PROBLEM

1. Selected accounts from the ledger of Phillips Company appear below. For each account, indicate the
following:

(a) In the first column at the right, indicate the nature of each account, using the
following abbreviations:

Asset - A Revenue - R
Liability - L Expense - E
None of the above - N

(b) In the second column, indicate the increase side of each account by inserting Dr. or
Cr.

Type of Increase
Account Account Side
(1) Supplies A Dr.
(2) Notes Receivable L Cr.
(3) Fees Earned R Cr.
(4) Drawings R Dr.
(5) Accounts Payable L Cr.
(6) Salaries Expense E Dr.
(7) Capital R Cr.
(8) Accounts Receivable A Dr.
(9) Equipment A Dr.
(10) Notes Payable L Cr.

2. Calculate the following.

(a) Determine the cash receipts for June based on the following data:
Cash payments during June P52,500
Cash account balance, June 1 5,750
Cash account balance, June 30 6,250
= 64,500
(b) Determine the cash received from customers on account during June based on the
following data:
Accounts receivable account balance, June 1 P12,100
Accounts receivable account balance, June 30 10,000
Fees billed to customers during June 30,000
= 52,100
3. Increases and decreases in various types of accounts are listed below. In each case, indicate by "Dr." or
"Cr." (a) whether the change in the account would be recorded as a debit or a credit and (b) whether the
normal balance of the account is a debit or a credit.

(a) (b)
Recorded Normal
As Balance
(1) Increase in Capital Credit Credit
 (2) Increase in Drawings Debit Debit
(3) Decrease in Accounts Receivable Credit Debit
(4) Increase in Note Payable Credit Credit
(5) Increase in Accounts Payable Credit Credit
(6) Decrease in Supplies Credit Debit
(7) Decrease in Salaries Expense Credit Debit
(8) Increase in Accounts Receivable Debit Debit
(9) Increase in Cash Debit Debit
(10) Decrease in Land Credit Debit

4. All nine transactions for Homes Realty, Inc. for June, the first month of operations, are recorded in the
following T accounts:

Exhibit 2-1.

Cash HR, Capital

(1) 20,000 | (3) 7,500 | (1) 20,000
(7) 6,900 | (5) 2,600 |
(9) 4,700 | (6) 5,500
| (8) 2,000

Accounts Receivable HR, Drawings

(4) 4,900 | (9) 4,700 (8) 2,000 |
| |

Supplies Fees Earned

(3) 7,500 | | (4) 4,900
| | (7) 6,900

Equipment Operating Expense

(2) 4,500 | (6) 5,500 |
| |

Accounts Payable
(5) 2,600 | (2) 4,500
|

Refer to Exhibit 2-1. Indicate the following for each debit and each credit:

(a) The type of account affected (asset, liability, Owner’s equity, drawings, revenue, or
expense).

(b) The effect on the account, using + for increase and - for decrease.
 Present your answers in the following form:

Account Debited Accounted Credited

Transaction Type Effect Type Effect

Refer to Exhibit 2-1. Prepare a trial balance, listing the accounts in their proper order.

5. Record the following selected transactions for March in a two-column journal, identifying each entry by
letter:

(a) Received P10,000 from Swinging Gates, the owner.

(b) Purchased equipment for P35,000, paying P10,000 in cash and giving a note
payable for the remainder.
(c) Paid P1,000 for rent for March.
(d) Purchased P8,500 of supplies on account.
(e) Recorded P2,500 of fees earned on account.
(f) Received P11,000 in cash for fees earned.
(g) Paid P200 to creditors on account.
(h) Paid wages of P1,250.
(i) Received P1,150 from customers on account.
(j) Recorded drawings of P1,850.

6. Set up T accounts for Cash; Accounts Receivable; Supplies; Accounts Payable; Capital; Drawing;
Professional Fees; and Operating Expenses.

(a) In the T accounts, record the following transactions of Bytes Consultant Services,
Inc. for May, identifying each entry by number:

(1) Stockholders invested P12,000 cash in the business.

(2) Purchased supplies on account, P5,750.
(3) Paid operating expenses, P5,000.
(4) Billed clients for fees, P6,940.
(5) Received cash from cash clients, P4,200.
(6) Paid creditors on account, P1,000.
(7) Received P2,600 from clients on account.
(8) Paid Dividends P1,000 cash.

(b) Prepare a trial balance as of May 31 for Bytes Consultant Services, Inc.

(c) Assuming that supplies expense (which has not been recorded) amounts to P1,000
for May, determine the following:

(1) Net income for the month.

(2) Capital as of May 31.