Solution manual fundamentals of accounting by cabrera chapter 09

Chapter Measuring Business Income: The Adjusting Process Exercises Exercise a The error will overstate the debits by P4,500 or understate the credits by P4,500 b The total debits will still be equal to the total credits But accounts payable will be overstated by P2,000 while accounts receivable will be overstated by P2,000 c The total debits will still be equal to the total credits but both totals will be understated by P5,040 d The total debits will still be equal to the total credits However, equipment will be understated by P6,000 while supplies will be overstated by P6,000 Exercise Cash Accounts receivable Supplies Prepaid insurance Equipment Accounts payable Jun Gomez, Capital Jun Gomez, Withdrawal Revenues Salaries expense Rent expense Advertising expense Utility expense Unadjusted Trial Balance DR CR 38,400 56,600 1,200 1,800 84,000 454,000 115,600 2,600 6,000 3,400 260 217,660 7,000 59,200 Corrections (a) (c) (d) (e) DR 4,000 1,200 1,200 1,800 (f) (i) 6,800 4,000 (b) Corrected Trial Balance CR 1,800 DR 40,600 57,800 24,000 3,600 84,000 38,600 115,600 (h) 14,000 11,000 (j) 26,000 6,000 3,400 2,600 2,340 (g) 24,000 237,400 Exercise b – credit column a – debit column b – credit column a – credit column 59,200 227,200 Note payable CR b – credit column a – debit column b – debit column b – credit column 24,000 237,400 Chapter b – debit column Exercise 10 b – debit column 10 11 12 asset asset liability revenue expense asset f g h i j asset asset liability revenue expense expense Exercise a b c d e 10 Exercise a b c d e f g Measuring Business Income: The Adjusting Process Exercise Pongky’s Sanitize Services Co Work Sheet For the Year Ended December 31, 2008 Cash Accounts receivable Supplies Prepaid insurance Land Equipment Accumulated depreciation – Equipment Accounts payable Wages payable Del Cee, Capital Del Cee, Drawing Fees Earned Wages expense Rent expense Insurance expense Utilities expense Depreciation expense Supplies expense Miscellaneous expense Total Trial Balance Debit Credit 60,000 250,000 40,000 60,000 100,000 140,000 Adjustments Debit Credit (a) 40,000 (b) 20,000 (c) 40,000 10,000 130,000 410,000 (d) 20,000 300,000 (a) 40,000 30,000 130,000 20,000 410,000 (e) 20,000 40,000 80,000 40,000 20,000 0 20,000 850,000 Adjusted Trial Balance Debit Credit 60,000 290,000 20,000 20,000 100,000 140,000 40,000 (e) 20,000 (c) 40,000 (d) 20,000 (b) 20,000 850,000 140,000 140,000 340,000 100,000 40,000 40,000 20,000 20,000 20,000 20,000 930,000 930,000 Chapter Exercise A/N: Please change column headings to Adjusted Trial Balance, Income Statement and Balance Sheet, respectively Sandy’s Sanitize Services Co Work Sheet For the Year Ended December 31, 2008 Cash Accounts receivable Supplies Prepaid insurance Land Equipment Accumulated depreciation – Equipment Accounts payable Wages payable Sandy Park, Capital Sandy Park, Drawing Fees Earned Wages expense Rent expense Insurance expense Utilities expense Depreciation expense Supplies expense Miscellaneous expense Total Net income (loss) Adjusted Trial Balance Debit Credit 60,000 290,000 20,000 20,000 100,000 140,000 Income Statement Debit Credit Balance Sheet Debit Credit 60,000 290,000 20,000 20,000 100,000 140,000 30,000 130,000 20,000 410,000 30,000 130,000 20,000 410,000 40,000 40,000 340,000 100,000 40,000 40,000 20,000 20,000 20,000 20,000 930,000 930,000 340,000 100,000 40,000 40,000 20,000 20,000 20,000 20,000 260,000 80,000 340,000 340,000 340,000 670,000 590,000 80,000 670,000 Measuring Business Income: The Adjusting Process Exercise PUB Service Co Statement of Owner’s Equity For the year ended December 31, _ Miguel Roces, Capital, January Add Net Income Less Drawings Miguel Roces, Capital, December 31 P1,437,500 332,500 1,770,000 100,000 P1,670,000 Exercise 10 Errors Balance Sheet should be as at August 31, 2008 Accounts payable should be listed in the current liabilities section Land should be under the Property, Plant and Equipment section Accumulated depreciation for Building and Equipment should be shown as contra-asset accounts in the PPE section Accounts receivable should be listed among the current asset accounts Net loss should be deducted from P Candelaria, capital account Wages payable should be listed among the current liabilities accounts 6 Chapter Sixteen Candles Company Balance Sheet (as corrected) August 31, 2008 Assets Current Assets Cash Accounts receivable Supplies Prepaid insurance Total current assets Property, Plant and Equipment Land Building Less: Accumulated depreciation Equipment Less: Accumulated depreciation Total PPE Total Assets P 51,700 53,900 5,900 16,000 P127,500 P750,000 P555,000 230,000 282,500 160,000 325,000 122,500 1,197,500 P1,325,000 Liabilities and Owner’s Equity Current Liabilities Accounts payable Wages payable Total current liabilities Owner’s Equity P Candelaria, Capital, January Less: Net loss P Candelaria, Capital, December 31 Total Liabilities and Owner’s Equity P P 43,900 9,750 53,650 1,271,350 155,000 1,116,350 P1,170,000 There is a difference between the total assets and total liabilities and owner’s equity of P155,000 One possible explanation is since the “net loss” account has a credit balance of P155,000 and just erroneously included in the current liabilities section, then this could in reality be “net income” which should be added to the capital account Measuring Business Income: The Adjusting Process Exercise 11 Green Badge Service Preparation of Adjusted Trial Balance October 31, 2007 Trial Balance Debit Credit Cash 30,000 Accounts receivable 65,000 Supplies 10,400 Office furniture Adjustments Debit Credit 30,000 (a) 9,000 (b) 2,400 110,600 Unearned revenue 9,000 Capital 8,000 293,000 Salary payable Owner’s withdrawals 74,000 293,000 Accumulated depreciation Adjusted Trial Balance Debit Credit (c) 3,600 114,200 (d) 6,000 6,000 (e) 2,100 6,900 263,400 263,400 62,000 Service revenue 62,000 118,300 (a) 9,000 129,400 (e) 2,100 Salary expense 26,900 Rent expense 14,000 (d) 6,000 32,900 14,000 Depreciation expense (c) 3,600 3,600 Supplies expense (b) 2,400 2,400 501,300 501,300 23,100 23,100 519,900 519,900 Chapter Multiple Choice Questions c c c a c 10 d b c c b 11 12 13 14 15 c b a c d Test Material Test Material 9-1 Cash Dec 120,000 8,000 21 90,000 28 6,000 Bal Dec Accounts Receivable 12 26 30 5,000 30,000 2,000 3,000 16,000 Dec 18 Bal Adj Bal Dec 28 6,000 87,000 Supplies Dec Bal 17,000 11,000 4,000 15,000 3,000 1,000 Adj Equipment 2,000 Dec Accumulated Depreciation – Equipment Adj 500 Furniture Dec Accumulated Depreciation – Furniture Adj 600 30,000 36,000 Accounts Payable Dec 26 3,000 Dec Bal 36,000 3,000 36,000 Measuring Business Income: The Adjusting Process Test Material 9-2 Requirement (1) Gabriel Liwayway, Speech Therapist Trial Balance October 31, 2008 Cash Accounts Receivable Prepaid Rent Supplies Furniture Accumulated Depreciation Accounts Payable Salary Payable Gabriel Liwayway, Capital Gabriel Liwayway, Drawing Consulting Service Revenue Salary Expense Rent Expense Utilities Expense Depreciation Expense Supplies Expense Trial Balance Debit Credit P 32,600 16,000 8,000 1,200 30,000 P 6,000 5,600 (a) 4,000 (b) 2,000* (c) 800 (d) 500** (e) 800*** 72,000 7,200 14,800 2,800 (a) 4,000 (e) 800*** (b) 2,000* 600 P 98,400 P 98,400 _ * P8,000  = P2,000 ** P30,000  = P6,000  12 = P500 *** P4,000  = P800 Requirement (2) Adjustments Debit Credit (d) 500** (c) 800 8,100 8,100 Adjusted Trial Balance Debit Credit 32,600 20,000 6,000 400 30,000 6,500 5,600 800 72,000 7,200 18,800 3,600 2,000 600 500 800 103,700 103,700 10 Chapter Gabriel Liwayway, Speech Therapist Income Statement For the Month Ended October 31, 2007 Revenues: Consulting service revenue Expenses: Salary expense Rent expense Supplies expense Utilities expense Depreciation expense Total expenses Net income P18,800 P3,600 2,000 800 600 500 7,500 P11,300 Gabriel Liwayway, Speech Therapist Statement of Owner’s Equity For the Month Ended October 31, 2007 Gabriel Liwayway, capital, September 30, 2007 Add: Net income Less: Withdrawals Gabriel Liwayway, capital, October 31, 2007 P72,000 11,300 83,300 7,200 P76,100 Gabriel Liwayway, Speech Therapist Balance Sheet October 31, 2007 ASSETS LIABILITIES Cash Accounts receivable Prepaid rent Supplies Furniture P30,000 Less: Accum depr 6,500 P32,600 20,000 6,000 400 Total assets P82,500 Test Material 9-3 23,500 Accounts payable Salary payable Total liabilities OWNER’S EQUITY Gabriel Liwayway, capital Total liabilities and owner’s equity P 5,600 800 P 6,400 76,100 P82,500 Measuring Business Income: The Adjusting Process 11 Requirement (1) Lorenzo Anicete, Attorney Preparation of Adjusted Trial Balance July 31, 2008 Account Title Cash Accounts Receivable Prepaid Rent Supplies Furniture Accumulated Depreciation Accounts Payable Salary Payable Lorenzo Anicete, Capital Lorenzo Anicete, Drawing Legal Service Revenue Salary Expense Rent Expense Utilities Expense Depreciation Expense Supplies Expense Trial Balance Debit Credit P 29,200 23,200 7,200 1,600 33,600 P 7,000 6,700 (a) 1,800 (b) 1,800* (c) 800 (d) 700** (e) 400*** 77,300 8,000 17,500 4,800 (a) 1,800 (e) 400*** (b) 1,800* 1,100 P108,700 P108,700 _ * P7,200  = P1,800 ** P33,600  = P8,400  12 = P700 *** P2,000  = P400 Requirement (2) Adjustments Debit Credit (d) 700** (c) 800 5,500 5,500 Adjusted Trial Balance Debit Credit 29,600 25,000 5,400 800 33,600 7,700 6,900 400 77,300 8,000 19,300 5,200 1,800 1,100 700 800 111,600 111,600 12 Chapter Lorenzo Anicete, Attorney Income Statement For the Month Ended July 31, 2007 Revenues: Legal service revenue Expenses: Salary expense Rent expense Utilities expense Supplies expense Depreciation expense Total expenses Net income P19,300 P5,200 1,800 1,100 800 700 9,600 P 9,700 Lorenzo Anicete, Attorney Statement of Owner’s Equity For the Month Ended July 31, 2007 Lorenzo Anicete, capital, July 31, 2007 Add: Net income Less: Withdrawals Lorenzo Anicete, capital, July 31, 2007 P77,300 9,700 87,000 8,000 P79,000 Lorenzo Anicete, Attorney Balance Sheet July 31, 2007 ASSETS LIABILITIES Cash Accounts receivable Prepaid rent Supplies Furniture P33,600 Less: Accum depr 7,700 P29,200 25,000 5,400 800 Total assets P86,300 25,900 Accounts payable Salary payable Total liabilities OWNER’S EQUITY Lorenzo Anicete, capital Total liabilities and owner’s equity P 6,900 400 P 7,300 79,000 P86,300 ... total assets and total liabilities and owner’s equity of P155,000 One possible explanation is since the “net loss” account has a credit balance of P155,000 and just erroneously included in the current... 11 Green Badge Service Preparation of Adjusted Trial Balance October 31, 2007 Trial Balance Debit Credit Cash 30,000 Accounts receivable 65,000 Supplies 10,400 Office furniture Adjustments Debit... 80,000 670,000 Measuring Business Income: The Adjusting Process Exercise PUB Service Co Statement of Owner’s Equity For the year ended December 31, _ Miguel Roces, Capital, January Add Net Income