PAGE 1

Long Problem 2
(a)
Auto supplies expense 855,000
Prepaid auto supplies 855,000
(b)
Accounts receivable 25,000
Repair income 25,000
(c)
Salaries expense 18,000
Salaries payable 18,000
(d)
Utilities expense 4,800
Utilities payable 4,800
(e)
Mr. Gerome, Drawing 15,000
Prepaid auto supplies 15,000
(f)
Unearned repair income 3,000
Repair income 3,000
(g)
Office supplies expense 5,000
Prepaid office supplies 5,000
(h)
Depreciation expense 10,000
Accumulated depreciation 10,000
(i)
Insurance expense 1,500
Prepaid insurance 1,500
(j)
Interest expense 1,000
Prepaid interest 1,000
(k)
Cash 6,000
Prepaid office supplies 5,000
Gain on sale 1,000

2.
GEROME COMPANY
Income Statement
For the year ended December 31, 2008
Repair income P1,128,000
Less: Expenses
Salaries 108,000
Repairs 38,000
Utilities 41,800
Auto supplies 855,000
Office supplies 5,000
Depreciation 10,000
Insurance 1,500 1,059,300
Operating income 68,700
Add: Gain on sale of office supplies 1,000
Less: Interest expense 1,000
Net Income P 68,700
 PAGE 2
GEROME COMPANY
Statement of Changes in Owner’s Equity
For the year ended December 31, 2008

Beginning Capital Balance 100,000

Less: Withdrawals 19,000
Balance before net income 81,000
Add: Net income 68,700
Ending Capital Balance P149,700

GEROME COMPANY
Balance Sheet
As Of December 31, 2008
Current Assets:
Cash P 61,000
Accounts Receivable 125,000
Prepaid auto supplies 110,000
Prepaid office supplies 10,000
Prepaid insurance 4,500
Prepaid interest expense 2,000
Total P312,500
Noncurrent assets:
Repair equipment 120,000
Less: Accumulated Depreciation 10,000 110,000
Total P110,000
Total Assets P422,500

Current Liabilities
Accounts payable P196,000
Unearned repair income 9,000
Salaries payable 18,000
Utilities payable 4,800
1-year Notes payable 20,000
Total P247,800
Noncurrent liabilities
3-year Note payable 25,000
Total 25,000
Total Liabilities P272,800
Total Owner’s equity P149,700

Total Liabilities and Owner’s Equity P422,500

PROBLEM 3

Sales 820,500
Rent Revenue 7,500
Cost of merchandise sold (545,000)
Administrative expense ( 75,500)
Interest expense ( 9,000)
Selling expense (101,000)
Net Income 97,500