Chapter 3 Exercises and Problems Answers
Chapter 3 Exercises and Problems Answers
Chapter 3 Exercises and Problems Answers
Corrrection please: Ex 19 g should read: On Jan 20, the owner purchased a computer worth P50,000. He
got it for P40,000……
Exercises
1. Coca Cola Liabilities $65.27
PepsiCo Assets $78.15
Dr. Pepper OE $ 23.36
Carlsberg OE $ 6.39 Equity
$ 12.07 Liability
Dr.Pepper has the highest net worth.
2. Coca Cola 24.43%
Pepsico 18.93%
Dr Pepper 46.97%
Carlsberg 34.62%
Dr.Pepper is most solvent
5. Financial Position:
Cash P 60,000 Accounts Payable P100,000
Accounts Receivable 10,000 Note Payable 250,000
Equipment (500-120) 380,000
Car 120,000 Blu, Capital ?220,000
P570,000 P570,000
8. Total assets and liabilities will both increase by P50,000. No change in owner’s equity.
9. Assets and liabilities will both decrease by P40,000 but no effect on owner’s equity.
11.
A L OE
A +500,000 NA +500,000
B NA NA NA
C NA NA NA
D -350,000 NA NA
+350,000
E +125,000 +125,000 NA
f) -62,500 - 62,500 NA
g) -5,000 NA NA
3
+5,000
12. a) Transaction b) car is not for the business and c) has no exchange of value yet.
b) Transactions e) and f) following entity principle since this is a business liability.
c) Yes, also following the entity principle since the cash withdrawn belongs to the business and the owner
took it and bought supplies for the business. If supplies is intended for personal use, then the analysis will
be: -asset cash and – owner’equity April, Drawings
13.
Cash Office Office Furniture & Accounts Notes Vera,
Supplies Equipment Fixtures Payable Payable Capital
A P 105,000 P+ 15,000 + P 95,000 + P215,000
B - 25,000 + 50,000 25,000
C -1,500 +1,500
D - 750 -750
E -15,000 -15,000
F +100,000 +100,000
163,500 750 65,000 95,000 10,000 100,000 214,250
14.
Date Cash Furniture Equipment Supplies Leasehold Imp Prepaid Rent Notes Pay De Jesus Cap
1) 350,000 350,000
10) (10,000) 10,000
15) (15,000) 15,000
(8,000) 8,000
(45,000) 45,000
20) (1,500) 1,500
25) (150,000) 300,000 150,000
4
Furn. Accts Notes Loans Valdez,
Date Cash Supplies Lot & Fix. Bldg. Equipt Payable Payable Payable Capital
June 4 1,500,000 250,000 1,750,000
8 ( 915,000) 15,000 900,000
10 80,000 80,000
14 (2,000) ( 2,000)
15 2,500,000 2,500,000
17 ( 40,000) (40,000)
30 (500,000) 2,400,000 1,900,000
2,545,000 13,000 250,000 80,000 2,400,000 900,000 40,000 1,900,000 2,500,000 1,748,000
18. a. Relevance and materiality prescribe that information must be pertinent and useful to statement users.
The waste basket, brooms, etc. should be immediately expensed as the amounts are not material to
warrant recognition as assets.
b. Understandability and disclosure prescribe that information must be presented in such a way that users
will be informed properly and completely so as to be able to come up with a correct judgment. Details
of the assets and liabilities should be disclosed either within the income statement or as footnotes.
c. Representational faithfulness dictates that this be recorded as owner’s drawing not business asset.
d. Relevance and timeliness
e. Understandability .
f. Comparability show figures also for the previous period to determine trend or progress
g. Faithful representation, it does not represent what it purports to be
h. Neutrality is complied
i. Verifiability
19. a. Only business transactions under the Entity Principle should be recognized as assets of the business.
b. Unit of measure should be consistent expressed in Philippine peso.
c. Time Period assumption & IAS1 prescribes preparation of FS annually.
d. Entity prescribes separate financial statements. Or if combined, use segment reporting.
e. Materiality is violated.
f. Accrual is violated. Accrual relates to the time assets, liabilities, revenues and expenses must be
recognized and recorded.
g. Objectivity is violated. Also an illegal practice as purchases should be supported by seller’s invoice or
OR.
5
Numbers 18 and 19 are suggested answers.
6
Problems
7
Green Golf Lane
Statement of Financial Position
As of the date ended March 31, 2019
Assets Liabilities & Owner’s Equity
Cash P 95,000 Loans Payable P 250,000
Equipment 215,000
Furniture & Fixtures 190,000 Ocampo, Capital ___750,00
Lease Right 500,000
Total P1,000,000 Total P1,000,000
6.
Bersoza Playhouse
Statement of Financial Position
As of the date ended Sept 30, 2018
Cash P16,900 Accounts Payable 19,000
Accounts Receivable 7,200 Notes Payable 20,000
Props & Costumes 50,000 Salaries Payable 29,200
Theater Building 0 Total Liabilities 68,200
Lighting Equipment 94,000 Bersoza, Capital 99,900
Automobile 0
Total Assets P168,100 Total Liabilities & Capital P168,100
The business is unstable with liabilities of P68,200 vs. cash of P16,900 only plus receivable of P7,200.
Debt ratio (68,200/168,100) x 100= 40.57%, bank will approve the loan
1. P5,000 is personal and should be excluded.
2. P125,000 is a violation of the accrual rule. It cannot be recognized immediately.
3. This should be recognized in full with a corresponding liability for the unpaid portion.
4. The P270,000 are expired costs to be recognized as expenses.
5. The automobile should be recognized at the purchase price but excluded since it is not for
business.
6. Personal liability should be excluded.
7. a. substance over form is violated b. comparability and consistency is violated
c. reliability is violated d. reliability is violated, prudence dictates that liability should be
recognized.
8. a. cost principle is violated in the second purchase. Should be 750,000 not the installment price of P800,000.
Cost means the price at date exchange took place.
b. Yes, following objectivity.
c. Yes, following unit of measure, all values should use one unit of measurement.
d. Yes, following the entity concept.
e. Yes, following cost and unit of measure principles. These information are not measurable values.