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Chapter 6
Business Transactions and their Analysis
PROBLEM 1: IDENTIFYING THE ACCOUNTS AFFECTED

TRANSACTIONS ACCOUNT TITLES

AFFECTED
1. Sale of goods on account Accounts Sales
(disregard cost of sales) receivable
2. Purchase of inventory for cash Inventory Cash
3. Obtaining a loan Cash Notes
payable
4. Payment of utilities expense Utilities Cash
expense
5. Payment of accounts payable Accounts Cash
payable

PROBLEM 2: IDENTIFYING THE ACCOUNTS AFFECTED

TRANSACTIONS ACCOUNT TITLES

AFFECTED
1. Purchase of inventory on account Inventory Accounts
payable
2. Collection of accounts receivable Cash Accounts
receivable
3. Obtaining a loan Cash Notes
payable
4. Sale of inventory on account Accounts Sales
(disregard cost of sales) receivabl
e
5. Charging of the cost of the Cost of Inventory
inventory sold in #4 above as sales
expense
6. Payment of accounts payable Accounts Cash
payable
7. Provision of capital to the business Cash Owner’s
by the owner capital
8. Payment of the loan obtained in #3 Notes Cash
above payable
9. Drawings of the owner from the Owner’s Cash
business during the period drawings
10. Purchase of equipment on cash Equipme Cash
basis nt

PROBLEM 3: IDENTIFYING THE EFFECTS ON ACCOUNTS

1. Cash – Increase; Owner’s capital – Increase
2. Cash – Increase; Sales – Increase
Cost of sales – Increase; Inventory – Decrease
3. Salaries expense – Increase; Cash – Decrease
4. Cash – Increase; Notes payable – Increase
5. Interest expense – Increase; Cash – Decrease

PROBLEM 4: IDENTIFYING THE EFFECTS ON ACCOUNTS

1. Inventory – Increase; Cash – Decrease
2. Inventory – Increase; Accounts payable – Increase
3. Accounts payable – Decrease; Cash – Decrease
4. Accounts receivable – Ingcrease; Sales – Increase
Cost of sales – Increase; Inventory – Decrease
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5. Cash – Increase; Accounts receivable – Decrease

6. Accounts payable – Decrease; Cash – Decrease
7. Owner’s drawings – Increase; Cash – Decrease
8. Prepaid rent – Increase; Cash – Decrease
9. Supplies expense – Increase; Cash – Decrease
10. None
PROBLEM 5: JOURNAL ENTRIES
1. Cash 60,000
Owner’s capital 60,000

2. Cash 300,000
Sales 300,000

Cost of sales 70,000

Inventory 70,000

3. Prepaid rent 66,000

Cash 66,000

4. Utilities expense 8,000

Cash 8,000

5. Cash 800,000
Notes payable 800,000

PROBLEM 6: JOURNAL ENTRIES

1. Cash 1,000,000
Owner’s capital 1,000,000

2. Inventory 300,000
Cash 300,000

3. Inventory 400,000
Accounts payable 400,000

4. Accounts receivable 800,000

Sales 800,000

Cost of sales 500,000

Inventory 500,000

5. Accounts payable 400,000

Cash 400,000

6. Cash 700,000
Accounts receivable 700,000

7. Equipment 58,000
Cash 58,000

8. Owner’s drawings 10,000

Cash 10,000

9. Salaries expense 70,000

Cash 70,000

10. Interest expense 5,000

Cash 5,000
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PROBLEM 7: JOURNAL ENTRIES & ACCTG. EQUATION

1st requirement: Journal entries

1. Cash 90,000
Owner’s capital 90,000

2. Inventory 60,000
Accounts payable 60,000

3. Cash 200,000
Sales 200,000

Cost of sales 80,000

Inventory 80,000

4. Prepaid rent 60,000

Cash 60,000

5. Salaries expense 10,000

Cash 10,000

2nd requirement: Effects on basic accounting equation

ASSETS LIABILITIES EQUITY
1. Cash 90,000 Owner's capital 90,000
Accounts 60,00
2. Inventory 60,000
payable 0
3. Cash 200,000 Sales 200,000
Inventory (80,000) Cost of sales (80,000)
4. Prepaid rent 60,000
Cash (60,000)
5. Cash (10,000) Salaries expense (10,000)
60,00
TOTALS 260,000   200,000
0  
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PROBLEM 8: JOURNAL ENTRIES & ACCTG. EQUATION

1st requirement: Journal entries

1. Cash 600,000
Owner’s capital 600,000

2. Cash 400,000
Notes payable 400,000

3. Inventory 200,000
Cash 200,000

4. Inventory 500,000
Accounts payable 500,000

5. Accounts receivable 900,000

Sales 900,000

Cost of sales 400,000

Inventory 400,000

6. Accounts payable 400,000

Cash 400,000

7. Cash 500,000
Accounts receivable 500,000

8. Equipment 480,000
Cash 480,000

9. Owner’s drawings 10,000

Cash 10,000

10. Interest expense 5,000

Cash 5,000
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2nd requirement: Effects on basic accounting equation

ASSETS LIABILITIES EQUITY
1. Cash 600,000 Owner's capital 600,000
2. Cash 400,000 Notes payable 400,000
3. Inventory 200,000
Cash (200,000)
Accounts
4. Cash
500,000 payable 500,000
5. Accounts
receivable 900,000 Sales 900,000
Inventory (400,000) Cost of sales (400,000)
Accounts
6. Cash (400,000)
payable (400,000)
7. Cash 500,000
Accounts
(500,000)
receivable
8. Equipment 480,000
Cash (480,000)
Owner's
9. Cash (10,000) (10,000)
drawings
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10. Cash (5,000) Interest expense (5,000)

TOTALS 1,585,000   500,000   1,085,000
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PROBLEM 9: JOURNAL ENTRIES

1. Cash 35,000
Owner’s capital 35,000

2. Supplies expense 15,000

Cash 15,000

3. Rent expense 5,000

Cash 5,000

4. Utilities expense 2,000

Cash 2,000

5. Cash 10,000
Notes payable 10,000

6. Accounts receivable 75,000

Service fees 75,000

7. Interest expense 500

Cash 500

8. Cash 50,000
Accounts receivable 50,000

9. Owner’s drawings 20,000

Cash 20,000

10. Salaries expense 10,000

Cash 10,000
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PROBLEM 10: TRUE OR FALSE

1. TRUE
2. TRUE
3. TRUE
4. FALSE – expense
5. FALSE – No effect on total assets – increase in one asset
account but decrease in another asset account.
6. TRUE
7. FALSE - journal
8. FALSE
9. FALSE – internal
10. FALSE

PROBLEM 11: MULTIPLE CHOICE

1. A
2. A
3. A
4. C
5. D
6. D
7. B
8. D
9. A
10. B
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PROBLEM 12: CLASSROOM ACTIVITY

JOURNAL ENTRIES:

A Company B Company
1. Cash 5
Owner’s capital 5
2. Cash 7
Owner’s capital 7
3. Cash 5
Notes payable 5
4. Equipment 6
Cash 6
5. Inventory 3
Cash 3
6. Cash 5 Inventory 15
Accounts receivable 10 Cash 5
Sales 15 Accounts payable 10

Cost of sales 3
Inventory 3

7. Cash 9
Sales 9

Cost of sales 5
Inventory 5

8. Accounts receivable 10
Sales 10

Cost of sales 5
Inventory 5
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9. Cash 5 Cash 3
Accounts receivable 5 Accounts receivable 3

Accounts payable 5
Cash 5

10. Salaries expense 1

Cash 1

ANSWERS TO QUESTIONS:
a. Answers: A Company = ₱11; B Company = ₱8; Side = ₱1

b. Answers: A Company = 0; B Company = 1 stuff; Side = 2 stuffs

c. Answer: ₱5

d. Answer: ₱7

e. Answer: ₱5