Answers to Practical Exercises and Problems for CHAPTER 3

Name:
Subject / Section:
P3-1.

How would the following accounts be classified (Asset, Liability, Owner's

Equity, Revenue, or Expense)?

Asset
Owners Equity
Liability
Asset
Expense

P3-2.

Score:
Professor:

1.
2.
3.
4.
5.

Cash
G. Williams, Capital
Accounts payable
Inventory
Cost of food sold

Liability
Asset
Revenue
Expense
Asset

6.
7.
8.
9.
10.

Mortgage payable
Equipment
Room sales
Payroll taxes expense
Accounts receivable

The Williamston Caf experienced several cash transactions on July 1,

2004, as follows:
a.
b.
c.
d.

Received cash on account for P3,000.

Received cash from sales of July 1, 2004, for P7,000.
Paid payroll taxes of P4,500.
Purchased a new range costing P60,000 by paying P10,000 and
signing a note payable for P50,000 with the supplier.
e. Received cash of P50,000 from an investor in the business.
f. Paid a food supplier P20,000 on account.
Required: Determine the balance of the cash account at the end of the
day. The cash balance at the beginning of the day was P6,500.
ANSWER: P 32,000 (P6,500 + 3,000 + 7,000 - 4,500 - 10,000 + 50,000 - 20,000)
P3-3.

Pam Reyes & Company had P156,000 in food sales during 2001. In
addition Pam had interest revenue of P5,200 for the year. Cost of food
sales for the year totaled P92,000. Other expenses for the year were:
Rent
Wages
Advertising
Utilities

P18,000
14,600
3,200
2,400

Required: Determine the net income for the company for 2001 using the
pro-forma income statement on page 29.
ANSWER: P 31,000
Supporting Computations for Problem 3-3:

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3-1

Answers to Practical Exercises and Problems for CHAPTER 3

Revenues:
Sales
Interest revenue
Cost and expenses:
Cost of food sales
Rent
Wages
Advertising
Utilities
Net income

P 156,000
5,200
161,200
92,000
18,000
14,600
3,200
2,400
130,200
P 31,000

Name:
Subject / Section:

Score:
Professor:

12

3-2

Answers to Practical Exercises and Problems for CHAPTER 3

P3-4.

Sandra's Restaurant was organized on January 3, 2001. While many

companies are not profitable in their first year, the company experienced a
modest net income of P17,500 in 2001.
Required: Prepare a statement of owner's equity assuming Sandra Reyes
began the company as a sole proprietorship by investing
P20,000 of her own money. Refer to page 29 for the format.
Sandras Restaurant
Statement of Owners Equity
For the Year Ended December 31, 2001

Beginning Capital

P 20,000

Add Net Income

17,500

Ending Capital

P 37,500

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3-3