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Answers to Practical Exercises and Problems for CHAPTER 5

Name:
Subject / Section:
P5-1.

In the spaces provided below, refer to the same transactions for Rose
Restaurant given in Problem 4-3 on page 273 and indicate the effect of
each transaction on the accounting equation elements and performance
elements in terms of debits and credits. The number of each transaction is
given to the left of the space provided for the transaction.
ASSETS

Ex. 1.
2.
3.
4.
5.
6.
7.
8.

P5-2.

Score:
Professor:

LIABILITIES

Debit
Debit Credit
Debit Credit
Credit
Credit
Credit

INVESTMENT

EQUITY
WITHDRAWAL
REVENUE
S

Credit
Credit
Credit

Debit
Debit
Debit

Debit
Credit

Credit

EXPENSES

Debit

Debit

Now correctly debit and credit the balance sheet and performance
elements with the actual amounts of the transactions of Rose Restaurant
in the spaces provided below. Determine the balance of the accounts.
Does the balance sheet equation balance for the month?
ASSETS

Ex. 1. 10,000
2. 5,000 4,000
3. 8,000 4,000
4.
1,000
5.
1,500
6.
1,000
7.
8.
1,000
Totals 23,000 12,500
Bal.
10,500

LIABILITIES

INVESTMENT

EQUITY
WITHDRAWAL
REVENUE
S

EXPENSES

10,000
1,000
8,000

4,000
1,000
1,500

1,000
300
1,000
1,000 1,300
300

300

10,000

1,000

8,000

6,800

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5-1

Answers to Practical Exercises and Problems for CHAPTER 5

Name:
Subject / Section:

Score:
Professor:

32

Answers to Practical Exercises and Problems for CHAPTER 5

P5-3.

The following T-accounts for Jessicas Restaurant show twelve


transactions that have been recorded for the month of June. The number
of each transaction is shown in parentheses to the left of each transaction
entry.

Cash
(1)10,000
(2) 500
(7) 3,000
(3) 1,000
(11)
800
(4) 4,000
(6)
500
(8) 1,000
(9) 1,000

Accounts Receivable
(5)7,000
(7) 3,000
(11)
800

(2)

Supplies
500
(12)

150

(4)

Food Inventory
4,000
(10) 4,000

Jessica Reyes, Capital


(1) 10,000

Accounts Payable
(9) 1,000
(3) 2,000

(6)

Rent Expense
500

(3)

Fixtures
3,000

Jessica Reyes, Drawing


(8) 1,000

Food Sales Revenue


(5) 7,000

Cost of Food Sales


(10) 4,000

Supplies Expense
(12)150

Problem 5-3 (Cont'd......)


Required:
Next to the number of each transaction given below, indicate the nature of
the transaction, type of account affected (asset, liability, investment,
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5-2

Answers to Practical Exercises and Problems for CHAPTER 5

withdrawal, revenue, or expense). Then indicate whether the effect of the


transaction is to increase or decrease the account.
Nature of
Transaction

ACCOUNT DEBITED
Type
Effect

ACCOUNT CREDITED
Type
Effect

1.

Owners investment.

Asset

Increase

Owners
Equity

Increase

2.

Purchased supplies for cash.


Purchased fixtures for P3,000
paying P1,000 cash and the
balance on account.

Asset

Increase

Asset

Decrease

Asset

Increase

Asset
Liability

Decrease
Increase

4.

Purchased food supplies worth


P4,000 and paid cash for them.

Asset

Increase

Asset

Decrease

5.

Billed customers for food


served, P7,000.

Asset

Increase

Revenue

Increase

6.

Paid rent of P500.

Expense

Increase

Asset

Decrease

7.

Collected P3,000 from charge


customers billed in the No. (5).

Asset

Increase

Asset

Decrease

8.

J. Reyes, withdrew cash of


P1,000 for personal use.

Withdrawal

Increase

Asset

Decrease

9.

Paid P1,000 of debt incurred in


No. 3.

Liability

Decrease

Asset

Decrease

Expense

Increase

Asset

Decrease

Asset

Increase

Asset

Decrease

Expense

Increase

Asset

Decrease

3.

10. Cost of food served in No. (5)


P4,000.
11. Collected P800 from customers
billed in No. (5).
12. Cost of used supplies, P150.

Name:
Subject / Section:
P5-4.

Score:
Professor:

In the space provided below, determine the balance of the accounts for
Jessicas Restaurant in Problem 5-3 for the month of June. Does the
34

5-3

Answers to Practical Exercises and Problems for CHAPTER 5

accounting equation balance for the month? What was the net income of
the store for the month?
Cash
10,000
3,000
800

500
1,000
4,000
500
1,000
1,000

Accounts Receivable
7,000
3,000
800
Supplies
500

150

Food Inventory
4,000
4,000

Fixtures
3,000
12,350 Assets

Jessica Reyes, Capital


10,000

Accounts Payable
1,000
2,000

Rent Expense
500

Jessica Reyes, Drawing


1,000

1,000 Liabilities

Food Sales Revenue


7,000

Cost of Food Sales


4,000

Supplies Expense
150

Answer sheet for Problem 5-4


Balance of the accounts for Jessica's Restaurant:
1. Cash
2. Accounts Receivable
3. Food Inventory

5,800
3,200
0

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5-4

Answers to Practical Exercises and Problems for CHAPTER 5

4. Supplies
5. Fixtures
6. Accounts Payable
7. Jessica Reyes, Capital
8. Jessica Reyes, Drawing
9. Food Sales Revenue
10.Cost of Food Sales
11.Rent Expense
12.Supplies Expense

350
3,000
1,000
10,000
1,000
7,000
4,000
500
150

Does the accounting equation balance for the month?


Assets
12,350

Net income for the month:

=
=
P

Liabilities
1,000

2,350

Owner's Equity
11,350

11,350 Owners Equity

(7,000 4,650)

Name:
Subject / Section:
P5-5.

+
+

Score:
Professor:

The following accounts show the transaction of Karl's Inn for the month.
The number of each transaction is given to the left of each entry.

Cash
(1)50,000
(3) 7,000
(4) 50,000
(6) 5,000

(9)

Accounts Payable
2,500
(2) 5,000

(7)

Karl, Drawing
1,000

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5-5

Answers to Practical Exercises and Problems for CHAPTER 5


(11) 35,000

(7)
(9)

1,000
2,500

Accounts Receivable
(5)60,000
(11) 35,000
(10) 4,000

Supplies Inventory
(2) 5,000
(8) 1,000

(6)

Notes Payable
5,000
(4) 50,000

Karl, Capital
(1) 50,000

Revenue
(5) 60,000
(10) 4,000

(3)

Rent Expense
7,000

Supplies Expense
(8)1,000

Problem 5-5 (Cont'd......)


Required:
Next to the number of each transaction given below, analyze the
transaction by describing it, then filling in the type of balance sheet
element (asset, liability, or equity) affected by the transaction and whether
the effect is to increase or decrease the account. The first transaction is
analyzed for you as an example.
Effect on
Account Debited

Effect on
Account Credited

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5-7
5-6

Answers to Practical Exercises and Problems for CHAPTER 5

1.

Karl invested P50,000 cash in the business.

increase asset

increase equity

2.

Purchased supplies amounting to P5,000 on


account.

increase asset

increase liability

3.

Paid rent of P7,000.

decrease equity

decrease asset

4.

Borrowed P50,000 and issued a promissory


note.

increase asset

increase liability

5.

Billed customers for room charges P60,000.

increase asset

increase equity

6.

Made partial payment of P5,000 on note


payable.

decrease liability

decrease asset

7.

Karl withdrew P1,000 cash for personal use.

decrease equity

decrease asset

8.

Supplies used P1,000.

decrease equity

decrease asset

9.

Paid account payable incurred in No. 2.

decrease equity

decrease asset

10. Billed customers for various services P4,000.

increase asset

increase equity

11. Collected P35,000 from charge customers.

increase asset

decrease asset

Name:
Subject / Section:
P5-6.

Score:
Professor:

Below is a list of accounts of Karen Company. For each of the


transactions below, indicate the accounts that would be debited and
credited by placing the number of the appropriate account in the debit and
credit column.
1. Cash
2. Accounts Receivable
3. Food Supplies

6. Accounts Payable
7. Karen Cabrera, Capital
8. Karen Cabrera, Drawing
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Answers to Practical Exercises and Problems for CHAPTER 5

4. Catering Equipment
5. Accumulated DepreciationOffice Equipment

9. Revenues
10. Expenses
Accounts Accounts
Debited Credited

Transactions
Example: Owner invested P10,000 cash in business

1. Purchased food supplies on account.


2. Paid this month's rent
3. Billed customers for catering services
rendered during the current month.
4. Owner withdrew cash from the business.
5. Additional food equipment is purchased;
P100 cash is paid now and the balance is
to be paid in 30 days.

3
10

6
1

2
8

9
1

1
6

1
10

2
1

10

6. Received cash from customers for services


rendered and billed in prior month.
7. Paid employees wages.
8. Received cash from customer at time
service was rendered.
9. Paid balance due on office equipment in
(5) above.
10. Recorded depreciation on office equipment
for current month.

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5-8

Answers to Practical Exercises and Problems for CHAPTER 5

Name:
Subject / Section:
P5-7.

Score:
Professor:

Keyman Catering Services began operations in January 2001. During its


first month of operations the following transactions occurred:
a. Sold 1,000 shares of no-par common stock for cash of P10,000.
b. Borrowed P12,000 from National Bank. A promissory note was
signed stating that the loan plus 12% interest would be repaid in 18
months.
c. Purchased P500 worth of office supplies for cash.
d. Purchased kitchen equipment costing P11,000, paying P2,000 down
with the balance on account.
e. Received cash P7,500 for catering services performed during January.
f. Billed customers P9,000 for catering services performed during
January.
40

Answers to Practical Exercises and Problems for CHAPTER 5

g.
h.
i.
j.
k.

Paid P2,500 rent for January 2001.


Paid P500 for utilities for January 2001.
Paid P900 to part-time employees for wages.
Paid a cash dividend to shareholders in the amount of P500.
Cost of food purchased for the month on cash basis amounted to
P6,500. There were no food supplies left the by end of the month.

Required:
1. Record the above transactions in the provided T-accounts.
2. Calculate ending account balances.

Problem 5-7 (Cont'd.....)


Requirement (1)
ASSETS
Cash

LIABILITIES
Notes Payable

REVENUES
Catering Service
(b) 12,000
Revenue

(a) 10,000 (c) 500


(b) 12,000 (d) 2,000
(e) 7,500 (g) 2,500
(h) 500

(e) 7,500
(f) 9,000

Accounts Payable

(i) 900
(j) 500
(k) 6,500

(d) 9,000

EXPENSES
Rent Expense
(g) 2,500

Accounts Receivable
EQUITY
Common Stock

(f) 9,000

Utilities Expense

(a) 10,000 (h) 500

Food Supplies
Inventory

Dividends

Wages Expense

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5-9

Answers to Practical Exercises and Problems for CHAPTER 5


(k) 6,500 (k) 6,500

(j)

500

Supplies Inventory
(c)

(i)

900

Cost of Food
Sales

500

(k) 6,500

Equipment
(d) 11,000

Requirement (2)
Balance of the accounts for Keyman Catering Services:
Cash
Accounts Receivable
Food Supplies Inventory
Supplies Inventory
Equipment
Notes Payable
Accounts Payable

P16,100
9,000
0
500
11,000
12,000
9,000

Name:
Subject / Section:
P5-8.

Common Stock
Dividends
Catering Service Revenue
Rent Expense
Utilities Expense
Wages Expense
Cost of Food Sales

P10,000
500
16,500
2,500
500
900
6,500

Score:
Professor:

Annie Domingo began Annie's Rainbow Inn in October 2001 and


completed the following transactions during the first month of operations.
a. Invested P400,000 cash to start the business, which is to be organized
as a sole proprietorship.
b. Purchased P8,750 of office supplies on account.
c. Purchased equipment of P250,000 with a down payment of P150,000,
and signed a 3-year note for the balance, with interest at 12%.
d. Performed services for customers for P58,000 cash.
e. Paid P5,000 of the amount owed from transaction b.
f. Performed services of P70,000 for customers on account.
g. Collected P32,500 from customers on account.
h. Paid the following expenses for October: rent P24,000, wages
P33,000, and utilities P13,750.
i. Annie withdrew P11,000 from the business for personal expenses.
Required:
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510

Answers to Practical Exercises and Problems for CHAPTER 5

Record the above transactions in T-accounts and determine the ending


balance in each account.
Answer sheet for Problem 5-8
Cash

Notes Payable

(a)400,000 (c)150,000
(d) 58,000(e) 5,000
(g) 32,500(h) 70,750
(i) 11,000

Service Revenue

(c)100,000

(d) 58,000
(f) 70,000

Accounts Payable

Accounts Receivable

(e) 5,000 (b) 8,750

Rent Expense

(f) 70,000(g) 32,500

(h) 24,000

Office Supplies

Annie, Capital

(f) 8,750

Utilities Expense

(a)400,000 (h) 13,750

Equipment

Annie, Withdrawals Wages Expense

(c)250,000

(i) 11,000

(h) 33,000

Answer sheet for Problem 5-8 (Contd.....)


Balance of the accounts for Annies Rainbow Inn:
Cash
Accounts Receivable
Office Supplies
Equipment
Notes Payable
Accounts Payable
Annie, Capital
Annie, Withdrawals
Service Revenue
Rent Expense
Utilities Expense
Wages Expense

P 253,750
37,500
8,750
250,000
100,000
3,750
400,000
11,000
128,000
24,000
13,750
33,000

43

511

Answers to Practical Exercises and Problems for CHAPTER 5

Name:
Subject / Section:
P5-9.

Score:
Professor:

Using the information from Problem 5-8, list the T-account balances in the
table below. Then, total the debit and credit columns to see if debits equal
credits.

Accounts
Accounts Payable
Accounts Receivable
Annie, Withdrawals
Annie, Capital
Cash
Equipment
Notes Payable
Office Supplies
Rent Expense
Service Revenue
Utilities Expense
Wages Expense

Do Debits = Credits?
DEBIT
Balances

CREDIT
Balances
P

3,750

37,500
11,000
400,000
253,750
250,000
100,000
8,750
24,000
128,000
13,750
33,000

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512

Answers to Practical Exercises and Problems for CHAPTER 5

TOTALS

631,750

631,750

P5-10. Using the information in Problem 5-9, prepare an income statement, a


statement of capital, and a balance sheet for Annie's Rainbow Inn as of
October 31, 2001.
Annies Rainbow Inn
Income Statement
For the month ended October 31, 2001
Service Revenue
Less: Operating Expenses
Rent Expense
Utilities Expense
Wages Expense
Net Income

P128,000
P 24,000
13,750
33,000

70,750
P 57,250

Problem 5-10 (Cont'd.....)


Statement of Capital
For the Month ended October 31, 2001
Capital, October 1
Add: Net Income

P400,000
57,250
P457,250
11,000
P446,250

Less: Withdrawals
Capital, October 31

Balance Sheet
October 31, 2001
Assets
Cash
Accounts receivable
Office supplies
Equipment
Total Assets

P253,750
37,500
8,750
250,000
P550,000
Liabilities and Owners Equity

Accounts payable

P 3,750

45

513

Answers to Practical Exercises and Problems for CHAPTER 5


Notes payable
Annie, Capital
Total Liabilities and Owners Equity

100,000
446,250
P550,000

46

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