Chapter 1 ACCOUNTING EQUATION

1. Mr. Paul Arancon started business by investing P7,500 cash. In addition, the business
assumes a payable of Mr. Arancon amounting to P1,500.
Required: Based on the information above, formulate the accounting information.

2. Mr. Samson invested assets worth P20,000. Capital of Mr. Samson is computed as P15,000.
Required: Based on the information above, formulate the accounting information.

3. From the data Paocial and Sons below, prepare a simple balance sheet as of December 31,
2008:
Cash on hand and in bank 2,500
Receivable from customers 10,500
Payable to Almaden Company 8,000
Counters, chairs and tables 2,000
Initial capital of P20,000 decrease by personal withdrawal of 1,500
Deliver equipment 15,000
Net income 3,500

4. Based on the following information, prepare a simple income statement of Johnny Diaz for the
period December 1 to December 31, 2008.

Total Service Revenue for the month 10,000

Supplies expense 7,000
Rent expense 500
Salaries 1,000
Other expenses 500

5. Below are information of Salarde Enterprises as of December 31, 2008:

Cash 5,000
Accounts receivable 15,000
Other assets 5,000
Accounts payable 10,000
Salarde, Capital ?
Required: Prepare the balance sheet

Chapter 2 JOURNALIZING
1. Transactions for the Chai Company for the month of May are presented below. Identify the
accounts to be debited and credited for each transaction.
5/2 Chai invests P12,500 cash in a small welding business of which he is the sole
proprietor.
5/3 Buys equipment on account for P4,500.
5/4 Pays P2,500 to landlord for May rent.
5/14 Bills Mang Protacio P1,500 for welding work done.
2. An inexperienced bookkeeper prepared the following trial balance that does not balance.
Prepare a correct trial balance, assuming all account balances are normal.

CARREON COMPANY
Trial balance
December 31, 2008
Account titles Debit Credit
Cash P94,000
Prepaid insurance P17,500
Accounts payable 15,000
Unearned fees 11,000
Carreon, Capital 85,000
Carreon, drawing 22,500
Fees Earned 128,000
Salaries Expense 93,000
Rent Expense 12,000
Balance P198,000 P280,000

3. Selected transactions for Bayoyong, an interior designer, in his first month of business, are as
follows:
a. Invested P50,000 cash in business.
b. Purchased used car for P40,000 cash for use in the business.
c. Purchased supplies on account for P5,000.
d. Billed customers P18,000 for service performed.
e. Paid P2,000 cash for advertising start of the business.
f. Received P7,000 cash from customers billed in (d) above.
g. Paid creditor P3,000 cash on account.
h. Withdrew P5,000 cash for personal use of the owner.

Instruction:
For each transaction indicate:
3.1 Basic type of account debited and credited (asset, liability, owner’s equity)
3.2 The specific account debited and credited (cash, rent expense, fees earned, etc.)
3.3 Whether the specific account is or decreased
3.4 Normal balance of the specific account

4. Presented below is information related to JiMan Real Estate Agency:

11/1 Jim Maniago begins business as a real estate agent with a cash investment of
P130,000.
11/2 Hires an administrative assistant.
11/3 Buy office furniture for P19,000 on account.
11/6 Sells a house and lot for Mr. Florendo; fees due from Mr. Florendo, P32,000 (not paid
by Mr. Florendo at this time).
11/10 Receives cash of P1,400 as fees for renting an apartment for the owner.
11/27 Pays P7,000 on the balance indicated in the transaction of November 3.
Pays the administrative assistant P9,600 in salary for November.
Prepare the debit-credit analysis for each transaction using the same format in the previous
problem.

5. On May 1, Felicidad Olay established the Olay Travel Agency. The following transactions were
completed during the month:
 1. Invested P40,000 cash in Manila Bank in the name of the agency.
2. Paid P800 cash for May office rent.
3. Purchased office equipment for P5,000 cash.
4. Incurred P600 of advertising costs in the Newsmaker, on account.
5. Paid P1,200 cash for office supplies.
6. Earned P18,000 for services rendered: Cash of P2,000 is received from customers and the
balance of P16,000 is billed to customers.
7. Withdrew P400 cash for personal use.
8. Paid Newsmaker amount due in transaction 4.
9. Received P16,000 in cash from customers who have been previously been billed in
transaction 5.

Olay Travel agency’s chart of account shows:

Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Olay, Drawings;
Olay, Capital; Service Revenue; Rent Expense; Advertising Expenses; Salaries Expense.

Prepare journal entries and make a balance sheet and an income statement for the month of
May.
6. The BuloVerde Hillside Park was started on May 1 by Don Quijote. The following selected
events and transactions occurred during May:
May 1 Invested P300,000 cash in the business.
May 4 Purchased land costing P150,000 for cash.
May 8 Incurred advertising expense of P9,000 on account.
May 11 Paid salaries to employees P7,500.
May 12 Hired park manager at a salary of P20,000 per month, effective June 1.
May 13 Paid P7,500 for a one-year insurance policy.
May 17 Withdrew P3,000 cash for personal use.
May 20 Received P28,500 in cash for admission fees.
May 25 Sold 100 coupon books for P125 each. Each book contains coupons that entitle the
holder to one admission to the park.
May 30 From the tickets sold on May 25, half was earned.
May 30 Paid P3,500 on account for Advertising incurred on May 8.
Don Quijote uses the following accounts: Cash; Prepaid insurance; Land; Accounts Payable;
Unearned Admissions; Quijote, Capital; Quijote, Drawing; Admission Revenue; Advertising
Expense; and Salaries Expense.

7. Washington Sycip, CPA is a licensed CPA. During the first month of operations of his
business, the following events and transactions occurred.
Jan. 1 Invested P84,000 cash.
2 Hired a secretary-receptionist at a salary of P2,000 a month.
3 Purchased P2,400 of supplies on account from Tristan Supply Company.
7 Paid office rent of P1,800 for one month.
11 Completed a tax assignment and billed client P2,200 for services rendered.
12 Received P7,000 advance on a management consulting engagement.
17 Received cash of P2,400 for services completed for T. Gok Co.
31 Paid secretary receptionist P2,000 salary for the month.
31 Paid 40% of balance due to Tristan Supply Company.
He uses the following chart of accounts: Cash; Accounts Receivable; Supplies: Accounts
Payable; Unearned Fees; Sycip, Capital; Fees Earned; Salaries Expense and Rent Expense.
Prepare necessary journal entries and make a balance sheet and income statement for the
month of January.
8. Wa Kang Computer Services entered into the following transaction during February 2008:
a. Purchased computer terminals for P190,000 from DigiZone on account.
b. Paid P40,000 cash for February rent on storage space.
c. Received P150,000 cash from customers for contracts billed in January.
d. Provided computer services to Lao Construction Company for P30,000 cash.
e. Paid SOCOTECO II P30,000 cash of energy usage in Factory.
f. Wa Kang invested additional P64,000 in the business.
g. Incurred advertising expenses for February of P10,000 on account.

Indicate with appropriate letter whether each of the transaction above results in:
a. An increase in assets and a decrease in assets
b. An increase in assets and an increase in owner’s equity
c. An increase in assets and an increase in liabilities
d. A decrease in assets and a decrease in owner’s equity
e. A decrease in assets and a decrease in liabilities
f. An increase in liabilities and a decrease in owner’s equity
g. An increase in owner’s equity and a decrease in liabilities