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Accrual Basis

Tory began a service proprietorship on February 1 with an initial cash investment of P200,000. In February, the proprietorship provided P500,000 in services and received full payment in March. Expenses of P300,000 were incurred in February and paid in April. Tory drew P100,000 in March. For the two months ended March 31, the amount to report as capital is P200,000.

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347 views2 pages

Accrual Basis

Tory began a service proprietorship on February 1 with an initial cash investment of P200,000. In February, the proprietorship provided P500,000 in services and received full payment in March. Expenses of P300,000 were incurred in February and paid in April. Tory drew P100,000 in March. For the two months ended March 31, the amount to report as capital is P200,000.

Uploaded by

Rosemarie Cruz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Chapter

Problem 35-13 (AICPAAdapted)


On February 1, Tory began a service proprietorship with an initial cash
investment of P200,000. The proprietorship provided P500,000 of service in
February and received full payment in March. The proprietorship incurred
expenses of P300,000 in February which were paid in April. Tory drew P 100,000
during March.
For the two months ended March 31, prepared under the cash basis, what amount
should be reported as capital?

Problem 35-14 (PHILCPAAdapted)

At the beginning of current year, Reims purchased the net assets of Alador Laundry, a sole
proprietorship, for P3,500,000, and commenced operations of Saint Etienne Laundry, a
sole proprietorship. The. assets had a carrying amount of P3,750,000 and a market value
of P3,600,000.

In Saint Etienne's cash basis financial statements for the current year, the entity reported
revenue in excess of expenses of P600,000. Reims' drawings during the current year
totaled P200,000.

In Saint Etienne's financial statements, what amount should be reported as Capital -


Reims on December 31?

Problem 35-1 (IAA)


Katcelynne Company provided the following data for the current year:

Cash sales
Sales on account
Cash purchases
Credit purchases
Expenses paid
Accounts receivable — January 1
Accounts receivable — December 31
Accounts payable — January I 150,000
Accounts payable — December 31 200,000
Inventory — January I 500,000
Inventory — December 3 1 600,000
Accrued expenses — December 31 20,000
Prepaid expenses — December 31
Equipment — December 3 1
Interest received
Chapter

Interest receivable — January 1


Interest receivable — December 31 20,000

On July 1 of the current year, an equipment was acquired for P200,000. The terms are P

50,000 down and the balance to be paid after one year.

The useful life of equipment is 10 years with no residual value


1. What is the amount of sales under cash basis?
2. What is the amount of purchases under cash basis?
3. What is the cost of goods sold under cash basis?
4. What is the amount of depreciation under cash basis?

5. What is the net income under cash basis?

ACCRUAL BASIS
Basic problems

Problem 36-1 (AICPA Adapted)

Reid Company, which began operations on January 1, 2014, has elected to use cash basis
accounting for tax purposes and accrual basis accounting for the financial statements. The
entity reported sales of P1,750,000 and P800,000 in the tax returns for the years ended
December 31, 2015 and 2014, respectively. The entity reported accounts receivable of P
300,000 and P 500,000 on December 3 1, 2015 and 2014, respectively.

What amount should be reported as sales in the income statement for 2015?

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