CHAPTER 36
SINGLE ENTRY
Basic Problems
Problem 36-1 (IAA)
Console Company reported capital at P1,700,000 on January 1 and P2,400,000 on December 31.
During the current year, the owner withdrew merchandise with a carrying amount of P100,000 and sales
value of P180,000.
The owner also paid a P1,000,000 note payable of the business with interest of 12% for six months with a
check drawn on a personal checking account.
What is the net income or loss for the current year?
a.
b.
c.
d.
260,000
260,000
180,000
180,000
income
loss
income
loss
Solution 36-1 Answer b
Capital – December 31
Add: Withdrawals- merchandise at carrying amount
Total
Less: Capital – January 1
Additional investment
2,400,000
100,000
1,700,000
1,060,000
Net Loss
2,500,000
2,760,000
(260,000)
The additional investment is determined as follows:
Payment of note payable out of personal checking account
Interest (1,000,000 x 12% x 6/12)
1,000,000
60,000
Total
1,600,000
Problem 36-2 (AICPA Adapted)
On December 31, 2018, Melissa Company showed shareholders’ equity of P5,000,000.
The share capital of P3,000,000 remained unchanged during the year.
Transactions during the year which affected the equity were:




An adjustment of retained earnings for 2017 overdepreciation
Gain on sale of treasury shares
Dividend declared, of which P400,000 was paid
Net income for 2018
100,000
300,000
600,000
800,000
What is the balance of retained earnings on January 1, 2018?
a.
b.
c.
d.
1,400,000
1,700,000
1,200,000
1,600,000
Solution 36-2 Answer a
Retained earnings – January 1 (SQUEEZE)
Net income
Prior period error of 2017 overdepreciation
1,400,000
800,000
100,000
Total
Dividends declared
2,300,000
(600,000)
Retained earnings - December 31
1,700,000
The beginning balance of retained earnings is “squeezed” by working back from the ending balance.
Total shareholders’ equity
Less: Share capital
Share premium from treasury shares
3,000,000
300,000
Retained earnings – December 31
5,000,000
3,300,000
1,700,000
Problem 36-3 (IAA)
Aubrey Company provided the following data at year-end:
Share capital, P100 par value
Share premium
Retained Earnings
2017
2018
5,000,000
1,500,000
3,000,000
5,500,000
2,500,000
4,500,000
During 2018, the entity declared and paid cash dividend of P1,000,000 and also declared and issued a share
dividend.
There were no other changes in equity during 2018.
What is the net income for 2018?
a.
b.
c.
d.
3,000,000
2,500,000
1,000,000
4,000,000
Solution 36-3 Answer d
Increase in share capital
Increase in share premium
Share dividend
(5,500,000 – 5,000,000)
(2,500,000 – 1,500,000)
500,000
1,000,000
1,500,000
Retained earnings – December 31, 2018
Share Dividend
Cash Dividend
4,500,000
1,500,000
1,000,000
Total
Retained earnings – December 31, 2017
7,000,000
(3,000,000)
Net Income for 2018
4,000,000
Problem 36-4 (IAA)
Trend Company provided the following information for the current year:
Net Loss
Total assets on December 31
Share capital on December 31
Share premium
Dividends declared
Debt-to-equity ratio (liabilities dividend by equity)
100,000
3,000,000
1,000,000
500,000
700,000
50%
What amount of retained earnings was reported on January 1?
a.
b.
c.
d.
1,100,000
1,300,000
500,000
600,000
Solution 36-4 Answer b
Shareholders’ equity (3,000,000 / 150%)
Contributed capital
2,000,000
(1,500,000)
Retained earnings – December 31
500,000
Share Capital
Share Premium
Contributed Capital
1,000,000
500,000
1,500,000
Total Liabilities
Shareholder’s equity
1,000,000
2,000,000
50%
100%
Total Assets
3,000,000
150%
Retained earnings – January 1 (SQUEEZE)
Net Loss
Dividends declared
1,300,000
( 100,000)
( 700,000)
Retained earnings – December 31
500,000
Problem 36-5 (AICPA Adapted)
Vela Company reported the following increases in accout balances during the current year:
Asset
8,900,000
Liabilities
Share capital
Share premium
2,700,000
6,000,000
600,000
Except for a P1,300,000 dividend payment and the year’s earnings, there were no changes in retained
earnings for the year.
What is the net income for the current year?
a.
b.
c.
d.
400,000
900,000
1,300,000
1,700,000
Solution 36-4 Answer b
Effect on Equity
8,900,000
(2,700,000)
6,200,000
1,300,000
Increase in assets
Increase in liabilities
Net Increase in equity
Add: Dividend
Total
7,500,000
Less: Increase in share capital
Increase in share premium
6,000,000
600,000
Net Income
6,600,000
900,000
Increase in asset will increase equity and decrease in asset will decrease equity.
Increase in liability will decrease equity and decrease in liability will increase equity.
Problem 36-6 (IAA)
Easy Company reported beginning and ending total liabilities at P840,000 and P1,000,000, respectively.
At year-end, owner’s equity was P2,600,000 and total assets were P200,000 larger than at the beginning of
the year.
The new share capital issued exceeded dividends paid by P240,000.
What is the net income or loss for the year?
a.
b.
c.
d.
280,000 income
280,000 loss
200,000 loss
40,000 income
Solution 36-6 Answer c
Increase in assets
Increase in liabilities (1,000,000 – 840,000)
Increase in owners’ equity
200,000
(160,000)
40,000
Excess of share capital issued over dividends paid
(240,000)
Net Loss
(200,000)
Problem 36-7 (IAA)
Sunshine Company had total assets of P4,000,000 and shareholders’ equity of P2,000,000 at the beginning
of the year.
During the year, assets increased by P500,000 and liabilities decreased by P800,000.
What is the shareholders’ equity at the end of the year?
a.
b.
c.
d.
3,300,000
2,300,000
1,000,000
1,300,000
Solution 36-7 Answer a
Increase in assets
Decrease in liabilities
Effect on equity
500,000
800,000
Net increase in equity
Shareholders’ equity – beginning
1,300,000
2,000,000
Shareholders’ equity – ending
3,300,000
Problem 36-8 (IAA)
On January 1, Racel Company showed total assets of P5,000,000, total liabilities of P2,000,000 and
contributed capital of P2,000,000.
During the current year, the entity issued share capital of P500,000 par value at a premium of P300,000.
Dividend of P250,000 was paid on December 31.
On December 31, total assets amounted to P7,500,000 and total liabilities amounted to P3,200,000.
What is the net income for the current year?
a.
b.
c.
d.
1,750,000
1,000,000
750,000
500,000
Solution 36-8 Answer c
Total assets
Total liabilities
January 1
5,000,000
2,000,000
December 31
7,500,000
3,200,000
Equity
3,000,000
4,300,000
Increase in equity
Dividend paid
(4,300,000 – 3,000,000)
Total
Issue price of share capital at a premium
1,300,000
250,000
1,550,000
( 800,000)
Net Income
750,000
Share capital at par
Share Premium
500,000
300,000
Total issue price
800,000
CHAPTER 37
SINGLE ENTRY
Comprehensive Problems
Problem 37-1 (IAA)
Isabel Company disclosed the following changes:
Cash
Accounts Receivable
Merchandise Inventory
Accounts Payable
480,000 decrease
300,000 increase
3,100,000 increase
420,000 increase
During the year, the owner borrowed P4,000,000 from the bank and paid off of P3,000,000 and interest of
P240,000. Interest of P100,000 is accrued on December 31. There was no interest payable at the beginning
of the year.
In the current year, the owner transferred certain trading securities to the business and these were sold for
P1,500,000 to finance purchase of merchandise. The owner made weekly withdrawals of P10,000.
What is the net income for the current year?
a.
b.
c.
d.
1,520,000
1,920,000
1,400,000
420,000
Solution 37-1 Answer d
Decrease in Cash
Increase in Accounts Receivable
Increase in Inventory
Increase in Accounts Payable
Increase in Loan Payable (4,000,000 – 3,000,000)
Increase in Accrued Interest Payable
Net increase in equity
(3,400,000 – 2,000,000)
Withdrawals (10,000 x 52 weeks)
Additional investments (sale of securities)
Net Income
Effect on equity
Increase
Decrease
480,000
300,000
3,100,000
420,000
1,000,000
100,000
3,400,000
2,000,000
1,400,000
520,000
(1,500,000)
420,000
Problem 37-2 (PHILCPAAdapted)
Camadillo Company reported the following changes in all the account balances for the current year, except
for retained earnings:
Increase
(Decrease)
Cash
800,000
Accounts Receivable, net
250,000
Inventory
1,250,000
Investments
Accounts Payable
Bonds Payable
Share Capital
Share Premium
( 500,000)
( 400,000)
900,000
1,000,000
100,000
There were no entries in the retained earnings account except for net income and a dividend declaration of
P300,000 which was paid in the current year
What is the net income for the current year?
a.
b.
c.
d.
1,300,000
1,600,000
500,000
200,000
Solution 37-2 Answer c
Effect on Equity
800,000
250,000
1,250,000
( 500,000)
400,000
( 900,000)
Increase in cash
Increase in accounts receivable
Increase in inventory
Decrease in investments
Decrease in accounts payable
Increase in bonds payable
Net increase in equity
Add: Dividend declared
1,300,000
300,000
Total
1,600,000
Less: Increase in share capital
Increase in share premium
1,000,000
100,000
Net Income
1,100,000
500,000
Problem 37-3 (IAA)
Java Company reported the following increases (decreases) in the accounts for the current year:
Cash
Accounts Receivable (net)
Inventory
Investments
Equipment
Accounts Payable
Bonds Payable
1,500,000
3,500,000
3,900,000
(1,000,000)
3,000,000
(800,000)
2,000,000
During the year, the entity sold 100,000 shares with P20 par value for P30 per share and received cash in
full.
Dividend of P1,500,000 was paid in cash during the year.
Equipment with fair value of P2,000,000 was donated by a shareholder during the year.
What is the net income for the current year?
a.
b.
c.
d.
6,200,000
9,700,000
8,200,000
7,700,000
Solution 37-3 Answer a
Effect on equity
Increase in cash
Increase in accounts receivable
Increase in inventory
Decrease in investments
Increase in equipment
Decrease in accounts payable
Increase in bonds payable
Net increase in equity
Add: Dividend paid
Total
Less: Increase in contributed capital
(100,000 x 30)
Increase in donated capital
Net Income
1,500,000
3,500,000
3,900,000
(1,000,000)
3,000,000
800,000
(2,000,000)
9,700,000
1,500,000
11,200,000
3,000,000
2,000,000.
5,000,000
6,200,000
Problem 37-4 (IAA)
At the beginning of current year, Crispin Santos started a retail merchandise business.
During the year, the entity paid trade creditors P2,000,000 and suffered a net loss of P350,000.
The ledger account preclosing balances at year-end included the following:
Accounts receivable
Accounts payable
Capital – total investment in cash
Expenses paid in cash
Merchandise account with unadjusted debit balance
600,000
750,000
2,000,000
100,000
700,000
All sales and purchases were on credit. The merchandise account is debited for purchases and credited for
sales.
1.
What is the amount of purchases for the year?
a.
b.
c.
d.
2.
2,000,000
2,750,000
1,250,000
2,050,000
What is the amount of sales for the year?
a.
b.
c.
2,750,000
2,050,000
2,650,000
d.
3.
What is the cash balance on December 31?
a.
b.
c.
d.
4.
700,000
1,350,000
2,000,000
1,450,000
3,450,000
What is the merchandise inventory on December 31?
a.
b.
c.
d.
700,000
450,000
750,000
0
Solution 37-4
Question 1 Answer b
Question 2 Answer b
Accounts payable – December 31
Payments to trade creditors
750,000
2,000,000
Total Purchases
Less: Unadjusted debit balance of merchandise account
2,750,000
700,000
Sales
2,050,000
Question 3 Answer a
Cash – January 1 (Investment)
Collections of AR (2,050,000 – 600,000)
Total
Less: Payment of Account Payable
Payment of expenses
2,000,000
1,450,000
2,000,000
100,000
Cash – December 31
3,450,000
2,100,000
1,350,000
Question 4 Answer b
Sales
Cost of Sales
Purchases
Merchandise Inventory – 12/31 (squeeze)
2,050,000
2,750,000
( 450,000)
2,300,000
Gross Loss
Expenses
( 250,000)
( 100,000)
Net Loss
( 350,000)
The ending merchandise inventory is “squeezed” by working back from net loss of P350,000.
Problem 37-5
At the beginning of current year, Complex Company started business and issued share capital, 60,000
shares with P100 par, for the following considerations:
Cash
Building with useful life of 15 years
Land
500,000
4,500,000
1,500,000
6,500,000
An analysis of the bank statements showed total deposits, including the original cash investment, of
P3,500,000.
The balance in the bank statement on December 31 was P250,000 but there were checks amounting to
P50,000 dated in December but not paid by the bank until January of next year.
Cash on hand on December 31 was P125,000 including customers' deposit of P75,000.
During the year, the entity borrowed P500,000 from the bank and repaid P125,000 and P25,000
interest.The proceeds of the loan were credited to the bank account of the entity.
Disbursements paid in cash during the year were:
Utilities
Salaries
Supplies
Taxes
Dividends
100,000
100,000
175,000
25,000
150,000
550,000
An inventory of merchandise taken on December 31 showed P755,000 of merchandise.
Tickets for accounts receivable totaled P900,000 but P50,000 of that amount may prove uncollectible.
Unpaid suppliers invoices for merchandise amounted to P350,000.
Equipment with a cash price of P400,000 was purchased in early January on a one-year installment basis.
During the year, checks for the downpayment and all maturing installments totaled P455,000. The
equipment has a useful life of 5 years.
1. What is the amount of sales for the year?
a.
b.
c.
d.
4,000,000
3,400,000
3,100,000
4,050,000
2. What is the amount of purchases for the year?
a.
b.
c.
d.
3,055,000
2,705,000
2,355,000
3,810,000
3. What is the net income for the year?
a.
b.
c.
d.
800,000
650,000
870,000
850,000
4. What is the amount of total assets on December 31?
a. 7,950,000
b. 7,800,000
c. 8,330,000
d. 8,380,000
5. What is the amount of shareholders' equity on December 31?
a. 7,150,000
b. 7,300,000
c. 6,500,000
d. 6,650,000
Solution 37-5
Question 1 Answer a
Initial cash investment
Proceeds of loan
Collections of accounts receivable (SQUEEZE)
Total Deposits
500,000
500,000
2,500,000
3,500,000
Customers' deposit
Collections of accounts receivable (SQUEEZE)
Total
Disbursements in cash
Cash on hand – December 31
75,000
600,000
675,000
(550,000)
125,000
Accounts Receivable – December 31
Collections deposited
Collections not deposited
Total sales
900,000
2,500,000
600,000
4,000,000
Question 2 Answer a
Total deposits
Total disbursements in check (SQUEEZE)
Adjusted cash in bank – December 31
3,500,000
(3,300,000)
200,000
Cash in bank per book
Outstanding checks
Adjusted cash in bank
250,000
(50,000)
200,000
Payment of loan
Interest on loan
Payment for equipment
125,000
25,000
400,000
Interest on equipment
Payment of accounts payable (SQUEEZE)
Total disbursements in check
45,000
2,705,000
3,300,000
Accounts payable – December 31
Payment of accounts payable
Total purchases
350,000
2,705,000
3,055,000
Question 3 Answer a
Sales
Cost of goods sold:
Purchases
Inventory – December 31
Gross Income
Expenses:
Utilities
Salaries
Supplies
Taxes
Doubtful accounts
Depreciation – building (4,500,000/15)
Depreciation – equipment (400,000/5)
Interest expense (25,000 + 45,000)
Net Income
4,000,000
3,055,000
(755,000)
100,000
100,000
175,000
25,000
50,000
300,000
80,000
70,000
2,300,000
900,000
800,000
Question 4 Answer a
Cash
Accounts Receivable
Allowance for doubtful accounts
Inventory
Land
Building
Accumulated Depreciation – building
Equipment
Accumulated Depreciation – equipment
325,000
900,000
(50,000)
755,000
1,500,000
4,500,000
(300,000)
400,000
(80,000)
Total assets
7,950,000
Cash on hand
Cash in bank
125,000
200,000
Total cash
325,000
Question 5 Answer a
Accounts payable
Loan payable – bank (500,000 – 125,000)
Customers' deposit
350,000
375,000
75,000
Total liabilities – December 31
800,000
Share Capital (60,000 x P100)
Share Premium (6,500,000 – 6,000,000)
Retained Earnings
Total Shareholders' equity – December 31
6,000,000
500,000
650,000
7,150,000
Net Income
Dividends paid
800,000
(150,000)
Retained Earnings
650,000
Liabilities
Shareholders' equity
800,000
7,150,000
Total liabilities and shareholders' equity
7,950,000
Note that the total amount of assets is equal to the total amount of liabilities and shareholders' equity.