Case 1

a. Bad debts 9,300.00

Allowance for bad debts 9,300.00
to record provision for bad debts
(P620,000 x 1.5%)

b. Bad debts 13,000.00

Allowance for bad debts 13,000.00
to record provision for bad debts

Computation:
Required Allowance for bad debts at year end 14,500.00
(P290,000 x 5%)
Less: Allowance for bad debts, beginning 9,300.00
Bad debts written off (7,800.00) 1,500.00
Bad debts expense 13,000.00
Case 2

a. Dec. 1 Accounts receivable 5,000.00

Sales 5,000.00
to record sales on account

Cost of sales 3,500.00

Merchandise inventory 3,500.00
to record cost of sales

b. Dec. 2 Merchandise inventory 720.00

Cash 720.00
to record purchase of inventory

c. Dec. 4 Merchandise inventory 2,600.00

Accounts payable 2,600.00
to record purchase of inventory on account

d. Dec. 5 Sales returns and allowances 300.00

Accounts receivable 300.00
to record return of merchandise sold

Merchandise inventory 210.00

Cost of sales 210.00
to record cost of merchandise returned by the customer

e. Dec. 6 Cash 4,850.00

Sales discounts 150.00
Accounts receivable 5,000.00
to record collection of account

f. Dec. 7 Accounts payable 600.00

Merchandise inventory 600.00
to record return of faulty merchandise to the supplier

g. Dec. 7 Merchandise inventory 200.00

Cash 200.00
to record payment of freight of the merchandise purchased

h. Dec. 11 Accounts payable 2,000.00

Merchandise inventory 20.00
Cash 1,980.00
to record payment of merchandise

I. Dec. 24 Accounts receivable 7,000.00

Sales 7,000.00
to record sales on account

Cost of sales 4,900.00

Merchandise inventory 4,900.00
to record cost of sales

j. Dec. 27 Cash 6,860.00

Sales discounts 140.00
Accounts receivable 7,000.00
to record collection of account
Case 3

XYZ Corporation
Statement of Cash Flow
For the year ended March 31, 2006
(amounts in Philippine Peso)

Net Cash Provided / Used in Operating Activities:

Net income 141,000.00
Add: Depreciation expense 25,000.00
Gain on sale of equipment (1,000.00)
Increase in receivables (20,000.00)
Increase in prepaid expenses (2,000.00)
Decrease in inventory 40,000.00
Increase in accounts payable 8,000.00
Decrease in salaries payable (24,750.00)
Increase in interest payable 2,000.00 168,250.00

Net Cash Provided / Used in Investing Activities:

Acquisition of fixed assets (90,000.00)
Proceeds from sale of fixed assets 41,000.00 (49,000.00)

Net Cash Provided / Used in Financing Activities:

Payment of bonds payable (30,000.00)
Issuance of capital stock 90,000.00
Payment of dividends (135,000.00)
Reacquisition of capital stock (Treasury stocks) (20,000.00) (95,000.00)

Net increase in cash 24,250.00

Add: Cash beginning balance 20,000.00

Cash balance, March 31, 2006 44,250.00

Case 4

1 Supplies expense 4,700.00

Supplies inventory 4,700.00
to record used supplies

2 Depreciation expense 1,925.00

Accumulated depreciation 1,925.00
to record provision for depreciation

3 Cost of sales 1,000.00

Inventory 1,000.00
to reconcile the quantity per stock card
with the quantity per physical count

4 Administration expenses 500.00

Advertising 500.00
to reclassify accounts

5 Cash in bank 16,000.00

Accounts payable 16,000.00
to close bank overdraft

**for the credit balance of Sales Discount, this should have been renamed or reclassified as Sales Discount Forfeited.
unt Forfeited.
Case 5

1.a
Date Transaction Quantity Unit Cost Balance
April 1 Beginning balance 100 5.00 500.00
4 Purchases 400 5.10 2,040.00
5 Sales (350) 5.10 (1,785.00) *
100 5.00 500.00
Balance
50 5.10 255.00
11 Purchases 300 5.30 1,590.00
12 Sales (300) 5.30 (1,590.00) *
(50) 5.10 (255.00) *
(25) 5.00 (125.00) *
Balance 75 5.00 375.00
18 Purchases 200 5.35 1,070.00
25 Sales (100) 5.35 (535.00) *
75 5.00 375.00
Balance
100 5.35 535.00
26 Purchases 100 5.60 560.00
Ending balance 275 1,470.00

* Cost of goods sold under LIFO = P4,290

1.b
Date Transaction Quantity Unit Cost Balance
April 1 Beginning balance 100 5.00 500.00
4 Purchases 400 5.10 2,040.00
5 Sales (100) 5.00 (500.00)
(250) 5.10 (1,275.00) *
Balance 150 5.10 765.00
11 Purchases 300 5.30 1,590.00
12 Sales (150) 5.10 (765.00) *
(225) 5.30 (1,192.50) *
Balance 75 5.30 397.50
18 Purchases 200 5.35 1,070.00
25 Sales (75) 5.30 (397.50) *
(25) 5.35 (133.75) *
Balance 175 5.35 936.25
26 Purchases 100 5.60 560.00
Ending balance 275 1,496.25

Sales:
April 5 (350 x P10.00) 3,500.00
April 12 (375 x P10.50) 3,937.50
April 25 (100 x P10.50) 1,050.00 8,487.50
* Cost of sales (4,263.75)

Gross Profit on Sales 4,223.75

2.a
Date Transaction Quantity Unit Cost Balance
April 1 Beginning balance 100 5.00 500.00
4 Purchases 400 5.10 2,040.00
 Balance 500 5.08 2,540.00
5 Sales (350) 5.08 (1,778.00)
Balance 150 5.08 762.00
11 Purchases 300 5.30 1,590.00
Balance 450 5.23 2,352.00
12 Sales (375) 5.23 (1,961.25)
Balance 75 5.23 390.75
18 Purchases 200 5.35 1,070.00
Balance 275 5.31 1,460.75
25 Sales (100.00) 5.31 (531.00)
Balance 175.00 5.31 929.75
26 Purchases 100.00 5.60 560.00
Ending balance 275.00 5.41 1,489.75

2.b Ending inventory, end under LIFO = P1,470

(see stock card for LIFO, 1.A requirement)

2.c Cost of goods sold under FIFO = P4,263.75

(see stock card for FIFO, 1.B requirement)
Case 6

1. Adjusting Journal Entries:

a. Accounts receivable 15,800.00
Sales 15,800.00
to record sales on account

b. Bad debts 3,800.00

Allowance for bad debts 3,800.00
to record provision for bad debts

c. Purchases 13,500.00
Accounts payable 13,500.00
to record purchases on account

d. Merchandise inventory 10,800.00

Income summary 10,800.00
to establish merchandise inventory end

e. Insurance 2,600.00
Ella's capital 2,600.00
to correct overstatement of last year's insurance expense
(P7,800/12 x 4 months)

Prepaid insurance 2,900.00

Insurance 2,900.00
to establish unexpired insurance for the current year
(P8,700/12 x 4 months)

f. Depreciation expense 13,200.00

Accumulated depreciation 13,200.00
to record provision for depreciation

g. Ella's capital 2,000.00

Utilities 900.00
Salaries 1,100.00
to record last year's accrued expenses

Utilities 1,500.00
Salaries 1,600.00
Accrued expense 3,100.00
to accrue expenses

2. The bank requested for the 2005 financial statements prepared under the Accrual
Basis of accounting because the bank wants to see the real performance and
position of the business. Proper matching of revenues and expenses are observed
under the Accrual Basis.
CASE 7

1. Stock Card for Tri Star

Date Transaction Quantity Unit Cost Amount
January 10 Purchases 10 2,500.00 25,000.00
14 Sales (8) 2,500.00 (20,000.00)
Balance 2 2,500.00 5,000.00
21 Purchases 15 2,800.00 42,000.00
23 Sales (2) 2,500.00 (5,000.00)
(2) 2,800.00 (5,600.00)
Balance 13 2,800.00 36,400.00
26 Sales (2) 2,800.00 (5,600.00)
Ending Balance 11 30,800.00

2 Stock loss/ Receivable from personnel 2,800.00

Inventory 2,800.00
to record stock loss

3 Date Particulars Debit Credit

Jan. 10 Merchandise inventory 25,000.00
Input tax 2,500.00
Accounts payable 27,500.00
to record purchase of inventory on account

21 Merchandise inventory 42,000.00

Input tax 4,200.00
Accounts payable 46,200.00
to record purchase of inventory on account

24 Merchandise inventory 10,000.00

Input tax 1,000.00
Accounts payable 11,000.00
to record purchase of inventory on account

4 Date Particulars Debit Credit

Jan. 14 Accounts receivable 35,200.00
Sales 32,000.00
Output tax 3,200.00
to record sales on account

23 Accounts receivable 17,600.00

Sales 16,000.00
Output tax 1,600.00
to record sales on account

26 Cash 8,640.00
Sales discounts 160.00
Sales 8,000.00
Output tax 800.00
to record cash sales

Cost of sales 5,600.00

Merchandise inventory 5,600.00
to record cost of sales
5 Depreciation expense 1,291.67
Accumulated depreciation 1,291.67
to take up provsion for depreciation
CASE 7

1. Stock Card for Tri Star

Date Transaction Quantity Unit Cost Amount
January 10 Purchases 10 2,500.00 25,000.00
14 Sales (8) 2,500.00 (20,000.00)
Balance 2 2,500.00 5,000.00
21 Purchases 15 2,800.00 42,000.00
23 Sales (2) 2,500.00 (5,000.00)
(2) 2,800.00 (5,600.00)
Balance 13 2,800.00 36,400.00
26 Sales (2) 2,800.00 (5,600.00)
Ending Balance 11 30,800.00

2 Stock loss/ Receivable from personnel 2,800.00

Inventory 2,800.00
to record stock loss

3 Date Particulars Debit Credit

Jan. 10 Merchandise inventory 25,000.00
Input tax 2,500.00
Accounts payable 27,500.00
to record purchase of inventory on account

21 Merchandise inventory 42,000.00

Input tax 4,200.00
Accounts payable 46,200.00
to record purchase of inventory on account

24 Merchandise inventory 10,000.00

Input tax 1,000.00
Accounts payable 11,000.00
to record purchase of inventory on account

4 Date Particulars Debit Credit

Jan. 14 Accounts receivable 35,200.00 8 units
Sales 32,000.00 8 x 4000 = 32000
Output tax 3,200.00
to record sales on account

Cost of sales 20,000.00 8 x 2500 = 20000

Merchandise inventory 20,000.00
to record cost of sales

23 Accounts receivable 17,600.00 4 units

Sales 16,000.00 4 x 4000 = 16000
Output tax 1,600.00
to record sales on account

Cost of sales 10,600.00 2 x 2500 = 5000

Merchandise inventory 10,600.00 2 x 2800 = 5600
to record cost of sales

26 Cash 8,640.00 2 units

 Sales discounts 160.00 2 x 4000 = 8000
Sales 8,000.00
Output tax 800.00
to record cash sales

Cost of sales 5,600.00 2 x 2800 = 5600

Merchandise inventory 5,600.00
to record cost of sales

5 Depreciation expense 1,291.67 15,000.00

Accumulated depreciation 1,291.67 16,000.00
to take up provsion for depreciation 31,000.00
24.00
1,291.67
8 x 4000 = 32000

8 x 2500 = 20000

4 x 4000 = 16000

2 x 2500 = 5000
2 x 2800 = 5600
2 x 4000 = 8000

2 x 2800 = 5600

computer equipment
motorbike

months
depreciation for the month of January
Case 8

1 Depreciation expense 2,816.00

Accumulated depreciation 2,816.00
to take up provision for depreciation

2 Cash 27,000.00
Accumulated depreciation 18,656.00
Equipment 44,000.00
Gain on sale of equipment 1,656.00
to take up sale of equipment