Financial Structure of a Business | Exercises Accounting

Angela De Dios, a business graduate student who was working in Think Computer Company selling all kinds of

computers, decided to become an entrepreneur, and put up an internet shop. The following are the transactions for

the month of March.

01 Angela started an internet shop called “Playnet.Com” by investing her savings of P 50,000 and the

proceeds from the sale of her car of P 300,000.

05 Angela hired two workers to assist her in the shop for a salary of P 3,000 per week.

10 Mr. Lee, the lessor, required Angela to pay for two months’ rent deposit, P 10,000

15 Paid P 15,000 for building materials to fix the shop, P 8,000 for furniture and fixtures, P45,000 for one-unit

of aircon and two units of electric fan

20 Purchased supplies for cash, P 1,500

25 The shop was ready for the installation of the computer units. Angela purchased units of computer hardware

from Think PC. She paid 50% in cash for P 150,000 and a note for the balance payable in 24 monthly

installments starting April 20

REQUIRED:

Analyze the transactions using the following accounts for the assets and liabilities: Cash, Supplies, Rent Deposit,

Furnitures & Fixtures, Equipment, Leasehold Improvement, Notes Payable, and De Dios Capital.

Assets invested by the owner.

01 Angela started an internet shop called “Playnet.Com” by investing her savings of P 50,000 and the

proceeds from the sale of her car of P 300,000.

Analysis: The assets of the business will increase in the form of cash, P 350,00 with a corresponding increase in

owner’s equity.

ASSETS = OWNER’S EQUITY

Cash P 350,000 De Dios, Capital P 350,000

P 350,000 P 350,000

Payment for prepaid expense.

10 Mr. Lee, the lessor, required Angela to pay for two months’ rent deposit, P 10,000

Analysis: The assets of the business will increase in the form of prepaid expense and decrease in the form of cash.

ASSETS = OWNER’S EQUITY

Cash P 340,000 De Dios, Capital P 350,000

Rent Deposit 10,000 ________

P 350,000 P 350,000

Assets purchased for cash.

Paid P 15,000 for building materials to fix the shop, P 8,000 for furniture and fixtures, P45,000 for one-unit

of aircon and two units of electric fan.

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Angela De Dios, a business graduate student who was working in Think Computer Company selling all kinds of computers, decided to become an entrepreneur, and put up an internet shop. The following are the transactions for the month of March. 01 Angela started an internet shop called “Playnet.Com” by investing her savings of P 50,000 and the proceeds from the sale of her car of P 300,000. 05 Angela hired two workers to assist her in the shop for a salary of P 3,000 per week. 10 Mr. Lee, the lessor, required Angela to pay for two months’ rent deposit, P 10, 15 Paid P 15,000 for building materials to fix the shop, P 8,000 for furniture and fixtures, P45,000 for one-unit of aircon and two units of electric fan 20 Purchased supplies for cash, P 1, 25 The shop was ready for the installation of the computer units. Angela purchased units of computer hardware from Think PC. She paid 50% in cash for P 150,000 and a note for the balance payable in 24 monthly installments starting April 20 REQUIRED: Analyze the transactions using the following accounts for the assets and liabilities: Cash, Supplies, Rent Deposit, Furnitures & Fixtures, Equipment, Leasehold Improvement, Notes Payable, and De Dios Capital. Assets invested by the owner. 01 Angela started an internet shop called “Playnet.Com” by investing her savings of P 50,000 and the proceeds from the sale of her car of P 300,000. Analysis: The assets of the business will increase in the form of cash, P 350,00 with a corresponding increase in owner’s equity. ASSETS = OWNER’S EQUITY Cash P 350,000 De Dios, Capital P 350, P 350,000 P 350, Payment for prepaid expense. 10 Mr. Lee, the lessor, required Angela to pay for two months’ rent deposit, P 10, Analysis: The assets of the business will increase in the form of prepaid expense and decrease in the form of cash. ASSETS = OWNER’S EQUITY Cash P 340,000 De Dios, Capital P 350, Rent Deposit 10,000 ________ P 350,000 P 350, Assets purchased for cash. Paid P 15,000 for building materials to fix the shop, P 8,000 for furniture and fixtures, P45,000 for one-unit of aircon and two units of electric fan.

Analysis: The assets of the business will increase in the form of property, plant, and equipment and decrease in the form of cash. ASSETS = OWNER’S EQUITY Cash P 272,000 De Dios, Capital P 350, Rent Deposit 10, Leasehold Improvement 15, Furniture & Fixtures 8, Equipment 45,000 _________ P 350,000 P 350, Asset purchased for cash. 20 Purchased supplies for cash, P 1, Analysis: The assets of the business will increase in the form of supplies and decrease in the form of cash. Total assets will still be the same since there was only a change in its form. ASSETS = OWNER’S EQUITY Cash P 270,500 De Dios, Capital P 350, Rent Deposit 10, Leasehold Improvement 15, Furniture & Fixtures 8, Equipment 45, Supplies 1,500 __________ P 350,000 P 350, Asset purchased for cash and note for the balance payable. 25 The shop was ready for the installation of the computer units. Angela purchased units of computer hardware from Think PC. She paid 50% in cash for P 150,000 and a note for the balance payable in 24 monthly installments starting April 20 Analysis: The assets of the business will increase in the form of equipment with a corresponding decrease in cash and increase in liabilities. ASSETS = LIABILITIES + OWNER’S EQUITY Cash P 120,500 Notes Payable P 150,000 De Dios, Capital P 350, Rent Deposit 10, Leasehold Improvement 15, Furniture & Fixtures 8, Equipment 345, Supplies 1,500 _________ __________ P 500,000 P 150,000 P 350, Required (a) Use the format in Demonstration Problem No. 2 but extract the balances only after the last transaction. From the balances, prove the accounting equation. (b) Prepare a statement of financial position.

Financial Structure of a Business, Exercises of Accounting

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