Chapter Introduction: Accounting and Its Environment Exercises Exercise 1 b a a c b b c c Exercise 2 10 11 12 b d a d a c b e e b c c 3-1 Chapter Exercise Requirement (a) Josie Tan Enterprises Balance Sheet January 2, 2007 Assets: Cash P30,000 Total assets P30,000 Liabilities: Owner’s Equity: J Tan, Capital Total liabilities and owner’s equity P P30,000 P30,000 Requirement (b) Josie Tan Enterprises Balance Sheet January 2, 2007 Assets: Cash P30,000 Total assets P30,000 Liabilities: Owner’s Equity: J Tan, Capital E Tan, Capital Total owner’s equity Total liabilities and owner’s equity P P20,000 10,000 P30,000 P30,000 Requirement (c) Josie Tan Enterprises Balance Sheet January 2, 2007 Assets: Cash P30,000 Total assets P30,000 Liabilities: Owner’s Equity: Ordinary share capital Additional paid-in capital Total owner’s equity Total liabilities and owner’s equity P P 6,000 24,000 P30,000 P30,000 Communication Through Financial Statements Requirement (d) Josie Tan Enterprises Balance Sheet January 2, 2007 Assets: Cash P30,000 Total assets P30,000 Liabilities: Owner’s Equity: Ordinary share capital Total liabilities and owner’s equity P P30,000 P30,000 Exercise Requirement (a) Jaycee and Company Income Statement (Single-Step) For the Year Ending December 31, 2007 Revenues: Sales Rent Revenue Total Revenue Expenses: Cost of Goods Sold Rent Wages Advertising Utilities Interest Total Expenses Net Loss P564,120 36,000 P600,120 P318,120 125,000 106,190 32,650 21,400 8,560 (611,920) P (11,800) Requirement (b) 4-3 Chapter Jaycee and Company Income Statement (MultiStep) For the Year Ending December 31, 2007 Sales Less: Cost of Goods Sold Gross Margin Operating Expenses: Rent Wages Advertising Utilities Total Operating Expenses Operating Loss Other Revenues: Rent Revenue Other Expenses: Interest Expense Net Loss P564,120 318,120 P246,000 P125,000 106,190 32,650 21,400 (285,240) P (39,240) 36,000 (8,560) P (11,800) Exercise Requirement (a) Canada Company Statement of Capital For the Year Ending December 31, 2007 Canada, Capital, January 3, 2007 Add: Net Income Canada, Capital, December 31, 2007 Requirement (b) P100,000 75,000 P175,000 Communication Through Financial Statements Canada Company Statement of Capital For the Year Ending December 31, 2007 Canada, Capital, January 3, 2007 Add: Net Income Canada, Capital, December 31, 2007 P50,000 37,500 Sibal, Capital, January 3, 2007 Add: Net Income Sibal, Capital, December 31, 2007 P30,000 22,500 Tan, Capital, January 3, 2007 Add: Net Income Tan, Capital, December 31, 2007 P20,000 15,000 P 87,500 52,500 87,500 Total Owner’s Equity, December 31, 2007 P175,000 Requirement (c) Canada Company Statement of Shareholders’ Equity For the Year Ending December 31, 2007 Balance, Jan Net Income Balance, Dec 31 Ordinary Shares P20,000 Additional Paid-in Capital P80,000 P20,000 P80,000 Retained Earnings P 75,000 Total Shareholders’ Equity P100,000 75,000 P75,000 P175,000 Exercise Requirement (a) Canada Company Statement of Capital For the Year Ending December 31, 2008 Canada, Capital, January 1, 2008 Add: Net Income P175,000 120,000 P295,000 80,000 Less: Drawings 4-5 Chapter Canada, Capital, December 31, 2008 Requirement (b) P215,000 Canada Company Statement of Capital For the Year Ending December 31, 2008 Canada, Capital, January 1, 2008 Add: Net Income P 87,500 60,000 P147,500 40,000 Less: Drawings Canada, Capital, December 31, 2008 P107,500 Sibal, Capital, January 1, 2008 Add: Net Income P 52,500 36,000 P 88,500 25,000 Less: Drawings Sibal, Capital, December 31, 2008 63,500 Tan, Capital, January 1, 2008 Add: Net Income P 35,000 24,000 P 59,000 15,000 Less: Drawings Tan, Capital, December 31, 2008 44,000 Total Owner’s Equity, December 31, 2007 P215,000 Requirement (c) Canada Company Statement of Shareholders’ Equity For the Year Ending December 31, 2007 Balance, Jan Net Income Dividends Balance, Dec 31 Ordinary Shares P20,000 Additional Paid-in Capital P80,000 P20,000 P80,000 Retained Earnings P 75,000 120,000 (80,000) P115,000 Total Shareholders’ Equity P175,000 120,000 (80,000) P215,000 Communication Through Financial Statements Requirement (d) Canada Company Statement of Retained Earnings For the Year Ending December 31, 2008 Retained Earnings, January 1, 2008 Add: Net Income Less: Drawings Retained Earnings, December 31, 2008 P 75,000 120,000 P195,000 (80,000) P115,000 Exercise a Rainee Ingrid Company is a sole proprietorship This can be determined by examining the statement of capital or the balance sheet Absence of retained earnings or stock accounts eliminates the possibility that the company is a corporation Since there is only one capital account, the company can’t be a partnership The single capital account suggests that Rainee Ingrid is the sole owner of a sole proprietorship b Rainee Ingrid uses a multistep income statement format This is demonstrated by the calculation of a gross margin for the company The multistep format highlights the relationship between sales revenue and cost of goods sold, thus arriving at gross margin From gross margin, all operating expenses are deducted, resulting in operating income, another item not found on a single-step income statement In a multistep format, other revenues and expenses are shown below operating income c Articulation is the link among the income statement, the statement of owners’ equity, and the balance sheet Specifically, there is a relationship between net income (or loss) on the income statement and the amount of earned equity on the balance sheet The statement of owners’ equity acts as a bridge statement between the income statement and the balance sheet In the case of Rainee Ingrid Company, the P74,510 net income amount shown on the income statement can also be found on the company’s statement of capital The ending balance on the statement of capital was derived by adding net income for 2007 (P74,510) to the January 1, 2007 capital balance (P338,060) and subtracting the owner’s drawings for the year (P90,000) The ending balance in the capital account (P322,570), shown on the statement of capital, can also be found on the company’s balance sheet 4-7 Chapter Exercise Requirement (a) Nico Francis and Company Income Statement (Single-Step) For the Year Ending December 31, 2007 Revenues: Sales Interest Revenue Total Revenue Expenses: Cost of Goods Sold Rent Wages Advertising Utilities Total Expenses Net Income P156,000 5,200 P161,200 P 92,000 18,000 14,600 3,200 2,400 (130,200) P 31,000 Requirement (b) Nico Francis and Company Income Statement (MultiStep) For the Year Ending December 31, 2007 Sales Less: Cost of Goods Sold Gross Margin Operating Expenses: Rent Wages Advertising Utilities Total Operating Expenses Operating Income Other Revenues: Interest Revenue Net Income P156,000 92,000 P 64,000 P 18,000 14,600 32,000 2,400 (38,200) P 25,800 5,200 P 31,000 Communication Through Financial Statements Test Material Test Material 4-1 Clarisse Enterprises Income Statement For the Year Ended December 31, 2007 Revenues: Commissions Earned Expenses: Insurance Expense Rent Expense Salaries Expense Net Income P100,000 P 5,000 18,000 42,000 (65,000) P 35,000 Clarisse Enterprises Statement of Owner’s Equity For the Year Ended December 31, 2007 K Clarisse, Capital, January 1, 2007 Add: Net income for the year Subtotal Less: Withdrawals by K Clarisse K Clarisse, Capital, December 31, 2007 P422,000 35,000 P457,000 15,000 P442,000 Clarisse Enterprises Balance Sheet December 31, 2007 Assets Cash Accounts Receivable Supplies Land Buildings P 31,000 3,000 2,000 200,000 260,000 Total Assets P496,000 Liabilities Accounts Payable Notes Payable Owner’s Equity K Clarisse, Capital Total Liabilities and Owner’s Equity 4-9 P 24,000 30,000 442,000 P496,000 10 Chapter Test Material 4-2 Andres Enterprises Income Statement For the Month Ended May 31, 2007 Revenues: Commissions Earned Expenses: Insurance Expense Rent Expense Salaries Expense Net Income P127,000 P 12,000 24,000 100,000 (136,000) P (9,000) Andres Enterprises Statement of Owner’s Equity For the Month Ended May 31, 2007 F Andres, Capital, May 1, 2007 Less: Net loss for the month Subtotal Less: Withdrawals by F Andres F Andres, Capital, May 31, 2007 P579,000 9,000 P570,000 80,000 P490,000 Andres Enterprises Balance Sheet May 31, 2007 Assets Cash Accounts Receivable Supplies Land Buildings P156,000 14,000 4,000 150,000 230,000 Total Assets P554,000 Liabilities Accounts Payable Notes Payable Owner’s Equity F Andres, Capital Total Liabilities and Owner’s Equity P 31,000 33,000 490,000 P554,000 ... Ingrid Company is a sole proprietorship This can be determined by examining the statement of capital or the balance sheet Absence of retained earnings or stock accounts eliminates the possibility... that Rainee Ingrid is the sole owner of a sole proprietorship b Rainee Ingrid uses a multistep income statement format This is demonstrated by the calculation of a gross margin for the company The... income statement can also be found on the company’s statement of capital The ending balance on the statement of capital was derived by adding net income for 2007 (P74,510) to the January 1, 2007