Exercises for Basic Accounting PDF

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CAT Level 1 (Module 1 Exercises) EXERCISES: E1: Direction: Each item relates to our topic discussion. Write in the space provided the term that corresponds to your answer. _________1. This refers to the business that is owned and controlled by one person. _________2. Certificate that certifies the ownership of stocks in a corporation. _________3. Branch of accounting concerned with the identification of the sources consistent with the provisions of city, municipal, provincial or national laws. _________4. This can be broadly defined as the branch of accounting that prepares general purpose financial statements to be used by parties both internal and external to the entity. _________5. Software development is an example of ________________________ business. _________6. This form of business is considered as the most common form of business organization in the Philippines.

E2: Directions: With the aid of T-accounts, record the transactions listed below. Determine the balances of the Taccounts. Use the template for easy recording of transactions. Danielle is an experienced events planner. The transactions and accounts for the business are as follows: a. Invested P100,000 in cash to start his own business. b. Paid P5,000 for one month’s rent. c. Bought office furniture for P15,000 in cash.

Received delivery of laptop computer, P54,000. Paid 50% down, balance due in 30 days. Performed services for P12,000 in cash. Performed services for P10,800 on credit. Received P5,400 from clients on account. Paid P10,000 for salaries. Received P7,000 in cash for services performed. Performed services for P12,000 on credit. Paid P1,350 for the monthly telephone bill. Paid P2,400 for the electric and water bills. Collected P2,000 from clients on account. n. Danielle withdrew P7,000 in cash for personal expenses. d. e. f. g. h. i. j. k. l. m.

E3: Direction: For each transaction, indicate whether the assets (A), liabilities (L) or owner’s equity (OE) increased (+), decreased (-) or did not change (0) by placing the appropriate sign in the appropriate column.

Ex. 1 2 3 4 5 6 7 8 9 10

Transaction Payment of cash to suppliers. Receipt of long outstanding receivables. Additional cash investment by the sole proprietor. Purchase of equipment on account. Owners cash withdrawal for personal use. Received cash for service rendered. Paid cash for salaries expense. Receipt of cash loan from the bank. Performed services to client on account. Purchased furniture with cash. Made cash distributions to owners.

A -

L -

OE 0

E4: Directions: Prepare the journal entries for the December transactions. Use the template below for your answers. Use the following account titles: Cash Accounts Receivable Office Supplies Office Condominium Office Equipment Accounting Library Notes Payable Accounts Payable

Date (2021) Dec

Modesto, Capital Modesto, Withdrawals Accounting Revenues Salaries Expense Rent Expense Telephone Expense Professional Dues Expense

Transactions 2 Transferred P92,500 cash from a personal savings account to a checking account. Acquired office equipment on account from Ximen Furnitures, P36,800. Acquired office supplies on account from Meizuo Office Supply Company, P17,100. Performed accounting services for Ryuji Computer Company and submitted a bill of P29,200 for those services. 7 Paid the accounting and tax books for use in the practice, P19,500. 8 Paid Meizuo Office Supply Company, P4,100 on account. 10 Acquired a condominium unit for the accounting practice, P265,000. A down payment of P38,000 was made and issued a note payable for the remaining P227,000.

3 4 6

12 13

19

Paid salaries, P14,200. Received P9,750 from Ryuji Computer Company, billed on May 6. 16 Paid telephone expense, P650. Received cash in the amount of P14,600 from Hifumi Book Company for accounting services rendered for the month.

Acquired office supplies on account from Meizuo Office Supply Company, P4,650. Withdrew P8,150 for personal use. Paid salaries, P10,300. 26 Billed Ann Exporters P31,600 for accounting services rendered. 27 Paid PICPA Makati P5,500 for professional dues. 28 Paid P3,250 rent on an office copying machine.

22 23 25

Date

JOURNAL Account Titles and Explanation

PR

Debit

Credit

JOURNAL Date

Account Titles and Explanation

JOURNAL

PR

Debit

Credit

Date

Account Titles and Explanation

PR

Debit

Credit

E5: Direction: Analyze the errors and their effect on trial balance. The bookkeeper for Bien Services made a number of errors in journalizing and posting, as describe below. A credit posting of P4,000 to Accounts Receivable was omitted. A debit posting of P7,500 for Prepaid Insurance wad debited to Insurance Expense. 3. A collection from customer of P1,000 in payment of its account owed was journalized and posted as a debit to Cash P1,000 and a credit to Service Revenue, P1,000. 4. A credit posting of P3,000 to Tax Payable was made twice. 5. A cash purchase of supplies for P2,500 was journalized and posted as a debit to Supplies P250 and a credit to Cash, P250. 6. A debit of P4,950 to Advertising Expense was posted as P4,590. Instructions For each error, 1. 2.

a. Indicate whether the trial balance will balance b. If the trial balance will not balance, indicate the amount of the difference. c. Indicate the trial balance column that will have the larger total.

Consider each error separately. Use the following form, in which error (1) is given as an example. Error 1

In-balance (a) No

Difference (b) P4,000

Larger column (c) debit

2 3 4 5 6

E6: Directions: Prepare journal entries for the following transactions. January 1

Cash sales, P230,000. 4

Sales on account, P450,000.

10

Purchased merchandise for cash, P150,000.

15

Purchased merchandise on account, P620,000. 22

28

DATE

Received cash for sales made on account.

Paid the amount due for merchandise purchased.

ACCOUNT TITLE

DR

CR

DATE

ACCOUNT TITLE

DR

CR

E7: Directions: Match the description below with relevant documents as follows: A. B. C. D. E. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Purchase Requisition Purchase Order Credit Memorandum Bill of Lading Invoice

F. Official Receipt G. Statement of Account H. Deposit Slips I. Receiving Report J. Check

This is an authorization made by the buyer to the seller to deliver the merchandise as detailed in the form. The document issued by the seller authorizing the return of merchandise due to errors in delivery terms. This document evidences the receipt of cash by the seller. The document prepared by the seller of goods and sent to a buyer detailing the specifics of a sale. It is a written request to the purchaser of an entity from a user department of the same entity that goods be purchased. It is a written order to a bank by a depositor to pay the specified amount from his checking account to the person named. These are printed forms with depositor’s name, account number and details of deposit. It specifies contractual conditions and terms of delivery of goods. It is a formal notice to the debtor detailing the accounts already due. It contains information about goods received from a vendor.

E8: Directions: Encircle the letter of the correct answer. 1. The entry to record a sale of P7,500 with terms of 2/10, n/30 would include a a. Debit to Sales Discounts for P150. b. Debit to Sales for P7,350. c. Credit to Accounts Receivable for P7,500. d. Credit to Sales for P7,500.

2. The collection of a P4,000 accout within the 2% discount period would result in a a. Debit to

Sales Discounts for P80. b. Debit to Accounts Receivable for P3,920. c. Credit to Cash for P3,920. d. Credit to Accounts Receivable for P3,920. 3. The collection of a P5,000 account beyond the 2%discount period would result in a a. Debit

to Cash for P4,900. b. Credit to Accounts Receivable for P5,000. c. Credit to Cash for P5,000. d. Debit to Sales Discount for P100. 4. Goods totaling P50,000 were purchased February 2 with terms of 2/10, n/30. Returns of

P10,000 were made on February 10. How much discount, if any, can be availed if the invoice was paid on February 12? a. None b. P1,000 c. P 800 d. P 200

5. The entry to record a payment on a P15,000 account within the 2% discount period would

include a a. Debit to Cash for P15,000. b. Debit to Accounts Payable for P14,700. c. Credit to Purchase Discounts for P300. d. Credit to Accounts Payable for P15,000. 6. A P5,000 purchases on account was made. The entry to record the payment on account

after the expiration of the 2% discount period would include a a. Debit to Accounts Payable for P5,000. b. Debit to Purchase Discounts for P100. c. Credit to Cash forP4,900. d. Credit to Accounts Payable for P4,900. 7. A buyer received an invoice for P6,000 dated June 10. If the terms are 2/10, n/30 and the

buyer paid the invoice within the discount period, what amount will the seller receive? a. P6,000 b. P5,880 c. P4,800 d. P 120 8. The purchase discounts account is a contra account to a. Accounts Payable b. Sales c. Purchases d. Sales Discount 9. The account that appears in the chart of accounts for a merchandising entity but not for a

service entity is a. b. c. d.

Accounts receivable Advertising expense Sales returns and allowances Service revenue

10. Grace Company bought merchandise for P8,000, terms 2/10, n/30. If Grace returns P2,000

of the goods to the vendor, the entry to record the return should include a a. Debit to Accounts Payable of P2,000. b. Debit to Discounts Lost of P40. c. Credit to Purchase Returns and Allowances of P1,960. d. Debit to Purchase Returns and Allowances of P1,960.

E9: Directions: Write True if the statement is correct; False if incorrect.

_______ 1. Cash discounts are called purchase discounts from the buyer’s point of view. _______ 2. The sales discounts account is a contra-income account and will have a debit balance. _______ 3. A credit term of “2/10, n/30” means that the buyer may deduct 2% from the invoice if payment is made within 10 days from the end of the month. ______ 4. Purchase returns and allowances is a deduction from purchases. ______ 5. When the terms of the sale include a sales discount, it is usually advisable for the buyer to pay within the discount period. ______ 6. The terms2/10, n/30 mean that a 2% discount is allowed on payments made over 10 but before 30 days after the invoice date. ______ 7. The entry to record the return of goods from a customer would include a credit to Sales Returns and Allowances. ______ 8. The entry to record a sale of P7,500 with terms of 2/10, n/30 would include a credit to Sales for P7,500. ______ 9. The collection of a P4,000 account within the 2% discount period would result in a credit to Accounts Receivable for P3,920. ______ 10. The collection of a P5,000 account beyond the 2% discount period would result in a debit to Sales Discounts for P100.

E10: Directions: Journalize the following transactions. Use the answer sheet below. Sun Company entered into the following transactions during the month of June 2021: June

2

Purchased 1,000 tires at a cost of P600 per tire. Terms of payment: 1/10, net 45. 4 5 6 7

Paid trucking firm P8,000 to ship the tires purchased on June 2. Purchased 600 tires at a cost of P600 per tire. Terms of payment: 2/10,net 30. Paid trucking firm P5,000 to ship the tires purchased on June 5. Returned 150 of the tires purchased on June 2 because they were defective. Received a credit on open account from the seller.

11

Paid for tires purchased on June 2.

13

Sold 700 tires from those purchased on June 2. The selling price was P900 per tire. Terms: 1/10, net 30.

22 Received cash from sale of tires on June 13. 30 Paid for tires purchased on June 5.

DATE

ACCOUNT TITLE AND EXPLANATION

DR

CR

DATE

ACCOUNT TITLE AND EXPLANATION

DR

CR

E11: Directions: Write True if the statement is correct; False if incorrect. _______ 1. The perpetual inventory system requires recording the cost of each sale as it occurs. _______ 2. There is no need for a physical inventory count in the perpetual inventory system.

_______ 3. A physical inventory is usually taken at the end of the accounting period. _______ 4. A company would be more likely to know the amount of inventory on hand if it used the periodic inventory system rather than the perpetual inventory system. _______ 5. Under the perpetual inventory system, the cost of merchandise is debited to Merchandise Inventory at the time of purchase. ______ 6. Under the perpetual inventory system, the account Cost of Goods Sold would not be used. _______ 7. Under the perpetual system, in addition to making the entry to record a sale, a company would debit Cost of Goods Sold and credit Merchandise Inventory. ______ 8. The entry to record a purchase return under the perpetual inventory system would include a credit to Merchandise Inventory. ______ 9. In addition to making the entry to record a sales return under the perpetual inventory system, a company would debit Cost of Goods Sold and credit Merchandise Inventory. ______ 10. The perpetual inventory system is used most commonly by companies that sell lowpriced, high-volume merchandise.

E12: Directions: Compute first the missing figures and then prepare adjusting entries for the beginning and ending inventory. Assuming Net Profit rate is 10%. Net sales Gross sales

P ________

Less: Sales returns

P 45,000

Sales discounts

15,000

60,000 P ________

Net sales Cost of goods sold Inventory, Jan. 1

P

Purchases

P 985,000

Less: Purchase returns Purchase discounts

P31,000 MMMMM M

Transportation in

20,000

____________

P 36,000

Net cost of purchases

________

Cost of goods available for sale Less: Inventory, Dec. 31

220,000

MMMMM P

260,000

Net purchases

Cost of goods sold margin from sales

P P

________ _ ________ _

Operating expenses Net profit

________ Gross

620,000

P

Adjusting entries

DATE

ACCOUNT TITLE AND EXPLANATION

DR

CR

E13. Directions: Prepare the Journal entries.

On June 13, 2022, Ginbuta purchased on account specialty feeds worth P560,000. A wholesaler operating in the region bought for cash all of the available feeds on June 25, 2021; amount of cash received was P1, 120,000. Ginbuta remitted the value added tax due to the BIR within the month.

DATE

ACCOUNT TITLE AND EXPLANATION

DR

CR

CAT Level 1 (Module 2 Exercises) EXERCISES E1: Direction: Practice what you understand by answering the proceeding problem. On August 1, 2021, Peter Company insured its property with Pru Life Insurance Company and pays premium of P24,000 for one year policy contract covering the period from Aug. 1, 2021 to Aug. 1, 2022. The accounting ends on December 31, 2021. Assuming expense method is used: 1. 2. 3. 4. 5. 6.

What is the journal entry to record the advance payment? On December 31, 2021, how much is the unexpired portion of the Insurance premium paid in advance What is the adjusting entry on December 31, 2021? In your adjusting entry, what account will you record, Asset or Expense? In your adjusting entry, are you increasing or decreasing the amount of your Insurance Expense account? After posting the adjusting entry, how much is the balance of the Insurance Expense account?

Assuming asset method is used: 7. 8. 9. 10. 11.

What is the journal entry to record the advance payment? How much is the unexpired portion of the Insurance Expense account as of December 31, 2021? What is the adjusting entry on December 31, 2021? In your adjusting entry, what account will you record, Asset or Expense? In your adjusting entry, are you increasing or decreasing the amount of your Prepaid Insurance account?

12. After posting the adjusting entry, how much is the balance of the Prepaid Insurance account? E2: Direction: Practice what you understand by answering the proceeding problem. On October 1, 2021, Adam Realty Co. collected the amount of P60,000 representing advanced rental from a tenant who occupies a space of the building. The advanced rental will cover the period Oct. 1, 2021 to October 1, 2022. The accounting period ends on December 31, 2021. Assuming the income method is used: 1. 2. 3. 4. 5. 6.

What is the journal entry to record the advance collection? How much is the unearned portion of the amount received in advance as of December 31, 2021? What is the adjusting entry to record on December 31, 2103? In your adjusting entry, what account will you record, Income or Liability? In your adjusting entry, are you increasing or decreasing the amount of your Rent Income account? After posting the adjusting entry, how much is the balance of the Rent Income account?

Assuming the liability method is used: 7. 8. 9. 10. 11. 12.

What is the journal entry to record the advance collection? How much is the earned portion of the amount received in advance as of December 31, 2021? What is the adjusting entry to record on December 31, 2103? In your adjusting entry, what account will you record, Liability or Income? In your adjusting entry, are you increasing or decreasing the amount of your Rent Income account? After posting the adjusting entry, how much is the balance of the Unearned Rent Income account?

E3: Directions: Check what you have understood by answering the following problem. As of December 31, 2021, Mr. Koekie Dano holds a 60-day, 10% note of P240,000 signed by Ms. Joy Ursula dated November 1, 2021. Answer the following questions or do what is requested. 1. Prepare the journal entry in the books of Mr. Dano upon released of the money. 2. How much interest would be earned upon maturity of the note? 3. How much is the maturity value of the note? 4. How much interest earned by Mr. Dano as of December 31, 2021? 5. Prepare adjusting entry on the books of Mr. Dano to record adjustments on December 31, 2021?

E4: Direction: Practice what you understand by answering the proceeding problem. Presented below is the worksheet of Anna Mae Company.

Anna Mae Company Unadjusted Trial Balance December 31, 2022 Debit Cash

9,316

Accounts Receivable Prepaid Insurance Laundry Supplies Laundry Equipment Accounts Payable

1,690 1,200 390 4,400

Anna Mae, Drawing Anna Mae, Capital

800

Laundry Service Revenue Store Rent Expense Utility Expense Total Adjustments: 1. Insurance Expense

3,9 90 12,0 00 300 1,040 154 18,990

1 0 0 19 6

Laundry Supplies

To record usage of repairs supplies 3. Depreciation Expense-Laundry Equipment Accumulated Depreciation-Laundry Equipment

16,290

10 0

Prepaid Insurance

To record the one-month expiration of prepaid insurance 2. L...