following rent contracts:

0266 November 1, 2009 P150,000 60
0437 June 3, 2011 69,000 36
0089 August 4, 2005 72,000 72
0125 October 7, 2008 175,000 60

What is the rent income of Ponyang Co. for the fiscal year July 31, 2013?
What is the balance of Unearned Rent for the fiscal year ended November 30,
2014?

21. On June 1, 2012, Bench Company received P900,000 from Matt Co. for payments for
the service to be rendered on September 1, 2012. The performance will cover a five-
year period. The company uses calendar year.
By what amount should the Unearned Revenue be decrease if the company uses
Liability method?
What is the amount of revenue to be recognized at the end of the year?

22. Antonniette Company must determine the December 31, 2012 year-end accruals for
2013, comprising of P37,500 for advertisements in December 2012 and P12,500 for
advertisements in January 2013 issued of the newspaper. A store lease effective
December 1, 2012 calls for a fixed rent of P120,000 per month payable at the beginning
of each month. In addition, rent equal to 5% of net sales over P3,000,000 per month is
payable on the 20th day of the following month. Net sales for December were
P5,500,000.
In its December 31, 2012 statement of financial position, Antonniette should report
accrued liabilities of?

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Comprehensive Handout in Basic Accounting Part 1 2013
ACCRUALS (INCOME AND EXPENSE)

23. German Company had the following long-term receivable account balances at
December 31, 2011:

## Notes Receivable from May Company 3,000,000

Notes Receivable from officer 1,500,000

## Transactions during 2012 and other information relating to German’s long-term

receivables were as follows:
 The P3,000,000 note, dated October 1, 2011 bears interest at 10%. Principal
payments of P1,000,000 plus appropriate interest are due on October 1, 2012,
2013 and 2014. The first principal and interest payment was made on October 1,
2012.
 The P1,500,000 note is dated January 1, 2011, bears interest of 8% and is due on
January 1, 2014. Interest is payable annually on December 31 and all interest
payment were made on their due dates.
 On January 1, 2012, German sold one of its divisions to AJ Company for
P1,000,000 under an installment sale contract. AJ made a P370,000 cash down
payment on the same date and signed a five-year, 12% note for the P630,000
balance. The equal annual payments of principal and interest on the note will be
payable on January 1, 2013 through January 1, 2017.

What is the accrued interest receivable on December 31, 2012 arising from the
foregoing data?

24. The following notes was found in the records of XYZ Co. as of December 31, 2013:
 Received a 4-year 12% interest-bearing note on September 3, 2011 with a
principal amount of P2,500,000.
 Received a 180-day note on May 10, 2013 with a face value of P1,250,000. It
bears an interest of 10%.
 Received a P750,000 90-day note on November 5, 2013 with an interest rate of
14%.

What is the interest receivable for the year ended December 31, 2013?
What is the interest income for the year 2013?

25. ABC Co. issued a P1,000,000 12% non-interest bearing note on October 1, 2013 in
payment for the merchandise purchased. The notes will mature on September 30, 2018.
What is the interest payable for the year ended December 31, 2014?
What is the interest expense for the year December 31, 2015?

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Comprehensive Handout in Basic Accounting Part 1 2013
26. On June 1, 2013, Aly Co. issued a non-interest bearing note for the amount of
P6,000,000 payable in 3 equal annual payments starting June 1, 2014. The prevailing
interest rate is 10%.
What is the interest payable for the year ended December 31, 2014?
What is the interest expense for the year 2015?

27. Bernadette Co. had the following notes payable account balances at December 31,
2011:

## Notes Payable from Aaron Company 5,000,000

Notes Payable from LOJ 2,000,000

## Transactions during 2012 and other information relating to Bernadette’s long-term

payables were as follows:

 The P5,000,000 note, dated July 1, 2011 bears interest at 8%. Principal payments
of P500,000 plus appropriate interest are due semi-annually. The first principal
payment was made on July 1, 2011 and interest payment was made on Dec 31,
2011.
 The P2,000,000 note is dated April 1, 2011, bears interest of 10% and is due on
April 1, 2013. Interest is payable annually and all interest payment were made on
their due dates.
 On August 1, 2012, Bernadette Co. purchased an equipment from Kim Company
for P3,000,000 under an installment sale contract. Denise made a P600,000 cash
down payment on the same date and signed a two-year, 12% note for the
remaining balance. The equal semi-annual payments of principal and interest on
the note will be paid on Jan 31, 2013 through August 1, 2016.
 On March 1, 2011, Bernadette Co. purchased a machine with a cash price of
P200,000. Cash paid at the time of purchase is P50,000 and the balance is
payable in three equal annual payments with interest at 10% on the unpaid
balance. Interest is payable annually.

What is the accrued interest payable on December 31, 2012 arising from the
foregoing data?

28. Burgundy Company pays all salaried employees on a biweekly basis. Overtime pay,
however, is paid in the next biweekly period. Burgundy Company accrues salaries
expense only at its June 30 fiscal year end. Data relating to salaries earned in June
2012 were as follows:
 Last payroll was paid on June 26, 2012 for the two-week ended June 26, 2012.
 Overtime pay earned in the two-week period ended June 26, 2012 was P42,000
 Remaining work days in June 2012 were June 28, 29, and 30 on which there was
no overtime.
 The recurring biweekly salaries total P750,000

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Comprehensive Handout in Basic Accounting Part 1 2013
Assuming a five-day work week, Burgundy should report a liability at June 30,
2012 for accrued salaries of?

## CASH TO ACCRUAL BASIS OF ACCOUNTING

29. Jax uhuh Co. rents and leases its buildings under different rental agreements involving
advance monthly rental payments or annual payments. Not all tenants pay their rent on
time.

## The balance sheet of the company contained the following accounts:

2011 2012
Rent Receivable 500,000 530,000
Unearned Rent 1,320,000 670,000

During 2012, the company reported a P2,700,000 cash collections from tenants.
What amount of Rent Revenue should the company report in its financial
statements?

30. Yana Co. collected P15,000 interest during 2012. It showed P2,000 interest receivable
on its December 31, 2012, balance sheet and P6,000 on December 31, 2011.
The interest revenue on the income statement for 2012 amounted to?

31. The following items were found in the comparative financial statements of Mary Co. as of
the year 2012 and 2013:

2012 2013
Cash P967,000 P1,153,000
Accounts Receivable 260,000 474,000
Allowance for bad debts 12,290 27,680
Rent Receivable 96,000 168,000
Interest Receivable 57,610 42,130
Prepaid Rent 119,000 87,250
Accounts Payable 183,150 174,220
Unearned Rent 375,000 224,000
Rent Payable 128,750 75,500
Income Taxes Payable 42,630 75,990

 Cash collected from tenants representing the rent for the year amounting to
P250,000
 Cash collected from sales in the amount of P519,000
 Cash paid for rental purposes in the amount of P1,369,000
 Cash received representing interest of the note receivable for the year amounting
to P22,880
 Cash paid for taxes during the year in the amount of P12,400

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Comprehensive Handout in Basic Accounting Part 1 2013
How much is the sales revenue for the year?
How much is the rent revenue for the year?
How much is the interest revenue for the year?
How much is the income tax expense for the year?
How much is the rent expense for the year?

32. The trial balance of Natang Nga Co. as of December 31, 2013 shows the following:

Dr Cr
Cash P3,218,000
Accounts Receivable 2,737,725
Rent Receivable 290,750
Interest Receivable 462,000
Inventories 490,000
Prepaid Expense 263,150
Property, Plant and Equipment 1,313,000
Accumulated Depreciation 468,000
Accounts Payable 768,500
Unearned Income 232,500
Bonds Payable 3,000,000
X Capital, Beginning 1,875,000
Service Revenue 1,792,500
Rent Income 124,500
Salaries Expense 68,600
Utilities Expense 250,000
Depreciation Expense 60,000
Total P10,855,075 P6,595,900

The trial balance was not correct due to the following errors committed by the
accountant:
 A P300,000 collection of accounts was posted twice in the debit balance of
accounts receivable.
 An accrued rent income of P27,500 was not recorded.
 A cash amounting to P64,500 representing advance payment from tenants was
recorded as debit to cash and credit to rent income.
 An acquisition of equipment worth of P810,000 on July 1, 2012 was not recorded .
It has a useful life of nine years with no salvage value.
 Payment of accounts payable worth P127,250 was posted in the debit balance of
accounts receivable as P12,725.
 Collection of accrued interest amounting to P180,000 was posted as P81,000 twice
in the credit balance of cash account and P18,000 once in the credit balance of
interest receivable.
 The accumulated depreciation of equipment was undervalued by P375,000.
 The equipment was over-depreciated by P125,000.
 Some of accounts was posted in the wrong side of the trial balance.

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Comprehensive Handout in Basic Accounting Part 1 2013

## What is the adjusted trial balance?

OMISSION/CORRECTION OF ERRORS

## 2011 2012 2013

Prepaid Expense P125,000 P75,000 P263,000
Unearned Income 87,250 149,000 152,750
Salaries Payable 12,500 16,500 18,000
Interest Receivable 52,150 68,350 47,950

##  On March 1, 2010 the company purchased a machinery costing P6,000,000 with a

useful life of ten years. The accountant recorded this as an expense transaction.

What is the net adjustment on the net income of JPIA Co. on the year
2011;2012;2013?(indicate whether debit or credit)
What is the net adjustment on the equity of JPIA Co. on the year ended
2011;2012;2013?(indicate whether debit or credit)

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Comprehensive Handout in Basic Accounting Part 1 2013
1. 3,032,335
2. 9,711,800
3. 1,028,000
4. 2,353,100
5. 37,140
6. 30,245;52,425
7. 2,541.60
8. 369,000;2,060,250
9. 9,230,000;8,191,625
10. 426,000;2,641,500
11. 25 years
12. 6,900,000;6,810,000;94,583
13. 141,600
14. 77,000
15. 8,750
16. 360,000
17. 13 years
18. 47,000;15,000
19. 420,000
20. 58,833;0
21. 60,000;60,000
22. 162,500
23. 125,600
24. 116,333;441,333
25. 19,066;78,551
26. 202,479;250,689
27. 278,333
28. 267,000
29. 3,380,000
30. 11,000
31. sales-733,000;rent revenue-473,000;interest revenue-7,400;income tax expense-45,760;rent
expense-1,347,500
32. 8,538,000
33. NI 2011-Cr5,577,400;2012-Dr699,550;2013-Dr437,650
Equity 2011-Cr5,577,400;2012-Cr4,877,850;2013-Cr4,440,200

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