CHAPTER 11

EXERCISES
1.

a)

b)

c)

d)

Bad Debts Expense

11,250
Allowance for Bad Debts
Financial position presentation:
Accounts Receivable
125,000
Less: Allowance for Bad Debts
17,250
Net Realization
107,750
Computation: 1% x 1,125,000
Allowance for Bad Debts, beginning
6,000
Add: Provision for bad debts
11,250
Total allowance for bad debts
17,250
Bad Debts Expense
5,417.50
Allowance for Bad Debts
Financial position presentation:
Accounts Receivable
125,000.00
Less: Allowance for Bad Debts
11,417.50
Net Realization
P113,582.50
Computation: 1/2% x (1,125,000 - 16,000 -25,500)
Allowance for Bad Debts, beginning
6,000.00
Add: provision for bad debts
5,417.50
Total allowance for bad debts
P11,417.50
Bad Debts Expense
2,500
Allowance for Bad Debts
Financial position presentation:
Accounts Receivable
125,000
Less: Allowance for Bad Debts
8,500
Net Realization
116,500
Computation: 2% x 125,000 = 2,500
Allowance for Bad Debts, beginning
6,000
Add: provision for bad debts
2,500
Total allowance for bad debts
8,500
Bad Debts Expense
250
Allowance for Bad Debts
Financial position presentation:
Accounts Receivable
125,000
Less: Allowance for Bad Debts
6,250
Net Realization
118,750
Computation: [5% x 125,000] required allowance
6,250
Allowance for Bad Debts, beginning
6,000
Provision for Bad Debts
250

11,250

5,417.50

2,500

250

2.
Amounts
P 60,000
150,000
70,000
50,000
20,000

Age of accounts
Within the discount period
1-30 days past due
31-60 days past due
61-90 days past due
Over 90 days

Estimated Percentage
Uncollectible
0
2
5
30
50

Bad Debts Expense

Allowance for Bad Debts
Financial position presentation:
Accounts Receivable
Less: Allowance for Bad Debts
Net Realization

Provision for
Bad Debts
3,000
3,500
15,000
10,000

31,500
31,500
350,000
51,500
298,500

3.
Bad Debts Expense
Allowance for Bad Debts
Financial position presentation:
Accounts Receivable
Less: Allowance for Bad Debts
Net Realization

4.

26,500
26,500
350,000
36,500
313,500

A. Popular Grocery
1. Building (8,800,000 1,250,000)/20 = 377,500 (yearly depreciation)
Depreciation Expense
377,500
Accumulated Depreciation Building
99

377,500

2.
3.

Furniture & Fixtures: (150,000 15,000)/10= 13,500

Depreciation Expense
Accumulated Depreciation Furniture & Fixture
Office Equipment [(345,000-75,000)/8 x10/12=28,125
Depreciation Expense
Accumulated Depreciation

13,500
13,500
28,125
28,125

B. Financial position Presentation:

Building
Less: Accumulated Depreciation (377,500 x 4)
Book Value
Furniture & Fixtures
Less: Accumulated Depreciation (13,500x 1.5 yrs)
Book Value
Office Equipment
Less: Accumulated Depreciation
Book Value
Income Statement Presentation:
Operating Expenses:
Depreciation Building
Depreciation Furniture & Fixtures
Depreciation Office Equipment
5.

Date
a)
b)
c)
d)
e)

6.

a)

b)
2011
12/31

Particulars
Adjusting Entries:
Accrued Interest Income
Interest Income
(8,000 x .14 x 19/360)
Interest Expense
Prepaid Interest
(250,000 x .18x 60/360 = 7,500x 15/60)
Lease Income
Unearned Rent
(600,000 x 14/15) + (520,000 x 1/6)
Insurance Expense
Prepaid Insurance
(6,000 x 12/18)
Merchandise Inventory
Income & Expense Summary

8,800,000
1,510,000
7,290,000
150,000
20,250
129,750
345,000
28,125
316,875
377,500
13,500
28,125
Debit

Credit

59.11
59.11
1,875
1,875
646,666.67
646,666.67
4,000
4,000
145,000
145,000

12/31/2011
Rent Expense
Accrued Rent Expense

12,000
12,000

Rent Expense
198,000
12,000

Accrued Rent Expense

12/31

12,000

In the 2011 Income Statement, Rent Expense will be presented as 210,000, while in the 2011
Statement of Financial Position there will be an additional Accrued Rent Expense or Rent Payable
in the liability section in the amount of P12,000
c)
d)

e)
2012
1/5
f)

7.

b.

Jan. 1, 2012
Accrued Rent Expense
Rent Expense
Jan. 5, 2012
Rent Expense
Cash
Rent Expense
2012
12,000 1/1 RE

12,000
12,000
12,000
12,000

12,000

Accrued Rent Expense

2012
12,000
beg

2012
1/1 RE

12,000

Based on the T Account shown above, although rent was paid, this will not be presented in the 2012
Income Statement and no accrued rent will be presented in the 2012 Statement of Financial Position
because it has already been paid.
Adjusting Entries:
Bad Debts
Allowance for Bad Debts
(10% x 110 = 11 8 = 3)
Depreciation Expense Furniture & Fixtures
Accum. Depn. Furniture & Fixtures
100

3
3
10
10

(60-10)/5=10)
Interest Receivable
Interest Income
(80 x 15% x 6/12)
Interest Expense
Interest Payable (80 x 18% x 5/12)

6
6
6
6

Rent Expense
Prepaid Rent
Salaries & Wages Expense
Salaries Payable
Commission Income
Unearned Commission Income
Output Tax
Input Tax
VAT Payable
Merchandise Inventory
Income & Expense Summary

10
10
6
6
1
1
192
104
88
85
85

c)
Villar Trading
Income Statement
For the year ended Dec. 31, 2011
Net Sales (note 1)
Cost of Sales (note 2)
Gross Income
Other Operating Income (note 3)
Selling Expenses (note 4)
General Expenses (note 5)
Interest Expense
Net Income
Note 1

Note 2

Note 3
Note 4

Note 5

d)

P1,459
951
508
10
(139)
( 120)
(6)
P 253

Sales
P1,500
Sales Return & allowances
( 25)
Sales Discount
( 16)
Net Sales
P1,459
Merchandise Inventory, Jan. 1
P 198
Purchases
850
Freight In
15
Purchase Returns & Allowances
( 19)
Purchase Discount
( 8)
Merchandise Inventory, Dec. 31
( 85)
Cost of Sales
P 951
Commission Income
P 4
Interest Income
6
Other Operating Income
P10
Selling Expenses
Freight Out
P 19
Salaries & Wages (78 x 2/3)
52
Utilities (64 x )
48
Depreciation
10
Rent
10
Total
P139
General Expenses
Salaries & Wages (78 x 1/3)
P 26
Utilities (64 x )
16
Taxes
75
Bad Debts
3
Total
P 120
Villar Trading
Statement of Owners Equity
For the Year Ended December 31, 2011
Villar Capital, Beginning
P 100
Add: Income
253
Less: Drawings
(16)
Villar Capital, End
P 337

e)

Villar Trading
Statement of Financial Position
Assets

Current Assets
Cash on Hand

P 25

December 31, 2011

Liabilities & Owners Equity
Current Liabilities
Accounts Payable
P 16
101

Cash In Bank
Accounts Receivable
P 110
Allowance for Bad Debts ( 11)
Merchandise Inventory
Supplies Inventory
Prepaid Rent
Notes Receivable
Interest Receivable
Total
Non- Current Assets
Furniture & Fixtures
P 60
Accumulated Deprn
( 20)
Total Assets

175
99
85
4
20
80
6
494

Salaries Payable
Unearned Commission Income
Interest Payable
VAT Payable
Total
Non-Current Liabilities
Loan Payable
Total Liabilities
Villar, Capital

40
P 534

Total Liabilities & Owners Equity

f)
1)

2)

3)

Closing Entries:
Sales
Interest Income
Commission Income
Purchase Returns & Allowances
Purchase Discount
Income & Expense Summary
Income & Expense Summary
Merchandise Inventory, Jan. 1
Purchases
Freight In
Freight Out
Salaries & Wages
Utilities Expense
Bad Debts
Depreciation
Rent
Taxes
Sales Returns & Allowances
Sales Discount
Interest Expense
Income & Expense Summary
Villar, Capital
CE

4)

Income & Expense Summary

1,369 AE
CE

Villar, Capital
Villar, Drawings

1,500
6
4
19
8
1,537
1369

198
850
15
19
78
64
3
10
10
75
25
16
6

1,183
1,183
85
1,537
253
16
16

g)
Reversing Entries:
Salaries Payable
Salaries and Expense
Interest Income
Interest Receivable
Interest Payable
Interest Expense
Unearned Commission Income
Commission Income
h)

6
6
6
6
6
6
1
1

Profitability
1. Gross Profit Ratio 508/1,459 = 35%
2. Operating Ratio 259/1,459 = 18%
3. Return on Sales = 253/1,459 = 17%
PROFITABLE
Liquidity
1. Working Capital 494 117 = 377
2. Current Ratio 494/117 = 4.22 :1
3. Acid Test Ratio = 299/117 = 2.56:1
VERY LIQUID
Solvency
1. Debt Ratio

197/534 = 37%
102

6
1
6
88

117
80
197
337

P 534

2. Equity Ratio 337/534 = 63%

3. Times Interest Earned 259/6 = 43.17 times
VERY SOLVENT
7. a)
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)

m)
n)
o)

Land
Cash
Carmelo, Capital
Resort
Cash
Cash
Mortgage Payable
Resort Improvements
Cash
Equipment
Cash
Notes Payable
Furnitures & Fixtures
Cash
Linen
Cash
Supplies
Accounts Payable
Vending Purchases
Cash
Cash
Credit Card Receivable
Room Sales Revenue
Cash
Vending Sales Revenue
Wages
W/Tax Payable
SS Premium Payable
Pag-ibig Premium Payable
PH Premium Payable
Cash
Accounts Payable
Cash
Insurance Expense
Cash
Mortgage Payable
Interest Expense
Cash

300,000
250,000

Cash
250,000
300,000
84,303
8,800

a)

Land
300,000

550,000
108,000
108,000
300,000
300,000
285,400
285,400
48,000
12,000
36,000
120,000
120,000
7,894
7,894
4,200
4,200
540
540
84,303
4,437
88,740
8,800
8,800
31,200
1,560
936
624
312
27,768
3,200
3,200
4,200
4,200
15,000
2,000
17,000

b)
a)
c)
j)
k)

b) 108,000
d) 285,400
e)
12,000
f) 120,000
g)
7,894
i)
540
l) 27,768
m)
3,200
n)
4,200
o) 17,000

g)

Linen Purchases
7,894

a)

Land
300,000

i)

Vending Purchases
5,400

b)

Resort
108,000

Credit Card Receivables

j)
4,437

d)

Resort Improvements
285,400
103

h)

Supplies
4,200

Accounts Payable
m)
3,200 h)
Notes Payable
e)

e)
4,200

Furniture & Fixtures

f) 120,000

36,000

n)

Mortgage Payable
o)
15,000 c) 300,000

l)

Carmelo Capital
a)

Prepaid Insurance
4,200
Wages
31,200
SS Premium Payable
l)
935

550,000

Vending Sales Revenue

k)
8,800
Room Sales Revenue
j)
88,740

Equipments
48,000

W/Tax Payable
l)

1,560

Pag-ibig Premium Payable

l)
624
PhilHealth Premium Payable
l)
312
o)

Interest Expense
2,000

104

c)

Accounts

Cash
Linen Purchases
Vending Purchases
Credit Card Receivable
Supplies
Land
Building
Equipment
Furnishings
Prepaid Insurance
Notes Payable
Mortgage Payable
Accounts Payable
Withholding Tax
Payable
SS & EC Payable
Philhealth Payable
Pag-ibig Payable
Carmelo, Capital
Vending Sales
Room Sales
Wages
Interest Expense
Linen Inventory
Vending Inventory
Wages Payable
Insurance Expense
Interest Payable
Depreciation
Equipment
Accumulated
Depreciation
Equipment
Depreciation
Furniture
Accumulated
Depreciation
Furniture
Depreciation
Building
Accumulated
Depreciation
Building
Supplies Expense
Totals

Trial Balance
Debit
Credit
57,101
7,894
540
4,437
4,200
300,000
393,400
48,000
120,000
4,200
36,000
285,000
1,000
1,560

Adjustments
Debit
Credit

Income Statement
Debit
Credit
7,894
540

8)

530

3)

350

4,437
3,670
300,000
393,400
48,000
120,000
3,850
36,000
285,000
1,000
1,560

936
624
312
550,000
8,800
88,740
31,200
2,000
972,972

_______
972,972

Financial Position
Debit
Credit
57,101

936
624
312
550,000
8,800
88,740
2)
4)

4,160
360

35,360
2,360
1) 1,200
1) 7,220
2)

3)

350

5)

375

4,160

360

360

375

1,177

375
1,177

6)

1,177

1,464

1,177
1,464

7)
8)

4,160
375

5)

7)

1,200
7,220

350
4)

6)

1)
1)

530
8,4
19

Net Income

105

1,464

8,41
9

1,464
530
50,050

105,960

55,910
105,960

105,960

938,878

55,910
938,878

8.

Credo's Auto Supply

Worksheet
For the year ended Dec. 31, 2011

Account Title
Cash On Hand
Cash In Bank
Accounts Receivable
Supplies
Merch. Invty.
Prepaid Interest
Store Equipment
Furniture & Fixtures
Accounts Payable
Loans Payable
Credo, Capital
Credo, Personal
Output Tax
Sales
Sales Discount
Purchases
Input Tax
Purchase Discounts
Freight In
Freight Out
Salaries-Office
Salaries-Sales
Utilities Expense
Rent Expense

Trial Balance
Debit
Credit

Adjustments
Debit
Credit

48
375
64
3
165
6
144
50

Adjusted Trial Balance

Debit
Credit

2)

5)

48
375
64
1
165
5
144
50

8
100
470

165

1)

Balance Sheet
Debit
Credit
48
375
64
1
1) 237
5
144
50

237

8
100
470

26

8
100
470

26
107
897

26

8) 107
897

16
310
68

16
310

897
16
310

8) 68

4
1
13
17
82
90
108
1,586

Income Statement
Debit
Credit

7)

_____
1,586

Supplies Expense
Dep.Exp.-Store Equip.
Acc.Dep-Store Equip.
DepnExp.-Office Furn.
Acc.Depn.-Office Furn.
Interest Expense
Prepaid Rent
Salaries Payable
Utilities Payable
Taxes Payable

6)

36

2) 2
3) 10

1
13
17
82
94
72

1
13
17
82
94
72

2
10

2
10

3) 10
4) 10

10
10

4) 10
5) 1
6) 36

170

10
1
36

7) 4
8) 39
170

36
4

1,610

1,610

Cash On Hand
Cash In Bank
Accounts Receivable
Supplies Inventory
Merchandise Inventory
Prepaid Interest
Prepaid Rent
Store Equipment
Accumulated Depreciation - Store Equipment
Furniture & Fixtures
Accumulated Depreciation - Furniture & Fixtures
Accounts Payable
Loans Payable
Taxes Payable
Utilities Payable
Credo, Capital
Credo's Auto Supply
Income Statement
For the year ended December 31, 2011
Net Sales (note 1)
Cost of sales (note 2)
Gross Profit
Selling Expenses
General Expenses
Operating Income
Interest Expense
Net Income
Gross Sales
Less Sales Discount
Net Sales
Note 2: Cost of Sales
Merchandise Inventory
Purchases
Freight In
Discount
Total Goods Available

10
1

Credo's Auto Supply

Post Closing Trial Balance
December 31, 2011

Note 1:

10
10

4
39
793
345
1,138

1,138
1,138

Debit
48
375
64
1
237
5
36
144
50

960

881.00
235.00
646.00
(230.50)
(69.50)
346.00
1.00
P345.00
897
16
881
165
310
1
(4)
472

106

986

Credit

10
10
8
100
39
4
789
960

345
986

Less Merchandise Inventory

237

Note 3:Rent Expense Store

Utilities Expense Store
Sales Salaries
Supplies Expense Store
Depreciation Expense - Store Equipment
Freight Out

54.0
70.5
82.0
1.0
10.0
13.0
230.5
18.0
23.5
1.0
17.0
10.0
P69.5

Note 4:Rent Expense Office

Utilities Office
Supplies Office
Salaries - Office
Depreciation Office

Credo's Auto Supply

Capital Statement
For the year ended Dec. 31, 2009
Credo, Capital Jan. 1
Net Income
Credo, Drawings
Credo, Capital, Dec. 31

P470
345
(26)
P789

a) Net Income/Net Sales (345/881)x100 =

Net Income/Capital (345/629.5) x 100 =
Operating Income/Net Sales (346/881)x100 =
Net Sales/Ave. Total Assets (881/907.50)x100 =
Very Profitable

39.16%
54.81%
39.27%
.97 times

b) Current Ratio 766/151 =

Acid Test Ratio 487/151 =
Very Liquid

5.073:1
3.225:1

c) Debt Ratio (151/960) x 100 =

Equity Ratio (789/960) x 100
=
Very solvent

15.73%
82.19%

d) Receivable TO (881/64) =
Average Age (360/13.77) =
Inventory TO (235/201) =
Average Age (360/1.17) =
Efficient in collection
Poor Inventory Management

13.77x
26 days
1.17
308 days

PROBLEMS
1.
Case 1
Case 2
Case 3
Case 1

Case 2

Case 3

Accounts & Explanation

Bad Debts Expense
Allowance for Bad Debts
(1,250,000 x .8 = 1,000,000 - 39,000)5%
Bad Debts Expense
Allowance for Bad Debts
(150,000 x 5%)
Bad Debts Expense
Allowance for Bad Debts
(7,500 - 1,550)
Financial Position Presentation:
Accounts Receivable
Less: Allowance for Bad Debts
Net Realizable Value
Income Statement Presentation:
Operating Expense - Bad Debts
Financial Position Presentation:
Accounts Receivable
Less: Allowance for Bad Debts
Net Realizable Value
Income Statement Presentation:
Operating Expense - Bad Debts
Financial Position Presentation:
Accounts Receivable
Less: Allowance for Bad Debts
Net Realizable Value
Income Statement Presentation:
Operating Expense - Bad Debts

2. a)
107

Debit
48,050

Credit
48,050

7,500
7,500
5,950
5,950
P150,000
49,600
100,400
48,050
P150,000
9,050
P140,950
7,500
P150,000
7,500
P142,500
5,950

Accounts & Explanation

Allowance for Bad Debts
Accounts Receivable

Debit
20,000

Bad Debts Expense

Allowance for Bad Debts

46,500

P750,000
200,000
220,000
60,000
10,000

b)

2.

Not yet due

1-30 days past due
31-60 days past due
61-90 days past due
Over 90 days

Credit
20,000
46,500

1
2
5
30
60

7,500
4,000
11,000
18,000
6,000
46,500

Financial Position Presentation:

Accounts Receivable (1,260,000 20,000)
Less: Allowance for Bad Debts (45,000 + 46,500)
Net Realizable Value

P 1,240,000
91,500
1,148,500

a. Equipment (450,000-75,000) /6 = 62,500 x (3/12) = P15,625 for 3 mos.

Furniture & Fixtures (125,000/10) = 12,500/2 = P6,250 for 6 mos.
Car (350,000 - 150,000) /5 = 40,000 x (2/12) = P6,667 for 2 mos
Depreciation Expense - Equipment
Depreciation Expense - Furniture & Fixtures
Depreciation Expense Car
Accumulated Depreciation -Equipment
Accumulated Depreciation - Fur. & Fix.
Accumulated Depreciation - Car
Income Statement
Depreciation Expense
Balance Sheet
Equipment
Less Accumulated Depreciation
Furniture & Fixtures
Less: Accumulated Depreciation
Car
Less Accumulated Depreciation
b)

4.

P 15,625
6,250
6,667
P 15,625
6,250
6,667
28,542
450,000
15,625
125,000
6,250
350,000
6,667

Depreciation Expense - Equipment

Depreciation Expense - Furniture & Fixtures
Depreciation Expense - Car
Accumulated Depreciation - Equipment
Accumulated Depreciation - Furn. & Fix.
Accumulated Depreciation - Car
Income Statement
Depreciation Expense
Balance Sheet
Equipment
Less Accumulated Depreciation
Furniture & Fixtures
Less: Accumulated Depreciation
Car
Less Accumulated Depreciation

a)

Accrued Interest
182.50

118,750
343,333

31,250
6,250
20,000
31,250
6,250
20,000
57,500
450,000
46,875
125,000
12,500
350,000
26,667

Accrued Interest
Interest Income

b)

434,375

403,125
112,500
323,333
838,958

182.50
182.50
Interest Income
550.00
182.50
732.50

Interest income should be P732.50 in the income statement.

Increase in the current asset by P182.50 for Accrued Interest.
c)
d)

Interest Income
Accrued Interest

182.50
182.50

Cash
Notes Receivable
Interest Income

37,047.50
36,500.00
547.50
108

Interest Income
1/1 RE
182.50 1/20
547.50
1/1 beg.
f) Interest income will be P365 in the 2010 Income Statement.
No accrued interest in the financial position statement.
5. A. 1)

2011
Aug. 1
Oct. 31

2)

3)
8/1

Prepaid Insurance
Cash In Bank
Advertising Expense
Cash In Bank

2)

9,000
18,000

Dec. 31 Prepaid Advertising

Advertising Expense
Insurance Expense
Prepaid Insurance
Prepaid Insurance
9,000
12/31
7,125

12,000
12,000
1,875
1,875
1,875

Advertising Expense
18,000 12/31
6,000

10/31

6.

1)
2)
3)
4)
5)
6)
7)

12,000

Insurance Expense
1,875

12/31

1,875
6,000

Financial Position Statement

Prepaid Insurance
Prepaid Advertising
Jan. 1 None for Prepaid Insurance
Advertising Expense
Prepaid Advertising
Dec. 31 Insurance Expense
Prepaid Insurance
Prepaid Insurance
7,125 12/31
2,625

1/1

4,500

7,125
12,000
12,000
12,000
4,500
4,500
Insurance Expense
4,500

12/31

Bad Debts
Allowance for Bad Debts
Supplies Expense
Supplies
Interest Expense
Prepaid Interest
Prepaid Rent
Rent Expense
Depreciation
Accumulated Depreciation
Salaries Expense
Salaries Payable
Utilities Expense
Utilities Payable

500
500
1,400
1,400
100
100
4,267
4,267
1,000
1,000
450
450
2,520
2,520

7. Gross Profit = P21,580

Operating Income (Loss) = (P9,403)
Net Income (Loss) = (P9,503)
The company is not profitable as it incurred a net loss of 9,503.
8.
Kenneth Toyland
8-Column Worksheet
For the year ended June 30, 2009
Account Title
Cash In Hand
Cash On Bank
Accounts Receivable
Allowance for DA
Notes Receivable
Merch. Invty., 7/1
Prep. Store Ins.
Store Furn. & Fixtures
Accum. Depn.

182.50

18,000

Income Statement
Insurance Expense
Advertising Expense

B. 1)

RE

9,000

Prepaid Advertising
12,000

12/31

Accrued Interest
182.50 1/1

Trial Balance
Debit
Credit
75200
487288
112000
4000
4800
89500
6300
16000
500

Adjustments
Debit
Credit

109

a)

1600

c)

3150

d)

2100

Income Statement
Debit
Credit

89500

Balance Sheet
Debit
Credit
75200
487288
112000
5600
4800
3150
16000

2600

Office Furn. & Fix.

Accum. Depn.
Accounts Payable
Notes Payable
Unearned Commission
Withholding Tax Payable
SS & EC Payable
Philhealth Payable
Pag-ibig Payable
Alfonso, Capital
Alfonso, Personal
Sales
Sales Ret. & Allowances
Sales Discount
Purchases
Freight In
Purch. Ret. & Allow.
Purchase Discount
Advertising Expense
Salary Expense
Sales
Salary Expense
Office
Rent Expense
Utilities Expense
Taxes Expense
Interest Expense
SS & EC Expense
Philhealth Expense
Pag-ibig Expense
Interest Income
Totals
Adjustments:
Bad Debts
Interest Receivable
Insurance Expense
Depn. Store Furn. & Fix.
Depn.-Off.Furn. & Fix.
Accrued Salaries
Prepaid Advertising
Interest Payable
Commission Income
Merch. Invty. End
Income & Exp. Sum.
Taxes Payable
Totals
Net Income
TOTALS

15000

30000
5020
2880
242000
6000
9000
60000

900
54000
180000
2400
490
522
100
200
521900

e)
h)

15000

3,000

800

583200

5020
2880
242000
6000

3000
2000
e)

550

f)

300

8700
60550

33400

33400

96800
42400
12000
600
6424
1200
2400

96800
42400
13437
2400
6424
1200
2400

1354900

j)
g)

1437
1800

3000
1354900

b)
a)
b)
c)
d)
e)

1600
20
3150
2100
3000

f)

300

i) 67125
81882

20

30000

583200

3000
2000

3020

1600

e)

550

g)
h)

1800
800

i) 67125
j) 1437
80445

20

3150
2100
3000

300
800

550
1800

67125

67125
622961
36184
659145

3900
54000
180000
1600
490
522
100
200
521900

659145

810883

659145

810883

1437
774699
36184
810883

Kenneth Toyland
Post Closing Trial Balance
June 30, 2009
Cash On Hand
Cash In Bank
Accounts Receivable
Allowance for Bad Debts
Notes Receivable
Merchandise Inventory
Prepaid Insurance
Store Furniture & Fixtures
Accumulated Depreciation - Store Furniture & Fix.
Office Furniture & Fixtures
Accumulated Depreciation Office Furniture & Fix.
Interest Receivable
Prepaid Advertising
Accounts Payable
Notes Payable
Salaries Payable
Interest Payable
Unearned Commission
W/Tax Payable
SS & EC Payable
PH Payable
Pag-ibig Payable
Alfonso, Capital

Closing Entries:
Income & Expense Summary
Purchases
Merchandise Inventory, June 1
Rent Expense
Taxes
Salary Expense - Office
Salary Expense - Sales
Depreciation Expense - Store Furniture & Fixtures
Depreciation Expense - Office Furniture & Fixtures
Freight In
Advertising Expense
110

Debit
75,200
487,288
112,000

Credit

5,600
4,800
67,125
3,150
16,000
2,600
15,000
3,900
20
300

______
780,883

54,000
180,000
550
1,800
1,600
490
522
100
200
528,084
780,883

622,961
242,000
89,500
96,800
13,437
33,400
60,550
3,000
2,100
6,000
8,700

Sales Returns & Allowances

Doubtful Accounts Expense
Sales Discount
Insurance Expense - Sales
Utilities Expense
Interest Expense
SS & EC
Pag-ibig
PhilHealth
Sales
Merchandise Inventory, June 30
Purchase Returns & Allowances
Purchase Discount
Interest Income
Commission Income
Income & Expense Summary
Alfonso, Capital
Income & Expense Summary
Alfonso, Capital
Alfonso, Personal
Reversing Entries:
Advertising Expense
Prepaid Advertising
Interest Payable
Interest Expense
Interest Income
Interest Receivable
Taxes Payable
Taxes Expense

5,020
1,600
2,880
3,150
42,400
2,400
6,424
2,400
1,200
583,200
67,125
3,000
2,000
3,020
800
659,145
36,184
30,000

36,184
30,000

300
300
1,800
1,800
20
20
1,437
1,437

CASE STUDY
1. a) Yes, the business is a losing venture with a net loss of P72,000.
b) There was no adjustment yet on merchandise inventory count at year end.
c) Sales returns and allowances is quite alarming at 33,750 which means that there are a lot of defective
items produced by the company.
2.

Profitability
Gross Profit Ratio 317,200/641,250 = 49%
Operating Ratio 77,400/641,250 = 12%
Rate of Return on Sales = 78,000/641,250 = 12%
The business is profitable
Net Sales (note 1)
Cost of sales (note 2)
Gross Profit
Selling Expenses
General Expenses
Operating Income
Interest Income
Net Income
Note 1:

641,250
324,050
317,200
(134,400)
(105,400)
77,400
600
P 78,000

Sales
Less Sales Discount
Net Sales

675,000
33,750
641,250

Note 2: Cost of Sales

Merchandise Inventory
Purchases
Purchase Returns and Allowances
Freight In
Total Goods Available
Less Merchandise Inventory

171,250
300,500
(2,400)
4,700
474,050
150,000

324,050

111