EXERCISES 1-Introduction To Accounting

EXERCISES:
1. Angie Santos, a native of Cebu, is a graduate of culinary arts and works as a baker in
Chicago, USA. After working for ten years, she was able to save P500,000. She decided
to go back to Cebu and put up her own bake shop called Angie’s Bread, Cakes and
Pastries or simply ABCP.
A. What form of business did she put up?
B. What is the type of operation?
C. Other than profit, explain why people engage in business.
2. Angie Santos, was not contented with the bakeshop. Teaching children was her first love.
She wanted to put up a nursery school as well. She remembered her friend Jean whom she
met in Chicao teaching nursery children. Jean agreed to come home to the Philippines and
put a nursery school with Angie. Unfortunately, they need about P2,000,000.00 to start the
business and both their savings only amounted to P1,000,000.00. Added to this, they know
little about marketing and finance. Beth is a business graduate and knows about marketing
and finance. They asked her to join them and Beth agreed to invest P500,000.00 also.
D. What form of business will they put up?
E. What is the type of operation?
F. Where can they go for added financing? Name as many possible sources.
3. From the following matrix, based on the features given, put a check on the respective
column identifying the form of organization that fits the description.
Sole proprietorship Partnership Corporation
Must register with SEC
Owner (s) is (are) generally

liable to business creditors.
Profit may be easily

withdrawn.
Must register with BIR
Managed by the Board of

Directors
Death of the owner/investor

may lead to business closure
4. There are several stakeholders who are considered users of financial reports. Based on the
given needs described in each number, identify the stakeholders.
a. This stakeholder charges penalties for the late filing of returns and for deficient
payment of taxes
b. This stakeholder demands the rollback of gas prices and threatens to stage a
boycott.
c. This stakeholder requires a project feasibility for review and evaluation of the
enterprise/project profitability and liquidity. Approval of loan will be based on this
project.
d. This stakeholder requires a submission of weekly sales report to evaluate
performance as a basis for promotion/reward.
e. This stakeholder wants to compare the company’s return on capital against BPI’s
premium rate on its UITF product before making a decision on where and how much to
invest.
4. Listed below are activities (planning, organizing, directing, controlling, decision making)
to be performed by division managers (finance, marketing, production, sales, human
resource). Identify the activity and division managers.
a. Makes a study on cost, volume and profit considering the escalating price of
petroleum which is one of its major cost as an airline company
b. With a view of reducing costs and meeting target prices, a product is undergoing
design and trial testing
c. Conducts monthly dialogues to thresh out problems of employees with regards to
work, work habits and interpersonal relationship
d. This manager is confronted with the problem on whether the factory machine
should be repaired or traded in for a new one
e. Prepares a survey on a particular locality’s reaction on a new product the firm
wants to launch
f. This manager makes surprise tours of its retail outlets, observes how employees
entertain customers and reviews the list of customers’ returns and complaints
4. Various reports are prepared for the users. Identify the reports described below as either
financial statements, tax reports, managerial reports, special reports
a. A sales reports for the VP for Sales of Philippine Sky Air showing number of flights and
passengers based on specific route services
b. A report to the Board of Directors showing the cost and expenses incurred by the
company as well as the revenues earned for 2018.
c. A report prepared by the company comptroller and submitted to the SEC showing the
results of the meeting conducted for the shareholders approval on the merger plan and the
exchange of shares of stocks between the constituent companies
d. As the merger mentioned in C will affect the future operation of the company, a report
was also prepared by the controller on the different activities resulting from the merger
and their effects on the tax obligation of the firm.
4. Continue with the Doria illustration. The following transactions took place in Week 2. Sales
(June 8-14). Sales amounted to P13,000.00 and another P7,500.00 worth of supplies used up.
Rent was also paid for P1,000.00
Statement of Income (wealth produced for the week)

Sales P__________
Rent P__________
Supplies Used P__________
Profit for the week ending June 14 P__________
Statement of Changes in Equity

Doria, Capital June 7 P__________
Add profit P__________
Doria, Capital June 14 P__________
Statement of Financial Position

Cash P__________
Supplies P__________
Xerox Machine P__________
Total Assets P__________
Doria, Capital P__________
Statement of Cash Flows

Cash, June 7 P__________
Cash receipts from sales P__________
Rent Paid P__________
Cash, June 14 P__________
5. Two of your business associates approached your for a loan. Joan has a travel agency with
assets worth P500,000.00 and liabilities of P100,000.00. Jane has a beauty parlor with assets
worth P600,000.00 and liabilities of P350,000.00. Both businesses are doing well. They want to
borrow from you so that they could expand their business.
a. Who has more assets? Liabilities?
b. If you have to choose only one, who are you going to help and why?
ASSIGNMENT:
1. Interview a friend or a relative who has a business. Answer the following requirements.
a. Company’s name, location and form of organization
b. Type of business and specify the goods or services being sold
c. Initial capital requirement (if new) or present net worth (if already existing)
d. Reasons for putting up the business
e. Major customers and competitors
f. Current problems confronting the business

EXERCISES 1-Introduction To Accounting

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EXERCISES:

Sole proprietorship Partnership Corporation

Must register with SEC

Owner (s) is (are) generally

Profit may be easily

Must register with BIR

Managed by the Board of

Death of the owner/investor

Statement of Income (wealth produced for the week)

Statement of Changes in Equity

Statement of Financial Position

Statement of Cash Flows

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