3-37

CASE A:
1.
List Price
Less: Trade Discount (56,200 x
10%)
Invoice Price
Less: Cash Discount (50,580 x
0.02)
Acquisition Cost

P56,200
5,620
P50,580
1,011.60

2.
Acquisition Cost
P49,568.40
Less: Scrap Value
1800
Depreciable Cost
P47,768.40
Divided by: Estimated Useful Life
4
Annual Depreciation
P11,942.10
X Fractional Year
3/12
Depreciation Expense on year of
P2,985.53
acquisition
Since purchased on October 4, 20X9, we need to get the depreciation
expense from Oct 1-Dec 31, 20x9= 3 months
3.
Depreciation Expense
Accumulated DepreciationOffice Equipment

2,985.53
2,985.53

4.
Office Computer (Acquisition Cost) P49,568.40
Less: Accumulated Depreciation to 2,985.53
date
Carrying Value
P46,582.87
*This is seen in the Note of Property, plant, and equipment
CASE B
1.
Invoice Price
P12,600
Less: Cash Discount [(12,600126
6300) x 0.02]
Acquisition Cost
P12,474
*Already a good accounting format for problem solving part (lack of
time)

Explanation:
How to compute cash discount:
Invoice Price
Less: Downpayment
Balance
x Discount percentage
Cash Discount
2.
Depreciation Expense
Accumulated DepreciationOffice Equipment

P12,600
6,300
P6,300
0.02
P126
11,186.40
11,186.40

Solutions:
Office Furniture
A
P60,000
4,500
P55,500
7

Office Furniture
B
P26950
3100
P23850
10

Acquisition Cost
Less:Scrap Value
Depreciable cost
Divided: Useful
Life
Annual
P7928.57
P2385
Depreciation
x Fractional yr
Depreciation
Expense
P7,928.57 + 2385 + 872.83 = P11,186.40

Office Cabinet
P12,474
2000
P10474
5
P2094.80
5/12
P872.83

3.
Acquisition Cost
Less:Scrap Value
Depreciable cost
Divided: Useful
Life
Annual
Depreciation
x Fractional yr
Depreciation
Expense
4.

Office Furniture
A
P60,000
4,500
P55,500
7

Office Furniture
B
P26950
3100
P23850
10

Office Cabinet

P7928.57

P2385

P2094.80

2 yrs & 9.5

months
P22,133.93

2 yrs & 8
months
P6,360

5/12

P12,474
2000
P10474
5

P872.83

Office Furniture
(60,000+26950+12474)
Less: Accumulated DepreciationOffice Furniture
Carrying Value

P99,424
29,366.76
P70,057.40

3-38
1.
Office Furniture

Delivery
Equipment
P654,000
45,000

Office
Equipment
P87,300
2,000

P137,900
5,700

Delivery
Equipment
P654,000
45,000

Office
Equipment
P87,300
2,000

P132,200

P609,000

P85,300

10

P26,440

P60,900

P17,060

5/12

(x 7/12)
9,951.67
P27,011.67

Acquisition Cost P137,900

Less: Salvage
5,700
Value
Depreciable
P132,200
P609,000
P85,300
Cost
Divided: Useful
5
10
5
life
Annual
P26,440
P60,900
P17,060
Depreciation
Since the problem is just asking for annual depreciation, disregard the
5-31-x8 to 12-31-x8
*This structure is advisable to problem solving type due to lack of time.
2.
Office Furniture
Acquisition Cost
Less: Salvage
Value
Depreciable
Cost
Divided: Useful
life
Annual
Depreciation
X fractional yr
Depreciation
Expense

P25,375

This time the problem is asking for the Accumulated Depreciation

(meaning the depreciation from the date of purchase up to the Dec 31,
20x9) so we need to compute for the depreciation for 1 year and 7
months.
Depreciation Expense:
1 year = P17,060
7 months = P9,951.67
total Depreciation Expense = P27,011.67
3. A. Carrying Value as of December 31, 2014
Office Furniture
Delivery
Office
Equipment
Equipment
Acquisition Cost P137,900
P654,000
P87,300
Less:
26440
25,375
27,011.67
Accumulated
Depreciation
Carrying Value
P111,460
P628,625
60,288.33
*The amount in the Accumulated Depreciation account title must be
the depreciation from the date of purchase up to Dec 31, 20x9
b. At the end of assets useful life
Office Furniture
Acquisition Cost
Less:
Accumulated
Depreciation
Carrying Value

P137,900
132,200
5,700

Delivery
Equipment
P654,000
609,000
45,000

Office
Equipment
P87,300
85,300
2,000

*The depreciable cost is said to be the maximum depreciation/decline

in the amount of the asset. Meaning, we should decrease that to its
cost in order to get the assets carrying value.
4.
Depreciation Expense
26,440
Accumulated Depreciation-Office
Furn
Depreciation Expense
Accumulated DepreciationDelivery E

26,440

25,375

Depreciation Expense
17,060
Accumulated Depreciation-Office

25,375

17,060

Equip
*Since these are adjusting entries, the amount should cover only one
year or simply the annual depreciation amount.
5.
Cash
Accumulated Depreciation- office
furniture
Loss on sale of office furniture
Office Furniture
Solution:
Office Furniture
Less: Accumulated Depreciation
Carrying Value
Vs. Resale Price
Loss on sale of Furniture

40,000
79,320
18,580
137,900

P137,900
79,320
P58,580
40,000
P18,580

Accumulated Depreciation from Jan 1, 20x9 to Dec 31, 2011 = 3 years

Annual Depreciation (26,440) x 3 years = P79,320

3-39
A

D(A)

D(B)

Doubtful Account Expense

Allowance for Doubtful
Account

32,174.10

Doubtful Account Expense

Allowance for Doubtful
Account

13500

Doubtful Account Expense

Allowance for Doubtful
Account

2500

Doubtful Account Expense

Allowance for Doubtful
Account

42874.10

Doubtful Account Expense

Allowance for Doubtful
Account

13500

32,174.10

13500

2500

42874.10

13500

D(C)

Doubtful Account Expense

Allowance for Doubtful
Account

13200
13200

Computation:
CASE A:
Accounts Receivable
403,851 (70%)
142,850 (beg)

12,760 (Returns)
158,700 (Cash collection)

P375,241
P576,930 x 70% = P403851
This is an Increased to assumption.
Allowance for Bad Debts
5350 (beginning balance as of Oct 1)
adjustment needed
32,174.1
P37,524.10
P375,241 x 10%
0
Computation for Problem Solving:
Accounts Receivable
X Estimated percentage of loss
Allowance balance end
Less; Unadjusted credit balance
Bad Debts Expense

P375,241
10%
P37,524.10
5350
P32,174.10

CASE B: INCREASED BY ASSUMPTION

Allowance for Bad Debts
5350
13500

adjustment

CASE C: INCREASED TO ASSUMPTION

Allowance for Bad Debts
5350
2500

7850
Allowance balance end
Less; Unadjusted credit balance
Bad Debts Expense

7850
5350
P2500

CASE D(A): What if P5350 is a debit?

Allowance for Bad Debts
5350

42874.10
P37,524.10

Allowance balance end

Add; Unadjusted debit balance
Bad Debts Expense

P37,524.10
5350
P42,874.10

CASE D(B): INCREASED BY ASSUMPTION

Allowance for Bad Debts
5350
CASE
5350

13500

adjustment
D: INCREASED TO ASSUMPTION
Allowance for Bad Debts

13200

7850
Allowance balance end
Add; Unadjusted debit balance
Bad Debts Expense
CASE B:
1
Doubtful Account Expense
Allowance for Doubtful
Account
2

Doubtful Account Expense

Allowance for Doubtful

7850
5350
P13,200

11,248.60
11,248.60
5348.60
5348.60

Account
3

Doubtful Account Expense

Allowance for Doubtful
Account

10128.60
10128.60

SOLUTIONS:
CASE 1: INCREASED TO ASSUMPTION
Allowance for Bad Debts
1120
11248.60 adjustment needed
P10,128.60
CASE 2:
Allowance for Bad Debts

5348.60

3-40

4780
adjustment needed
P10,128.60

1.
Accounts Receivable
X Estimated percentage of loss
Allowance balance end
Less; Unadjusted credit balance
Bad Debts Expense

P152,260
3.5%
P5329.10
4075
P1,254.10

Accounts Receivable
624960
81215 (Cash sales)
34260 (beg) 10000 (Cash collection)
326,247 (collected within DP)
89,498 (collected after DP)
P152,260
Allowance for Bad Debts

4075 (beginning balance)

1254.10

adjustment needed
P5329.10

2.
Accounts Receivable
Less: Allowance for Bad Debts
Net realizable Value
*This is seen in the Trade and other
3.
Allowance balance end
Add; Unadjusted debit balance
Bad Debts Expense

P152260 x 3.5%

P152,260
5329.10
P146,930.90
receivables section
P5329.10
4075
P9,404.10

Allowance for Bad Debts

4075 (beg)
9,404.10

adjustment needed

P5329.10
3-41
Cash (687,920 x 30%)
Accounts Receivable (687,920 x
70%)
Sales

206,376
481544
687,920

Sales Returns and Allowances

Accounts Receivable

15744

Cash (98%)
Sales Discount (2%)
Accounts receivable
(307720/.98)

307,720
6280

15744

314,000

Cash

22500
Accounts Receivable

22500

Allowance for Doubtful accounts

Accounts Receivable

10000

Cash

3000

10000

Miscellaneous Income
B.
Doubtful Account Expense
Allowance for Doubtful
Account
Adjusting Entry

3000
14,772
14772

Accounts Receivable
102850 (beg)
481544

15744 (ret)
314,000 (Cash collection)
22,500 (Cash collection)
10,000,498 (written off)

P222,150
Allowance for Bad Debts
4114 (beginning balance)
10000 (written
off)

14772

P8886
C.
Trade and other receivables
Accounts Receivable
Less: Allowance for Bad Debts

P222,150 x 4%

P222,150
8,886

P213,264

3-42
Merchandise inventory
beginning
Add: Net cost of Purchases

CASE A
P25300

B
P12400

Purchases
Less: Purchase Discount
Purchase Returns &
Allowances
Net Purchases
Add: Freight In
Cost of Goods Available for
Sale
Less: Cash Sales (25%)
Charge Sales (65%)
Merchandise Inventory end

474500
(4839.10)
(6800)

474500
(4839.10)
(6800)

474500
(4839.10)
(6800)

P462,860.1
0
4900
493,060.10

P462,860.1
0
4900
P480160.10

P462,860.1
0
4900
467,760.10

(123,265.02
5)
(320,489.06
5)
P49306.10

(120,040.02
5)
(312,104.06
5)
P48,016.01

(116940.02
5)
(304044.06
5)
P46776.10

Merchandise Inventory
Income Summary

49306.10

Merchandise Inventory
Income Summary

P48,016.01

Merchandise Inventory
Income Summary

P46776.10

49306.10
P48,016.01
P46776.10

SOLUTIONS:
Journal Entries for the amount of Purchases, purchase discount etc.
Purchases
474,500
Cash
189,800
Accounts Payable
284,700
Accounts Payable
Cash
Purchase Discount

241,995

Accounts payable
Cash

42705

Cash
Purchase Returns and Allowances

6800

237,155.10
4839.90
42705
6800

Freight in
Cash

4900

Accounts payable
Cash

2100

4900
2100