CH 2 Answers PDF

CHAPTER 2
REVIEW OF THE ACCOUNTING PROCESS

Problems
2-1.
(TIGER COMPANY)
a.
Adjusting entries at December 31, 2012:
a.
b.
c.
d.
e.
f.
g.
b.
2-2.
Supplies expense
Supplies
25,000-8,500
16,500
16,500
Insurance expense
Prepaid insurance
24,000 x 8/24
8,000
Rent revenue
Unearned rent revenue
27,000/3
9,000
8,000
9,000
Depreciation expense
Accumulated depreciation
(360,000/10) x 10/12
30,000
30,000
Uncollectible accounts expense

Allowance for uncollectible accounts
2% x 450,000 3,000 = 6,000
6,000
Interest expense
Interest payable
200,000 x .12 x 30/360
2,000
Merchandise inventory
Purchase returns and allowances
Cost of goods sold
Purchases
Freight-in
6,000
2,000
480,000
25,000
415,000
900,000
20,000
Reversing entries at January 1, 2013

c.
Rent revenue
9,000
f.
2,000
Interest payable
Interest expense
2,000
(DRAGON COMPANY)
a.
Salary expense
Salaries payable
80,000 x 2/5
b.
c.
9,000
420,000 / 12
Interest receivable
Interest revenue
60,000 x .12 x 3/12
32,000
32,000
35,000
35,000
1,800
1,800
Chapter 2 Review of the Accounting Process

d.
e.
f.
g.
h.
i.
2-3.
Supplies expense
Store supplies
Office supplies
28,400
Uncollectible accounts expense

Allowance for uncollectible accounts
(5% x 650,000 )+ 15,000
47,500
12,800
15,600
Insurance expense
Prepaid insurance
5,280
Prepaid travel expense (or Prepaid expense)

Travel expense
8,100
Prepaid rent
Rent expense
18,000 x 2/6
6,000
5,280
c.
d.
e.
f.
g.
h.
8,100
6,000
Income tax expense

Income tax payable
Reported net income
Adjustments: (a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Correct net income
365,916
365,916
1,352,000
(32,000)
(35,000)
1,800
(28,400)
(47,500)
(5,280)
8,100
6,000
1,219,729
(MONKEY CORPORATION)
a.
a.
Bad debts expense
Allowance for bad debts
b.
47,500
Insurance expense
Prepaid insurance
x 30%
=365,916
1,700
1,700
1,250
1,250
Interest receivable
Interest revenue
250
250
Prepaid rent
Rent expense
1,550
1,550
Salary expense
Salaries payable
25,000
25,000
8,000
8,000
Interest expense
Interest payable
200
200
Rent revenue
20,000
20,000

b.
Closing entries (partial)

a.
Rent revenue
Interest revenue
Income summary
b.
c.
f.
g.
h.
Income summary
Rent expense
Salaries expense
Interest expense
Bad debts expense
Insurance expense
864,700
7,450
828,000
1,300
1,700
25,000
1,250
250
250
Rent expense
Prepaid rent
1,550
Salaries payable
Salary expense
8,000
1,550
8,000
Interest payable
Interest expense
200
200

Rent revenue
20,000
20,000
(ROOSTER COMPANY)
a.
b.
c.
d.
e.
f.
g.
2-5.
83,850
Reversing entries at January 1, 2013

c.
Interest revenue
Interest receivable
d.
2-4.
80,000
3,850
Amount of
Adjustment
16,800
6,750
60,000
20,000
58,000
108,000
20,000
Salaries Payable
Interest Payable
Advertising Payable
Accumulated Depreciation
Office Supplies
Unearned Plumbing Revenue
Prepaid Insurance
(SNAKE COMPANY)
a.
a.
Financial assets at FVPL
Unrealized gain on FVPL
b.
d.
Operating expenses
Prepaid expenses
Req. bal in prepaid expenses:
144,000 x 4/12
48,000
Office supplies on hand 39,000
Store supplies on hand
23,000
Total
110,000
Reported amount
125,200
Req. decrease in PE
15,200
Operating expenses
Amount that would appear

in Statement of FP
16,800
6,750
60,000
30,000
28,000
36,000
40,000
13,000
13,000
15,200
15,200
156,000
156,000

e.
No entry required. The required balance in accrued interest is

P22,500, computed as 200,000 x 15% x 9/12. This amount is
already included in the Trade and Other Payables balance.
g.
Rent revenue
Required balance in unearned rent
192,000 x 9/12
142,000
Reported balance
80,000
Required increase
62,000
62,000
Insurance expense
Prepaid insurance
84,000 + 37,500 96,000
25,500
133,050 + 8,850 127,800
14,100
Unearned rent
Rent revenue
55,000 + 45,000 75,000
25,000
62,000
2-6.
a.
b.
c.
d.
25,500
14,100
Salaries payable
Salary expense
21,430 17,380
25,000
4,050
4,050
2-7
a.
P1,200,000
Same as given total. The transaction will increase office supplies

and decrease cash whose balances are both reflected in total
debit amount.
b.
P698,000
Accounts Payable
R. Abbit, Capital
Interest Payable
Accumulated Depreciation
Notes Payable
Salaries Payable
TOTAL
157,000
200,000
5,000
20,000
220,000
96,000
698,000
c.
P2,220,000
Accounts Payable
Accumulated Depreciation (810,000+27,000)
B. Ox, Capital (1,100,000+410,000-15,00027,000-190,000)
TOTAL
245,000
837,000
1,138,000
2,220,000
d.
P744,000
729,000 + 15,000 = 744,000; The use of P12,000 office

supplies does not affect the trial balance total.
e.
P243,500
Total debits is P243,500 consisting of CashP48,000; Accounts

receivableP27,500; Prepaid insurance P8,000; Equipment
P80,000; Salaries expenseP42,000; Advertising expense
P14,000; Property tax expenseP9,000; and Hoe Rose,
Drawing P15,000.
Total credits is P243,500 consisting of Accounts payable
P44,000; Property tax payableP5,600; Service revenue
P66,900; and Hoe Rose, Capital P127,000.

MULTIPLE CHOICE QUESTIONS
Theory
MC1
MC2
MC3
MC4
MC5
MC6
MC7
MC8
MC9
MC10
C
D
D
A
A
B
C
B
D
D
MC11
MC12
MC13
MC14
MC15
MC16
MC17
MC18
MC19
MC20
C
A
B
C
B
B
C
D
B
A
Problems
MC21
MC22
MC23
MC24
MC25
MC26
MC27
MC28
MC29
MC30
MC31
MC32
MC33
MC34
MC35
MC36
B
B
A
D
C
A
C
D
MC37
MC38
MC39
A
B
MC40
MC41
MC46
B
C
C
A
B
A
C
B
A
A
16,000 + 29,000 21,000 = 24,000

122,500 + 437,500 105,000 = 455,000
990,000 + 50,000 60,000 = 980,000
400,000 + (15% x 3.0M) = 850,000
36,000 x 34/36 = 34,000; 44,100 33,100 = 11,000
60,000 17,000 = 43,000
12,350 - 1,850 + 5,300 = 15,800
P0. The post-closing trial balance includes real accounts only.
24,900 - 4,500 + 3,600 = 24,000
(14,400 x 5/12) + 9,600 + (11,200 x 12/16) = 24,000
30,000 + 45,000 + 20,000 = 95,000
144,000 95,000 = 49,000
36,000 x 4/12 = 12,000
1,337,100 + 274,000 120,000 + 67,000 = 1,558,100
or 1,684,000 274,000 + 120,000 + 80,100 52,000 = 1,558,100
(7,200 X 21/24) + (3,600 X 2/6) + (24,000 X 27/36) = 25,500 28,200 =
2,700 Decrease
45,000 x 10% x 30/360 = 375
(27,000 x 3/12) + (22,200 x 6/12) + (28,800 x 9/12) + (10,700 x 12/12) =
60,150 56,250 = 3,900 Increase
11,250 x 2/5 = 4,500
117,000 (108,000 9,000) = 18,000
117,000 (108,000 9,000) = 18,000; 18,000 9,000 = 9,000

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CHAPTER 2

REVIEW OF THE ACCOUNTING PROCESS

Uncollectible accounts expense

Reversing entries at January 1, 2013

Chapter 2 Review of the Accounting Process

Uncollectible accounts expense

Prepaid travel expense (or Prepaid expense)

Income tax expense

Chapter 2 Review of the Accounting Process

Closing entries (partial)

Unearned rent revenue

Reversing entries at January 1, 2013

Amount that would appear

Chapter 2 Review of the Accounting Process

No entry required. The required balance in accrued interest is

Same as given total. The transaction will increase office supplies

729,000 + 15,000 = 744,000; The use of P12,000 office

Total debits is P243,500 consisting of CashP48,000; Accounts

Chapter 2 Review of the Accounting Process

16,000 + 29,000 21,000 = 24,000

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