FINANCIAL ACCOUNTING PROCESS – FINANCIAL ACCOUNTING AND REPORTING

1. On July 01,2016 Jon Snow opened House Stark Company, a perfume shop with an
initial investment of P900,000. House Stark borrowed a total of P300,000 to
finance it initial operation. In early September, Jon Snow issued a personal
check for P100,000 in payment for one of House Stark’s loan. In mid-December,
Jon Snow took merchandise costing P50,000 which were marked to sell for P75,000
for personal use. Sales and other income in 2016 amounted to P750,000 while
expenses totaled P300,000. House Stark’s liabilities decreased by P175,000.
The assets of House Stark at December 31, 2016

2. House Lannister Company was incorporated on June 1, 2016 issuing 5,000 P10
ordinary shares for a total consideration of P80,000 and borrowed funds totaling
P20,000. Operations in 2016 resulted in an excess income over expenses of
P150,000. Additional 1,000 ordinary shares were issued for a total cash
consideration of P150,000. On December 1, 2016, House Lannister declared cash
dividends of P40,000 for holders on record as of December 31, 2016 to be
distributed in January 15, 2017.
At December 31, 2016 total assets increased by P140,000.
The liabilities of House Stark at December 31, 2016

3. House Tully Company’s total assets on December 31, 2016 were 30% higher than the
total assets on January 1, 2016. Total equity on January 1, 2016 amounting to
P120,000 was 25% lower than the total liabilities on that date. During 2016,
total liabilities on that date House Tully’s equity increased by 15%.
House Tully’s equity at December 31, 2016

4. The assets and liabilities of House Baratheon are as follows:

December 31, 2016 December 31, 2015

Assets 1,400,000 210,000
Liabilities 700,000 180,000

During the year, House Baratheon made additional investment of P100,000 and
withdrew P70,000.
The net income (loss) for 2016 is

5. House Tyrell Company’s accounts balances showed the following changes:

Current Assets P450,000 Increase

Non-Current Assets 200,000 Decrease
Current Liabilities 270,000 Decrease
Non-Current Liabilities 180,000 Increase
Ordinary Shares 40,000 Increase
Premium on Ordinary Shares 10,000 Increase

There were no other changes in the retained earnings account other than a P300,000
dividend payment and the current year’s net income.
House Tyrell’s current year’s net income(loss) is

6. Some account balances included in the ledger of House Greyjoy Company at the end
of 2016 are as follows:

Accounts Payable 300,000 Accrued Interest Income 80,000

Accounts Receivable 250,000 Accrued Salaries Expense 90,000
Administrative Expenses 150,000 Accumulated Depreciation 150,000
Cash in Bank 100,000 Allowance for doubtful accounts 60,000
Deferred tax asset 40,000 Bonds Payable 500,000
Finance Cost 90,000 Capitalized Development Cost 600,000
Land 900,000 Finance Lease Obligation 140,000
Machinery 300,000 Net loss – exchange differences 60,000
Notes Payable 150,000 Premium on bonds payable 100,000
Office Equipment 220,000 Provision related to pension 200,000
Prepaid Supplies 60,000 Retained Earnings 380,000
Share Capital – ordinary 390,000 Revaluation Surplus 100,000
Treasury Shares 50,000 Unearned Service Revenue 100,000
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 FINANCIAL ACCOUNTING PROCESS – FINANCIAL ACCOUNTING AND REPORTING

The sum of accounts with debit balances is

7. Some account balances for House Arryn as of the end of the accounting period are
as follows:
Advances to employees 120,000 Accounts Receivable 400,000
Cash & cash equivalents 450,000 Accrued interest expense 25,000
Cost of goods sold 100,000 Advances from customers 150,000
Deferred tax liabilities 300,000 Dividends 75,000
Distribution Cost 200,000 Inventory 60,000
Interest Revenue 90,000 Investment in Associate 700,000
Land 80,000 Net Unrealized Gains – OCI 280,000
Patent 300,000 Premium on Share Capital 200,000
Prepaid Insurance 40,000 Provision for pending lawsuits 150,000
Share Capital 800,000 Retained Earnings 300,000
Trade Receivables 200,000 Treasury Shares 140,000

The sum of accounts with credit balances is

8. The trial balance of House Targaryen does not balance. The debit column totaled
P174,000 while the credit column totaled P147,200. An examination of the ledger
shows these errors
• Collection from credit customer was recorded both dr and cr as P14,500
instead of P15,400.
• Acquisition of a computer table on account for P6,000 was recorded as debit
Office expense and credit to Accounts Payable.
• Purchase of inventory units on account was recorded as P231,000 instead of
P213,000
• Services performed on account for a client, P12,000 was recorded as a debit
to Accounts receivable for P12,000 and a credit to Service Revenue of
P1,200.
• A payment of P3,000 for utilities used was posted as a debit to Utilities
Expense and a debit to Cash
• The rent revenue account was totaled at P48,000 instead of P58,000.
The correct debit and credit column totals should be

9. The accounts receivable balance at the start of the year was P1,250,000.
Collections from credit customers – current for the period totaled to P4,300,000.
Sales discounts granted P60,000. Accounts deemed worthless during the year
P180,000. Bad debt expense for the year P75,000. At the end of the year, the
accounts receivable balance was P1,120,000.
Credit sales for the year

10. Unearned rent beginning, P450,000; Unearned rent end P670,000. Total rent revenue
during the year, P960,000
Rent collected for the period is

11. Decrease in accounts receivable, P120,000; increase in advances from customers,

P80,000. Total sales for the year P1,700,000.
Collections from customers during the year

12. Inventory beginning P4,800,000. Accounts payable beginning P2,100,000. Payments

made to suppliers for purchases made during the year, P7,500,000. Purchase
returns amounted to P120,000. Freight- in P70,000. Inventory ending, physical
count P4,200,000. Accounts payable ending P8,400,000.
Total purchases made during the year amounts to
The amounts to be reported as cost of goods for the year

13. Prepaid rent beginning for the year, P125,000; Rent expense during the year
P270,000; Prepaid rent end of the year, P260,000.
Total rent paid during the year is

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 FINANCIAL ACCOUNTING PROCESS – FINANCIAL ACCOUNTING AND REPORTING

14. Salaries payable, beginning P450,000; Salaries paid during the year totaled
P1,500,000. Salaries payable, ending P760,000.
Total salaries paid during the year is

15. Increase in prepaid expenses (utilities), P90,000; increase in acrrued expenses

(utilities), P70,000. Utilities expense for the year P300,000.
Payment for utilities during the year is

16. Allowance for bad debts beginning, P24,000; written off uncollectible accounts
during the year, P12,000; recoveries from previously written-off accounts P4,500.
Allowance for doubtful accounts end, P39,500.
The bad debt expense for the year amounts to

17. Accumulated depreciation and impairment – equipment, January 1, 2016 P700,000;

equipment costing P290,000 was sold for P140,000 resulting in loss of P25,000.
Accumulated depreciation and impairment – equipment, December 31, 2015, P910,000.
The amount of depreciation expense for the year amounted to P335,000.

18. Retained earnings, beginning P1,300,000. During the year, the company declared
dividends of P800,000 paying P500,000. Retained earnings, ending P1,200,000.
The amount of net income(loss)during the period is

19. Salaries payable at the start of the year was P0. Salaries are paid every Friday
for the current week. Three employees received a salary of P7,500 each per week.
Employees do not work on weekends. December 31 fell on a Wednesday. All employees
worked on the last day of December.
The appropriate adjusting entry at the end of the year is

20. Forwared a loan to another company on August 1, 2016 and received an 8-month,
12.6% note with face amount of P800,000.
The appropriate adjusting entry to be made at December 31, 2016 is

21. A truck costing P1,400,000 was acquired on August 21, 2016. It has an estimated
useful life of 20 years and a residual value equal to 8% of cost. The Company
uses the straight line method in recording depreciation on its machines.
The appropriate adjusting entry to be made at December 31, 2016 is

22. The allowance for bad debts has an unadjusted balance of P1,200 as of December
31, 2016. Based on the aging schedule, it is determined that the balance of the
allowance account should be P1,950 at December 31
The appropriate adjusting entry to be made at December 31, 2016 is

23. During 2016, Westeros Company entered into two advertising contracts and paid a
total of P480,000. A nominal account was debited for this advance payment. The
contract provides for a monthly ad placement into widely read magazines. The
terms of the contract are as follows:

No. Of
Contract Date Amount
Issues
Bravos Magazine August 1 P180,000 15
Essos Digest October 1 300,000 6

The first ad placement runs in the month in which the contract is signed. The
The appropriate adjusting entry to be made at December 31, 2016 is

24. House Martell began subleasing office space in its new building in 2016. At
December 31, House Martell had the following rental contracts that are paid in

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 FINANCIAL ACCOUNTING PROCESS – FINANCIAL ACCOUNTING AND REPORTING

full for the entire term of the lease. House Martell recorded all advance
collections initially under liability account.

Contract
Date Term (months)
Price
August 1 12 P75,000
October 1 18 125,000

The appropriate adjusting entry to be made on December 31, 2016 is

25. The adjusted trial balance of House Frey Company at the end of the year showed
the following accounts:

Accounts Payable 4,500 Accrued Interest Revenue 62,000

Accounts Receivable 5,200 Accrued Salaries Expense 190,000
John, Capital 280,500 Accumulated Depreciation 216,000
Erick, Capital 130,000 Depreciation Expense 47,500
Building 600,000 Notes Payable 90,000
Dividend Revenue 25,000 Pension Expense 44,500
Finance Cost 60,000 Premium on bonds payable 100,000
Insurance expense 7,500 Prepaid supplies 36,500
Interesr income 90,000 Professional fees earned 500,000
Prepaid Insurance 23,000 Salaries Expense 225,000
Supplies expense 11,500 Utilities expense 87,000

The balance of the Income Summary account after all the required balances have
been transferred to this account.

26. The bookkeeper of House Greyjoy Company prepared the following closing entries
at the end of the calendar year:

Dec 31 Interest Revenue 9,400

Accounts Payable 3,900
Capital Stock 12,000
Sales 60,000
Income Summary 85,300

Dec 31 Income Summary 53,500

Gain on sale of land 3,000
Cost of Goods Sold 32,000
Accounts Receivable 12,000
Operating Expenses 4,000
Other Assets 3,500
Dividends 5,000

Dec 31 Income Summary 31,800

Retained Earnings 31,800

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