BA 99.1 EXERCISES: CONCEPTUAL FRAMEWORK AND ACCOUNTING PRINCIPLES
THEORY
1. Statement 1: Accounting refers only to the recording, classifying, and summarizing of
transactions.
Statement 2: Bookkeeping refers only to the recording, classifying, and summarizing of
transactions.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. All statements are true.
d. All statements are false.
2. Information is _________________ when it has predictive or confirmatory value.
a. Relevant
b. Reliable
c. Comparable
d. Timely
3. Which assumption in financial reporting requires that only transactions that can be
expressed in money terms are recorded?
a. Time period assumption
b. Going concern assumption
c. Monetary unit assumption
d. Economic entity assumption
4. An increase in a liability has a corresponding
a. Increase in equity.
b. Increase in expense.
c. Increase in revenue.
d. Increase in another liability.
5. ___________________________ presents assets, liabilities, and equity at a specific date.
a. Statement of cash flows.
b. Statement of changes in owner’s equity
c. Profit and loss statement
d. Statement of financial position
PROBLEM SOLVING
BE1.1 modified (Weygandt et al., 2019)
Presented below is the basic accounting equation. Determine the missing amounts.
a.
b.
c.
Assets
=
P 90,000
?
P 94,000
Liabilities
P 50,000
P 44,000
?
+
Equity
?
P 70,000
P 53,000
BA 99.1 EXERCISES: CONCEPTUAL FRAMEWORK AND ACCOUNTING PRINCIPLES
BE1.3 modified (Weygandt et al., 2019)
At the beginning of the year, Gilles Plumbers had total assets P 800,000 and total liabilities of
P300,000. Answer the following questions.
a. If total assets increased P 150,000 during the year and total liabilities decreased P60,000,
what is the amount of equity at the end of the year?
b. During the year, total liabilities increased P 100,000 and equity decreased P 70,000. What is
the amount of total assets at the end of the year?
c. If total assets decreased P 80,000 and equity increased P 120,000 during the year, what is
the amount of total liabilities at the end of the year?
BE1.4 modified (Weygandt et al., 2019)
Use the expanded accounting equation to answer each of the following questions.
a. The liabilities of Kumar Company are P 90,000. Owner’s capital is P 150,000; drawings are
P40,000; revenues, P 450,000; and expenses P340,000. What is the amount of Kumar’s total
assets?
b. The total assets of Kalim Company are P 57,000. Owner’s capital is P 35,000; drawings are P
7,000; revenues, P 52,000; and expenses P 35,000. What is the amount of the company’s
total liabilities?
c. The total assets of Siram Co. are P 60,000 and its liabilities are equal to two-thirds of its total
assets. What is the amount of Siram Co.’s owner’s equity?
E1.12 (Weygandt et al., 2019)
The following information relates to Karen Weigel Co. for the year 2020.
Owner’s capital, January 1,
2020
Owner’s drawings during 2020
Service revenue
Salaries and wages expense
P 42,000
6,000
63,600
30,200
Advertising expense
Rent expense
Utilities expense
P 1,800
10,400
3,100
Required: After analyzing the data, prepare an income statement and an owner’s equity statement
for the year ending December 31, 2020.
P1.1 modified (Weygandt et al., 2019)
On April 1, July Chen established Miaoli’s Travel Agency. The following transactions were completed
during the month.
1.
2.
3.
4.
5.
6.
Invested P 15,000 cash to start the agency.
Paid P 600 cash for April office rent.
Purchased equipment for P 3,000 cash.
Incurred P 700 of advertising costs for Facebook ads, on account.
Paid P 900 cash for office supplies.
Performed services worth P 10,000. P 3,000 cash is received from customers, and the
balance of P 7,000 is billed to customers on account.
7. Withdrew P 600 cash for personal use.
8. Paid Facebook P 500 of the amount due in transaction (4)
BA 99.1 EXERCISES: CONCEPTUAL FRAMEWORK AND ACCOUNTING PRINCIPLES
9. Paid employees’ salaries P 2,500
10. Purchased travel bags using cash in transaction (7)
11. Received P 4,000 in cash from customers who have previously been billed in transaction (6)
12. Borrowed P 5,000 from the local bank
Required:
a. Prepare a tabular analysis of the transaction using the format below.
#
ASSETS
Cash
Accounts
Receivable
Supplies
LIABILITIES
Equipment
Accounts
Payable
Notes
Payable
EQUITY
Owner’s
Capital
Owner’s
Drawings
Revenue
1.
b. Prepare an income statement for the period ended April 30, 2021 using the following
accounts: Service Revenue, Advertising Expense, Rent Expense, Salaries and Wages Expense.
c. Prepare a statement of changes in equity for the period ended April 30, 2021.
d. Prepare a statement of financial position as of April 30, 2021.
P1.5 modified (Weygandt, 2019) Financial statement information about four different companies is
as follows:
Alpha
Company
January 1, 2020
Assets
Liabilities
Owner’s Equity
December 31, 2020
Assets
Liabilities
Owner’s Equity
Owner’s Equity changes in
year
Additional investment
Drawings
Total revenues
Total expenses
Beta
Company
Psi
Company
Omega
Company
P 80,000
41,000
(a)
P 90,000
(d)
40,000
P
(g)
80,000
49,000
P 150,000
(j)
90,000
(b)
60,000
50,000
112,000
72,000
(e)
170,000
(h)
82,000
(k)
100,000
151,000
(c)
15,000
350,000
333,000
8,000
(f)
410,000
385,000
10,000
12,000
(i)
350,000
15,000
10,000
500,000
(l)
Requirement: Determine the missing amounts
Expenses