Solution manual fundamentals of accounting by cabrera chapter 08

Chapter Recording Business Transactions Exercises Exercise a Rent Expense Rent Payable (or Accounts Payable) 7,000 7,000 b Prepaid Insurance Cash c 10,000 10,000 Mhel Aguilar, Drawing Cash 3,000 3,000 d Rent Payable (or Accounts Payable) Cash 7,000 7,000 e Land Cash Notes Payable 180,000 90,000 90,000 Exercise ACCOUNTS PAYABLE DATE 2007 Aug 12 ITEM Exercise a P0 b P900 c P10,000 Exercise POST REF J1 J1 J2 J2 DEBIT 5,000 1,000 CREDIT 17,500 3,500 Account No 212 BALANCE DEBIT CREDIT 17,500 12,500 16,000 15,000 Chapter a b c d e f g h i j Debit Credit Credit Debit Debit Credit Debit Credit Debit Credit Exercise Nov Cash 120,000 Kai Venice, Capital Prepaid Rent Cash No entry Sound Equipment Cash Accounts Payable 17 17 20 120,000 20,000 20,000 15,000 3,000 12,000 No entry Cash Accounts Receivable Tuition Revenue 4,500 500 Wages Expense Cash 2,200 Cash 5,000 2,200 500 Accounts Receivable 21 23 Exercise Accounts Payable Cash Utilities Expense Accounts Payable 500 6,000 6,000 400 400 Recording Business Transactions Assets Liabilities Owner’s Equity Revenues Expenses Debit Credit Credit Credit Debit Exercise Requirement (1) RJ Tan Import Service Income Statement For the Year Ended December 31, 2007 Revenues Service revenue Expenses Salary expense Rent expense Utilities expense Supplies expense Property tax expense Total expenses Net income P1,512,000 P490,000 240,000 68,000 40,000 12,000 850,000 P 662,000 Requirement (2) First, we prepare the statement of owner’s equity for the year ended December 31, 2007 The format of the statement of owner’s equity is as follows: Statement of Owner’s Equity Capital, beginning of year Add: Investment by owner Net income for the year (Req 1) Less: Withdrawals by owner Capital, end of year P -0150,000 662,000 812,000 541,000 P271,000 To solve for proprietor’s withdrawals, we put the data in equation form: Chapter P0 + P150,000 + P662,000 – PX = X = X = P271,000 P662,000 – P150,000 – P271,000 P541,000 Exercise Date Dec Analysis of Transactions and Journal Entries The asset Cash is increased; therefore, debit Cash The liability Note Payable is increased; therefore, credit Note Payable Cash Note Payable 120,000 120,000 The asset Accounts Receivable is increased; therefore, debit Accounts Receivable The revenue Service Revenue is increased; therefore, credit Service Revenue Accounts Receivable Service Revenue 12 16,000 16,000 The asset Office Furniture is increased; therefore, debit Office Furniture The liability Accounts Payable is increased; therefore, credit Accounts Payable Office Furniture Accounts Payable 19 8,100 8,100 The asset Cash is increased; therefore, debit Cash The asset Land is decreased; therefore, credit Land Cash Land 24 740,000 740,000 The asset Building is increased; therefore, debit Building The liability Note Payable is increased; therefore, credit Note Payable Building 1,400,000 Note Payable 1,400,000 Recording Business Transactions Dec 27 The liability Accounts Payable is decreased; therefore, debit Accounts Payable The asset Cash is decreased; therefore, credit Cash Accounts Payable Cash 8,100 8,100 Exercise JOURNAL Page Date 2007 Mar Account Titles and Explanation Cash Post Ref Debit 590,000 Anne Shin, Capital Investment by owner Office Supplies Accounts Payable Purchased office supplies on account Building Cash Paid cash for a building Cash 590,000 2,000 2,000 400,000 400,000 20,000 Service Revenue Performed services for cash 17 23 Accounts Payable Cash Paid cash on account 20,000 1,000 1,000 Accounts Receivable Service Revenue Performed service on account 16,000 Cash 12,000 16,000 Accounts Receivable Received cash on account 31 Exercise 10 Salary Expense Rent Expense Cash Paid cash expenses Credit 12,000 12,000 5,000 17,000 Chapter Mar 23 Mar.31 Mar Mar.31 Mar 590,000 20,000 12,000 204,000 Cash Mar 31 Office Supplies 2,000 2,000 Mar 17 Mar.31 Mar Mar.31 Accounts Payable 1,000 Mar Mar.31 2,000 2,000 Service Revenue Mar 17 Mar.31 20,000 16,000 36,000 Rent Expenses Mar 31 5,000 Mar 31 5,000 400,000 1,000 17,000 Accounts Receivable 16,000 Mar.23 4,000 12,000 Building 400,000 400,000 Anne Shin, Capital Mar 590,000 Mar.31 590,000 Mar.31 Mar.31 Salary Expense 12,000 10,000 Recording Business Transactions Exercise 11 Tarlac Enterprises Trial Balance February 28, 2007 Account Cash Accounts receivable Supplies Land Accounts payable Emz Iglesia, capital Service revenue Salary expense Rent expense Utilities expense Total Debit P46,000* 16,000 6,000 460,000 Credit P41,000* 420,000* 97,000 17,000 8,000 5,000* P558,000 P558,000 _ * Explanations: Cash: P42,000 + P4,000 = P46,000 Accounts Receivable: P20,000 – P4,000 = P16,000 Accounts Payable: P30,000 + P10,000 – P1,000 + P2,000 = P41,000 Emz Iglesia, Capital: P416,000 + P4,000 = P420,000 Utilities Expense: P3,000 + P2,000 = P5,000 Exercise 12 (a) 72,000 Bal 15,000 Mar Mar.31 Mar Cash (b) (d) (e) (g) 15,000 18,000 4,000 20,000 Office Supplies 2,000 2,000 Accounts Payable 1,000 Mar Mar.31 (f) Mar.31 Mar Mar.31 2,000 2,000 Accounts Receivable 16,000 Mar.23 4,000 12,000 Building 400,000 400,000 Anne Shin, Capital Mar 590,000 Mar.31 590,000 Chapter Service Revenue Mar 17 Mar.31 20,000 16,000 36,000 Mar.31 Mar.31 Salary Expense 12,000 10,000 Rent Expenses Mar 31 5,000 Mar 31 5,000 Exercise 13 The ethical issue is whether Alalay sa Kapwa is taking advantage of the bank’s generosity Students who approve of Alalay sa Kapwa action can point out that the bank allows Alalay sa Kapwa to overdraw its cash balance In this view, Alalay sa Kapwa is merely using a privilege the bank has granted Most banks are civicminded and are relatively generous with charitable organizations Students who disapprove may argue that Alalay sa Kapwa is using the bank’s money adequately compensating the bank – a subtle form of stealing In this view, Alalay sa Kapwa should curtail its spending until it has the money to cover its expenditures and maintain a positive balance Alternatively, Alalay sa Kapwa could sign a note payable to borrow the needed money The related interest is the bank’s compensation The bank is the key player in this case Whether the bank approves or disapproves of Alalay sa Kapwa overdrafts is critical to the ethical decision Approval by the bank turns the overdrafts into a gift to Alalay sa Kapwa Disapproval by the bank would no doubt be communicated to Mr Oscar Exercise 14 Date May Analysis of Transactions Given in the problem; not required for May transaction The expense Rent Expense is increased Increases in expenses are recorded by debits; therefore, debit Rent Expense The asset Cash is decreased Decreases in assets are recorded by credits; therefore, credit Cash Recording Business Transactions May 9 The asset Land is increased Increases in assets are recorded by debits; therefore, debit Land The asset Cash is decreased Decreases in assets are recorded by credits; therefore, debit Cash 10 The asset Supplies is increased Increases in assets are recorded by debits; therefore, debit Supplies The liability Accounts Payable is increased Increases in liabilities are recorded by credits; therefore, credit Accounts Payable 19 The liability Accounts Payable is decreased Decreases in liabilities are recorded by debits; therefore, debit Accounts Payable The asset Cash is decreased Decreases in assets are recorded by credits; therefore, credit Cash 22 The asset Cash is increased Increases in assets are recorded by debits; therefore, debit Cash The liability Notes Payable is increased Increased in liabilities are recorded by credits; therefore, credit Notes Payable 30 The assets Cash and Accounts Receivable are increased Increases in assets are recorded by debits; therefore, debit Cash and Accounts Receivable The revenue Service Revenue is increased Increases in revenues are recorded by credits; therefore, credit Service Revenue for the sum of the debits to Cash and Accounts Receivable 30 The expenses Salary Expense, Rent Expense, and Utilities Expense are increased Increases in expense are recorded by debits; therefore, debit Salary Expense, Rent Expense, and Utilities Expense The asset Cash is decreased Decreases in assets are recorded by credits; therefore, credit Cash for the sum of the three debit amounts 30 The owner’s equity of the business is decreased Decreases in owner’s equity are recorded by debits Decreases due to withdrawals by the owner are debited to the Withdrawals account; therefore, debit Jayce Ferrer, Withdrawals The asset Cash is decreased Decreases in assets are recorded by credits; therefore credit Cash 10 Chapter JOURNAL Page Date May Accounts and Explanation Cash Post Ref Debit 500,000 Jayce Ferrer, Capital Rent Expense Cash Land 500,000 7,000 7,000 420,000 Cash 10 19 22 420,000 Supplies Accounts Payable 12,000 Accounts Payable Cash 10,000 Cash 12,000 10,000 200,000 Notes Payable 30 30 30 Exercise 15 Credit 200,000 Cash Accounts Receivable Service Revenue Received cash on account 60,000 50,000 Salary Expense Rent Expense Utilities Expense Cash 24,000 15,000 4,000 Jayce Ferrer, Withdrawals Cash 40,000 110,000 43,000 40,000 Recording Business Transactions Palace Copy Center Trial Balance October 31, 2007 Account Cash Accounts receivable Supplies Office furniture Land Accounts payable Note payable Lorna Rodriguez, capital Lorna Rodriguez, withdrawals Service revenue Salary expense Rent expense Advertising expense Utilities expense Office maintenance expense Property tax expense Debit P 34,000 25,400 6,000 13,000 460,000 Total P617,000 P 21,000 183,000 308,000 50,000 105,000 10,000 10,000 3,000 2,600 2,000 1,000 Explanations: Cash: P38,000 – P4,000 = P34,000 Accounts receivable: P20,000 – P600 + P6,000 = P25,400 Supplies: P5,000 + P1,000 = P6,000 Accounts payable: P20,000 + P1,000 = P21,000 Lorna Rodriguez, capital: P295,000 + P13,000 = P308,000 Lorna Rodriguez, withdrawals: P37,000 + P13,000 = P50,000 Service revenue: P49,000 + P56,000 = P105,000 Rent expense: P6,000 + P2,000 + P2,000 = P10,000 Utilities expense: P2,000 + P600 = P2,600 Exercise 16 Credit P617,000 11 12 Chapter May Cash Office Equipment Cash Supplies Accounts Payable 3,000 19 Cash 5,000 22 Cash 25 Rent Expense Cash 6,500 31 Accounts Receivable Service Revenue 2,500 50,000 Share Capital 25,000 Service Revenues 6,000 Unearned Service Revenue 50,000 25,000 3,000 5,000 6,000 6,500 2,500 Exercise 17 May 19 Cash 50,000 May 5,000 25 6,000 61,000 Balance 29,500 25,000 6,500 May Office Equipment 25,000 May 25 Rent Expense 6,500 May Supplies 3,000 22 31,500 Accounts Receivable May 31 25,000 Service Revenue May 19 5,000 31 25,000 30,000 Exercise 18 Unearned Service Revenue May 22 6,000 Accounts Payable May 3,000 Share Capital May 50,000 Recording Business Transactions Jones Programming Service, Inc Trial Balance May 31, 2007 Cash Accounts receivable Supplies Office equipment Accounts payable Unearned service revenue Service revenue Rent expense Share capital Debit P29,500 25,000 3,000 25,000 Credit P 3,000 6,000 30,000 6,500 P89,000 50,000 P89,000 Exercise 19 Smallville Company Trial Balance June 30, 2008 Cash (balancing figure) Accounts receivable Equipment Accounts payable M Cruz, capital Service revenue Office expense Debit P 1,000 14,000 20,000 Credit P 7,000 22,000 15,000 9,000 P44,000 P44,000 13 14 Chapter Exercise 20 Kim Beauty Service Trial Balance January 31, 2007 Debit P20,000 13,000 1,500 Cash Accounts receivable Prepaid rent Accounts payable Unearned service revenue Ling Kim, Capital Ling Kim, Drawing Service revenue Wage expense Fuel expense Credit P 4,000 2,500 15,000 6,500 17,500 8,000 P52,000 Unlocated difference P52,000 P39,000 13,000 P52,000 Multiple Choice Questions 10 b a c a b d c c c a 11 12 13 14 15 16 17 18 19 20 c b b c c a b c a b * (P68,000 = P25,000 + P43,000) 21 22 23 24 25 26 27 28 29 30 d b b b a a d c d b 31 32 33 34 35 36 37 38 39 40 a a b c d c a a b* b 41 d Recording Business Transactions Test Material Test Material 8-1 Requirement (1) a Cash 184,000 Furniture 62,000 Microcomputers 146,000 Garcia, Capital To record initial investment of E Garcia b Rent expense Cash To record payment of rent c 392,000 5,600 5,600 Software 15,000 Accounts payable 15,000 To take up purchase of computer software on credit d Advertising expense Cash To record payment of advertisement 2,000 2,000 e No entry f Wages expense Cash To record payment of wages g Cash 3,000 3,000 12,000 Tuition revenue To record collection from students 12,000 h Account receivable Tuition revenue To record billing for students 8,000 i Utility expense Cash To record payment of utility bill 2,200 Accounts payable Cash 5,000 j 8,000 2,200 5,000 15 16 k l Chapter Cash To record partial payment of software purchased 4,000 Accounts receivable To record collection from one student billed 4,000 Microcomputers 94,000 Cash To record purchase of 2nd microcomputer 94,000 m Garcia, Drawing 6,000 Cash To record withdrawal for personal use 6,000 Requirement (2) T-accounts (a) (g) (k) (c) Cash 184,000 (b) 12,000 (d) 4,000 (f) (i) (j) (l) (m) 82,200 Software 15,000 (d) Advertising Expense 2,000 (i) Utility Expense 2,200 5,600 2,000 3,000 2,200 5,000 94,000 6,000 (a) (h) (b) Furniture 62,000 (a) (l) Accounts Receivable 8,000 (k) 4,000 4,000 Rent Expense 5,600 Tuition Revenue (g) (h) (f) 12,000 8,000 20,000 (m) Garcia, Drawing 6,000 (j) Microcomputers 146,000 94,000 240,000 Accounts Payable 5,000 (c) 15,000 10,000 Wages Expense 3,000 Garcia, Capital (a) 392,000 Recording Business Transactions Requirement (3) Garcia Training Center Trial Balance (current date) Cash Accounts receivable Software Furniture Microcomputers Accounts Payable Garcia, Capital Garcia, Drawing Tuition Revenue Wages Expense Utility Expense Rent Expense Advertising Expense Debit P 82,200 4,000 15,000 62,000 240,000 Credit P 10,000 392,000 6,000 20,000 3,000 2,200 5,600 2,000 P422,000 P422,000 17 18 Chapter Test Material 8-2 Requirement (1) GENERAL JOURNAL Date Dec Particulars Accounts Payable Cash F Debit 2,800 2,800 Accounts Receivable Service Revenue 8,200 Pick-up Truck Expense Cash 5,800 Supplies Accounts Payable 3,000 Cash 5,800 8,200 5,800 3,000 Service Revenue 11 13 14 5,800 Equipment Accounts Payable 26,000 Pick-up Truck Expense Accounts Payable 800 26,000 800 Accounts Payable Equipment 6,400 Cash 3,800 6,400 Accounts Receivable 16 20 21 22 24 3,800 Accounts Payable Cash 800 Accounts Payable Cash 3,000 Accounts Receivable Service Revenue 5,400 Equipment Accounts Payable 5,600 Cash 7,800 Accounts Receivable GENERAL JOURNAL Credit 800 3,000 5,400 5,600 7,800 Recording Business Transactions Date Dec 28 30 31 Particulars Pick-up Truck Expenses Cash F Debit 600 19 Credit 600 Notes Payable Cash 12,000 12,000 Legarda, Drawing Cash 2,200 2,200 Requirements (2) and (3) Date 2008 Dec 14 16 20 24 28 30 31 Date 2008 Dec 14 21 24 Cash Explanation Balance Debit Account No 111 Credit Balance 62,000 2,800 5,800 5,800 3,800 800 3,000 7,800 600 12,000 2,200 Accounts Receivable Explanation Balance Debit Account No 113 Credit Balance 4,400 8,200 3,800 5,400 7,800 Supplies 62,000 59,200 53,400 59,200 63,000 62,200 59,200 67,000 66,400 54,400 52,200 Account No 4,400 12,600 8,800 14,200 6,400 115 20 Chapter Date 2008 Dec Date 2008 Dec Date 2008 Dec 13 13 22 Date 2008 Dec 30 Explanation Balance Debit Credit 9,200 3,000 Prepaid Insurance Explanation Balance Debit 9,200 12,200 Account No 116 Credit Balance 8,000 Equipment Explanation Balance Debit 8,000 Account No 141 Credit Balance 88,000 26,000 6,400 5,600 Notes Payable Explanation Debit Balance 88,000 114,000 107,600 113,200 Account No 211 Credit Balance 60,000 12,000 Balance 60,000 48,000 Recording Business Transactions Accounts Payable Explanation Date 2008 Dec 11 13 16 20 22 Date 2008 Dec Date 2008 Dec 31 Date 2008 Dec 21 Debit Account No 212 Credit Balance 14,000 2,800 3,000 26,000 800 6,400 800 3,000 5,600 Legarda, Capital Explanation Debit Balance Balance Debit 84,000 Account No 312 Credit Balance 8,400 2,200 Service Revenue Explanation Balance Debit 14,000 11,200 14,200 40,200 41,000 34,600 33,800 30,800 36,400 Account No 311 Credit Balance 84,000 Legarda, Drawing Explanation 21 8,400 10,600 Account No 411 Credit Balance 29,800 8,200 5,800 5,400 29,800 38,000 43,800 49,200 22 Chapter Date 2008 Dec Date 2008 Dec 11 28 Lease Expense Explanation Balance Debit Account No 412 Credit Balance 5,800 Pickup Truck Expense Explanation Balance Debit 5,800 Account No 413 Credit Balance 2,000 5,800 800 600 2,000 7,800 8,600 9,200 Requirement (4) Legarda Lawn Service Trial Balance January 31, 2009 Cash (111) Accounts Receivable (113) Supplies (115) Prepaid Insurance (116) Equipment (141) Notes Payable (211) Accounts Payable (212) Legarda, Capital (311) Legarda, Drawing (312) Service Revenue (411) Lease Expense (412) Pickup Truck Expense (413) P52,200 6,400 12,200 8,000 113,200 P48,000 36,400 84,000 10,600 49,200 5,800 9,200 P217,600 P217,600 Recording Business Transactions 23 Test Material 8-3 Requirement (1) GENERAL JOURNAL Date June Particulars Cash Equipment Gomez, Capital F Truck Debit 142,000 24,600 166,600 38,000 Cash Notes Payable 10 10,000 28,000 Supplies Accounts Payable 6,400 Accounts Receivable Painting Fees Earned 9,600 Cash 3,000 6,400 9,600 Painting Fees Earned 3,000 11 No entry 12 Supplies Cash 3,200 Cash 9,600 13 3,200 Accounts Receivable 14 16 18 19 20 Credit Prepaid Insurance Cash Accounts Receivable Painting Fees Earned Wages Expense Cash 9,600 8,000 8,000 12,400 12,400 3,000 3,000 Truck Expense Cash 800 800 Accounts Payable Cash GENERAL JOURNAL 6,400 6,400 24 Chapter Date June 21 23 24 Particulars Equipment Supplies Accounts Payable F Debit 1,200 5,800 Credit 7,000 Telephone Expense Accounts Payable 1,200 Cash 6,600 1,200 Accounts Receivable 26 6,600 Cash 7,200 Painting Fees Earned 28 29 30 7,200 Notes Payable Cash 4,000 Wages Expense Cash 3,600 Gomez, Drawing Cash 6,000 4,000 3,600 6,000 Requirement (2) Cash June 142,000 June 10,000 June 16 10 13 24 3,000 9,600 6,600 12 14 18 3,200 8,000 3,000 26 7,200 19 20 28 29 30 800 6,400 4,000 3,600 6,000 45,000 168,400 123,400 June14 June 28 June 30 Prepaid Insurance 8,000 Notes Payable 4,000 June 28,000 24,000 Gomez, Drawing 6,000 Accounts Receivable 9,600 June 13 12,400 22,000 5,800 24 9,600 June 6,600 16,200 12 21 Equipment 24,600 1,200 25,800 June 21 June 20 Accounts Payable 6,400 June 21 23 June 3,200 5,800 15,400 Truck 38,000 Gomez, Capital June 166,600 6,400 7,000 1,200 8,200 Painting Fees Earned June 9,600 Supplies 6,400 June 18 Wage Expense 3,000 Recording Business Transactions 10 16 26 June 23 Telephone Expense 1,200 June 19 3,000 12,400 7,200 32,200 29 25 3,600 6,600 Truck Expense 800 Requirement (3) Gomez Painting Service Trial Balance June 30, 2008 Cash Accounts Receivable Supplies Prepaid Insurance Equipment Truck Notes Payable Accounts Payable Gomez, Capital Gomez, Drawing Painting Fees Earned Wages Expense Telephone Expense Truck Expense P123,400 5,800 15,400 8,000 25,800 38,000 P 24,000 8,200 166,600 6,000 32,200 6,600 1,200 800 P231,000 P231,000 Requirement (4) a Since the painting services have been rendered on June and June 10, income should be recognized Since June 8’s service has not been paid for, a receivable should be set up as contrasted with June 10’s service which has been settled or paid by the customer b Both transactions involved payment for benefits that the company would receive and had received June 14 payment of insurance premium for 18 months represents consideration for the protection / coverage for a future period hence, an asset is set up, Prepaid Insurance June 18 payment is for services already received by the company, hence an expense was recognized  ... statement of owner’s equity for the year ended December 31, 2007 The format of the statement of owner’s equity is as follows: Statement of Owner’s Equity Capital, beginning of year Add: Investment by. .. initial investment of E Garcia b Rent expense Cash To record payment of rent c 392,000 5,600 5,600 Software 15,000 Accounts payable 15,000 To take up purchase of computer software on credit d... 54,400 52,200 Account No 4,400 12,600 8,800 14,200 6,400 115 20 Chapter Date 2 008 Dec Date 2 008 Dec Date 2 008 Dec 13 13 22 Date 2 008 Dec 30 Explanation Balance Debit Credit 9,200 3,000 Prepaid