Chapter – Cash to Accrual/ Single Entry System CHAPTER CASH TO ACCRUAL ACCOUNTING/ SINGLE ENTRY SYSTEM PROBLEMS 6-1 6-2 (Brainy Company) Capital, end Assets Less liabilities Capital, beginning Assets Less liabilities Increase in capital Additional investments Withdrawals Net income a b c d P609,000 138,000 P471,000 P485,000 94,000 391,000 P 80,000 ( 70,000) 120,000 P130,000 38,900 + 13,480 – 48,200 = 4,180 1,160,000 + 980,000 – 700,000 = 1,440,000 collections; 1,440,000 + 1,660,000 + 30,000 – 1,200,000 = 1,930,000 210,000 + 80,000 – 40,000 – 206,000 = 44,000 440,000 – 80,000 + 100,000 + 54,000 – 30,000 = 484,000 6-3 (Text Company) Requirement Capital, end Assets P352,800 Less liabilities (including P8,000 unrecorded purchase) 123,500 P229,300 Capital, beginning Assets P293,200 Less liabilities 117,800 175,400 Increase in capital P 53,900 Withdrawals 20,000 Net income P 73,900 Requirement Text Gift Haus Income Statement For Year Ended December 31, 2007 Sales (net of P21,000 returns) – Schedule P725,000 Cost of goods sold: Merchandise inventory, January P 97,200 Purchases (net of P13,000 returns) – Schedule 551,200 Merchandise inventory, December 31 (105,800) 542,600 Gross profit on sales P182,400 Other income 8,000 Operating income – Schedule (114,000) Operating income P 76,400 Interest expense ( 2,500) 30 Chapter – Cash to Accrual/ Single Entry System Net income Schedule – Sales Receipts from customers Accounts receivable, beginning Accounts receivable, ending Accounts written of Sales returns Gross sales P 73,900 P697,500 ( 59,400) 76,100 10,800 21,000 P746,000 Schedule – Purchases Payments to trade creditors Accounts payable, beginning Accounts payable, ending Unrecorded purchases Purchase returns Gross purchases P536,600 ( 63,300) 69,900 8,000 13,000 P564,200 Schedule – Operating expenses Bad debts expense Depreciation expense (85,000 + 20,000 – 95,500) Other operating expenses: Payments for operating expenses Prepaid expenses, beginning Prepaid expenses, ending Accrued expenses, beginning Accrued expenses, ending Total operating expenses 6-4 P 10,800 9,500 P94,100 6,000 ( 7,500) ( 4,500) 5,600 P 114,000 (Best Fastfood) Best Fastfood Income Statement For Six Months Ended December 31, 2007 Sales P2,100,000 Cost of sales: Purchases P1,850,000 Less Inventory, end 450,000 1,400,000 Gross profit P 700,000 Depreciation expense ( 24,000) Other operating expenses ( 556,000) Net income P 120,000 Best Fastfood Balance Sheet December 31, 2006 Assets Liabilities and Capital Current Assets Current Liabilities Cash P 24,000 Accounts payable P230,000 Accounts receivable 200,000 Bank loan 200,000 Inventory 450,000 Total current liabilities P430,000 Total current Assets P674,000 Non-current Assets Tom Cruz, Capital Equipment P400,000 Initial investment P500,000 Less accum Depr 24,000 376,000 Add net income 120,000 620,000 Total assets P1,050,000 Total liabilities and capital P1,050,000 31 Chapter – Cash to Accrual/ Single Entry System Computation of cash balance: Cash receipts from: Initial investment by owner Collections from sales Bank loan Less cash payments for: Purchases Bank loan Equipment Cash operating expenses Cash balance, end P 300,000 1,900,000 500,000 P2,700,000 P1,620,000 300,000 200,000 556,000 2,676,000 P 24,000 6.5.1 (Kenny Rogers Corporation) (Cash Basis) Kenny Rogers Corporation Income Statement For the Years Ended December 31, 2006 and 2005 Revenues Expenses Net Income 2006 sales = P160,000 + 355,000 = 515,000 2005 sales = 295,000 2006 expenses = 67,000 + 160,000 + 45,000 = 272,000 2005 expenses = 185,000 + 40,000 = 225,000 2006 P 515,000 272,000 P 243,000 (Accrual Basis) Kenny Rogers Corporation Income Statement For the Years Ended December 31, 2006 and 2005 Revenues Expenses Net Income 2006 sales = 355,000 + 90,000 = 445,000 2005 sales = 295,000 + 160,000 + 30,000 = 485,000 2006 expenses = 40,000 + 160,000 + 55,000 = 255,000 2005 expenses = 185,000 + 67,000 + 25,000 = 277,000 6-6 6.5.2 2006 P445,000 255,000 P190,000 2005 P295,000 225,000 P 70,000 2005 P485,000 277,000 P208,000 (Jill and Jenni) Jill and Jenni Income Statement For the Year Ended December 31, 2007 Cash Basis Sales P750,000 Cost of Sales ( 892,500) Salaries Expense ( 96,000) Rent Expense ( 60,000) Other Operating Expenses ( 84,000 ) Profit P(382,500) (Atty D Macapanalo) Atty D Macapanalo Income Statement For the Year Ended December 31, 2007 32 Accrual Basis P1,057,500 ( 637,500) ( 126,000) ( 20,000) (104,000) P 170,000 Chapter – Cash to Accrual/ Single Entry System Professional Fees Expenses Profit P P Professional Fees 2007 Collection Fees Receivable, January Fees Receivable, December 31 Unearned Fees, January Unearned Fees, December 31 Professional Fees, Accrual Basis ( Expenses 2007 Payments Accrued expenses, January Accrued expenses, December 31 Prepaid expenses, January Prepaid expenses, December 31 Expenses, accrual basis 6.5.3 1,242,200 727,300 514,900 P1,250,000 52,000) 47,000 26,200 ( 29,000) P 514,900 P 722,400 ( 18,000) 21,500 6,400 ( 5,000) P 727,300 (Jack and Jill Company) Jack and Jill Company Income Statement For the Year Ended December 31, 2007 Sales Cost of sales Gross Profit Other operating income Gain on sale of automobile Total income Operating expenses Depreciation Others Total expenses Profit before interest Interest expense Profit P P 7,440,000 4,670,000 2,770,000 P 20,000 2,790,000 P 298,667 1,003,600 1,302,667 1,487,733 104,000 1,383,733 Jack and Jill Company Statement of Changes in Equity For the Year Ended December 31, 2007 Jack P1,750,000 (500,000) 691,867 P1,941,867 Equity, January Withdrawals Share in profit Equity, December 31 Jill P1,815,000 (250,000) 691,866 P2,256,866 Jack and Jill Company Balance Sheet December 31, 2007 Assets Current Assets Cash Accounts receivable Allowance for bad debts (60,000 – 17,500) 33 P 736,000 1,782,500 (42,500) Chapter – Cash to Accrual/ Single Entry System Receivable from employees Deposit on merchandise purchases Merchandise inventory Prepaid insurance Total current assets Non-current Assets Property, plant and equipment Furniture and fixtures Accumulated depreciation – furniture and fixtures Automobiles Accumulated depreciation - automobiles Total property, plant and equipment Total Assets Liabilities Current Liabilities Accounts Payable Accrued Expenses Bank loan, including accrued interest Total current liabilities Equity Jack Jill Total partners’ equity Total liabilities and partners’ equity Sales Collections in 2006 (6,500,000 -60,000) Accounts receivable, end (1,800,000 – 17,500) Write of Accounts receivable, January 1, 2007 Sales P 30,000 75,000 3,750,000 8,000 6,339,000 P P P P P P P 220,000 (87,000) 940,000 (421,667) 651,333 6,990,333 1,875,000 16,600 900,000 2,791,600 1,941,867 2,256,866 4,198,733 6,990,333 P6,440,000 1,782,500 17,500 ( 800,000) P7,440,000 Purchases Payments to merchandise creditors P4,500,000 Accounts payable, end 1,875,000 Returned merchandise (to be applied to future purchases) ( 75,000) Accounts payable, beginning (1,380,000) Net purchases P4,920,000 Cost of sales Inventory, beginning Net purchases Inventory, end Cost of sales Depreciation expense On old furniture and fixtures (P220,000/10) On old automobiles (P780,000 – 280,000)/ On new automobile 440,000 / x 9/12 Depreciation expense Expenses other than depreciation Payments for selling and general expenses Prepaid insurance, beginning Prepaid insurance, end Accrued expenses, beginning 34 P3,500,000 4,920,000 ( 3,750,000) P4,670,000 P 22,000 166,667 110,000 P 298,667 P1,000,000 15,000 ( 8,000) ( 20,000) Chapter – Cash to Accrual/ Single Entry System Accrued expenses, end Expenses other than depreciation 16,600 P1,003,600 Interest Expense On bank loan obtained on 01/02/06 and paid 05/02/06 Accrued on bank loan obtained on 05/01/06 Total interest expense P P 32,000 72,000 104,000 MULTIPLE CHOICE QUESTIONS Theory MC1 MC2 MC3 MC4 MC5 D A C A D MC6 MC7 MC8 MC9 MC10 B C A A C Problems MC11 D MC12 MC13 MC14 MC15 MC16 MC17 MC18 A D B A D D A MC19 MC20 MC21 MC22 MC23 MC24 A B D B C C MC25 A MC26 MC27 C B 210,000 – 50,000 = 160,000 capital, end; 260,000 – 60,000 = 200,000 capital beginning; 160,000 – 200,000 = 40,000 decrease in capital + 50,000 – 12,000 = 78,000 net loss (80,000–4,000) + (120,000– 6,000+ 40,000 – 30,000) = 200,000 800,000 + 320,000 + 124,000 – 240,000 – 96,000 = 908,000 189,000 + 12,000 – 8,000 + 36,000 + 7,000 – 10,500 = 225,500 30,000 + 3,000 – 21,000 = 12,000 + 60,000 – 58,000 = 14,000 600,000 + 400,000 – 200,000 + 300,000 – 150,000 = 950,000 794,000 + 51,000 – 45,000 = 800,000 715,000 – 144,000 – 96,000 – 7,000 = 468,000 + 60,000 – 33,000 = 495,000 800,000 – (144,000/45%) = 480,000 890,000 – 270,000 – 600,000 – 60,000 + 130,000 = 90,000 310,000 + 85,000 + 4,000 + 66,000 = 465,000 280,000 + 67,000 + 5,000 = 352,000 352,000 – 5,000 – 21,700 = 325,300 45,000 + 3,500 + (200,000 x 2%) + (4,000/20% = 20,000 x 5%) = 53,500 45,000 + 280,000 + 140,000 – 110,000 = 355,000 + 10,000 + 50,000 – 60,000 = 355,000 800,000 – 96,000 + 124,000 + 320,000 – 908,000 = 240,000 2,000,000 + 960,000 + 100,000 + 800,000 + 120,000 + 320,000 – 400,000 – 1,600,000 + 1,200,000 + 2,000,000 = 5,500,000 35 ... 6, 339,000 P P P P P P P 220,000 (87,000) 940,000 (421 ,66 7) 65 1,333 6, 990,333 1,875,000 16, 600 900,000 2,791 ,60 0 1,941, 867 2,2 56, 866 4,198,733 6, 990,333 P6,440,000 1,782,500 17,500 ( 800,000) P7,440,000... 31, 2007 Jack P1,750,000 (500,000) 69 1, 867 P1,941, 867 Equity, January Withdrawals Share in profit Equity, December 31 Jill P1,815,000 (250,000) 69 1, 866 P2,2 56, 866 Jack and Jill Company Balance Sheet... P4 ,67 0,000 P 22,000 166 ,66 7 110,000 P 298 ,66 7 P1,000,000 15,000 ( 8,000) ( 20,000) Chapter – Cash to Accrual/ Single Entry System Accrued expenses, end Expenses other than depreciation 16, 600