Elaine Joyce R.

Garcia BSA 2A

Evsu Cobe, established a shipping business last January 5, 2016 under the trade name Fast and Furious. The
year-end balance sheet of the company is presented below:

Fast and Furious

Statement of Financial Position
As of December 31, 2016

Assets
Current Assets
Cash P450,000
Accounts Receivable 306,500
Notes Receivable 58,700
Fuel and oil supplies 90,600
Prepaid Insurance 45,000
Total Current Assets 950,800
Noncurrent Assets
Land 1,500,380
Building 800,000
Accumulated Depreciation – building (40,000) 760,000
Office Equipment 250,400
Accumulated Depreciation – office equipment (25,040) 225,360
Transportation Equipment 1,500,000
Accumulated Depreciation – transportation equipment (100,000) 1,400,000
Total Noncurrent Assets 3,885,740
Total Assets P4,836,540
Liabilities
Current Liabilities
Accounts Payable P560,800
Salaries Payable 45,700
Utilities Payable 15,000
Notes Payable 1,670,800
Total Current Liabilities 2,292,300
Noncurrent Liabilities
Bonds Payable 1,200,000
Total Liabilities 3.492,300
Owner’s Equity
Cobe, Capital 1,344,240
Total Liabilities and Owner’s Equity P4,836,540

The transactions during the period is presented below:

2017 Transactions
January 5 Acquired transportation equipment amounting to P400,500 on account.
February 5 Rendered services for cash amounting to P800,760.
March 23 Paid salaries amounting P50,000.
April 15 Paid utilities amounting P25,000.
September 14 Rendered services on account amounting to P659,450.
October 24 The owner withdraw cash from the business amounting to P130,780
November 1 Collected 50% of the receivable from September 14 transaction.
December 12 Received cash from a customer as advance payment amounting to, P60,000.
December 24 The owner made an additional investment of P2,500,000 cash to the business.
December 27 Paid the liability arising from January 5 transaction.
The owner strictly commands that no other accounts should be used except those provided in their chart of
accounts. The following data presents the Company’s chart of accounts.

Fast and Furious

Chart of Accounts

ASSETS LIABILITIES
110 Cash 210 Accounts Payable
120 Accounts Receivable 220 Notes Payable
125 Allowance for doubtful accounts
130 Notes Receivable 230 Salaries payable
140 Fuel and Oil Supplies 240 Utilities Payable
150 Prepaid Insurance 250 Unearned Service Revenue
160 Land 260 Bonds Payable
170 Building
175 Accumulated depreciation – building OWNER’S EQUITY
180 Office Equipment 310 Cobe, Capital
185 Accumulated depreciation – office 320 Cobe, Drawings
equipment
190 Transportation equipment
195 Accumulated depreciation – transportation INCOME
equipment
410 Service Revenue

EXPENSE
510 Utilities expense
520 Salaries expense
530 Insurance expense
540 Fuel and oil expense
550 Doubtful accounts expense
560 Depreciation expense-building
570 Depreciation expense-office
equipment
580 Depreciation expense-
transportation equipment

REQUIRED:

1. Additional information:
a. The prepaid insurance is good for six (6) years.
b. The unused fuel and oil supplies amounts to P50,400.
c. The management estimates that 5% of the outstanding receivables is doubtful of collection.
d. The building has no residual value and useful life of 20 years. The office equipment has no residual
value and useful life of 10 years. The transportation equipment has residual value of 1/3 of its
acquisition cost and useful life of 10 years.
e. Unpaid salaries at year-end amounts to P23,800.
f. Rendered P36,000 worth of services for the advance payment from the customer.

2. Prepare a Statement of Cash Flows under the direct method and indirect method.
GENERAL JOURNAL
DATE
REF. PARTICULARS DEBIT CREDIT
2017
190 Transportation Equipment 400 500
Jan. 5 210 Accounts Payable 400 500
To record purchase of equipment on account.

110 Cash 800 760

Feb. 5 410 Service Revenue 800 760
To record cash received for service rendered.

520 Salaries Expense 50 000

Mar. 23 110 Cash 50 000
To record payment of salaries.

510 Utilities Expense 25 000

Apr. 15 110 Cash 25 000
To record payment of utilities.

120 Accounts Receivable 659 450

Sept. 14 410 Service Revenue 659 450
To record service rendered on account.

320 Cobe, Drawings 130 780

Oct. 24 110 Cash 130 780
To record withdrawal of cash.

110 Cash 329 725

Nov. 1 120 Accounts Receivable 329 725
To record collection of receivables.

110 Cash 60 000

Dec. 12 250 Unearned Service Revenue 60 000
To record advance payment on services rendered.

110 Cash 2 500 000

310 Cobe, Capital 2 500 000
24
To record additional investment.

210 Accounts Payable 400 500

27 110 Cash 400 500
To record payment of payables.

ADJUSTING JOURNAL ENTRIES

DATE
REF. PARTICULARS DEBIT CREDIT
2017
530 Insurance Expense 7 500
Dec. 31 150 Prepaid Insurance 7 500
To record adjustment in insurance.

540 Fuel and Oil Expense 40 200

/ 140 Fuel and Oil Supplies 40 200
To record adjustment in fuel and oil supplies.

550 Doubtful Accounts Expense 31 811.25

/ 125 Allowance for Doubtful Accounts 31 811.25
To record adjustment in accounts receivable.

560 Depreciation Expense - Building 40 000

/ 175 Accumulated Depreciation - Building 40 000
To record the depreciation of building.

/ 570 Depreciation Expense – Office Equipment 25 040

 185 Accumulated Depreciation - Office Equipment 25 040
To record the depreciation of office equipment.

580 Depreciation Expense – Transportation Equipment 126 700

195 Accumulated Depreciation - Transportation Equipment 126 700
/
To record the depreciation of transportation
equipment.

520 Salaries Expense 23 800

/ 230 Salaries Payable 23 800
To record unpaid salaries.

250 Unearned Service Revenue 36 000

/ 410 Service Revenue 36 000
To record services rendered.

b.
Fast and Furious
Statement of Cash Flows (Direct)
For year ending December 31, 2017

Cash and cash equivalents – January 1 ₱ 450 000

Net cash provided by operating activities:

Cash received from customers ₱ 1 190 485
Cash paid for salaries ( 50 000)
Cash paid for utilities ( 25 000)
1 115 485

Net cash used in investing activities:

Cash paid for transportation equipment (400 500)
(400 500)

Net cash provided by financing activities:

Cash withdrawn by owner (130 780)
Cash invested by owner 2 500 000
2 369 220

Cash and cash equivalents – December 31 ₱ 3 543 205

 Fast and Furious
Statement of Cash Flows (Indirect)
For year ending December 31, 2017

Cash Flow from Operationg Activities

Net Income for the year ₱ 1 226 158.75
Adjustment for:
Depreciation 91 740
Provision for losses on Accounts Receivable 31 811.25
Operating Income before working capital changes ₱ 1 349 710.00
Increase in Accounts Receivable 329 725
Decrease in Fuel and Oil Supplies 40 200
Decrease in Prepaid Insurance 7 500
Increase in Salaries Payable 23 800
Increase in Unearned Service Revenue 24 000
Net cash provided in Operating Activities 234 225

Cash Flow from Investing Activities

Acquisition of transportation equipment (400 500)
Net cash used in Investing Activities 400 500

Cash Flow from Financing Activities

Investment of the owner 2 500 000
Drawings by the owner 130 780
Net cash provided in Operating Activities 2 369 220
Net increase (decrease) in cash 3 084 205
Cash Balance at the beginning of the year 450 000
Cash Balance at the end of the year ₱ 3 534 205