Professional Documents
Culture Documents
AUDITING
With Comprehensive
Review of Philippine Financial
Reporting Standards (PFRSs)
By
Sincerely,
Suggested answer: A
Suggested answer: C
4
Chapter 5: Cash to Accrual
Merchandise Inventory
Beginning balance 400,000 210,000 Ending balance
Net purchases 860,000 1,050,000 Cost of sales
Total 1,260,000 1,260,000
Computation of the net purchases:
Gross purchases on account 859,000
Add cash purchases 10,000
Total 869,000
Less: Purchase returns and allowances 6,000
Purchase discount 3,000
Net purchases 860,000
E READER
Suggested AND
answer: B PC.Compatible in Acrobat
Suggested answer: B
5
Chapter 5: Cash to Accrual
Suggested answer: C
Question No. 1
Carrying amount of equipment sold 25,000
Add: Accumulated depreciation 15,000
Cost 40,000
Question No. 2
Equipment
Beg. Balance 100,000 120,000 Balance end
Cost of PPE acquired 60,000 40,000 Cost of PPE disposed
(squeeze)
Total 160,000 160,000
Accumulated depreciation
Balance end 18,000 15,000 Beg. Balance
Accumulated depreciation 18,000 Depreciation expense
of PPE disposed 15,000
E READER
Total AND PC.Compatible
33,000 33,000 in Acrobat
SUMMARY OF ANSWERS:
1. D 2. A
PROBLEM 5-8
Question No. 1
Prepaid Insurance
Beg. Balance 7,500 6,000 Balance end
Payments 41,500 43,000 Expenses (squeeze)
Total 49,000 49,000
Question No. 2
Interest Receivable
Beg. Balance 14,500 3,700 Balance end
Income (squeeze) 112,700 123,500 Collections
Total 127,200 127,200
6
Chapter 5: Cash to Accrual
Question No. 3
Salaries payable
Balance end 61,500 53,000 Beg. Balance
Payments 481,000 489,500 Expenses
Total 542,500 542,500
Question No. 4
Accounts receivable trade
Beg. Balance 415,000 550,000 Balance end
Sales 1,980,000 1,845,000 Collections (squeeze)
Total 2,395,000 2,395,000
Question No. 5
Accounts receivable trade
Beg. Balance 415,000 550,000 Balance end
Sales 1,980,000 1,820,000 Collections (squeeze)
25,000 Write-off
Total 2,395,000 2,395,000
E READER AND
Question No. 6 PC.Compatible in Acrobat
Accounts receivable trade
Beg. Balance 415,000 550,000 Balance end
Sales 1,980,000 1,840,000 Collections (squeeze)
Recoveries 20,000 25,000 Write-off
Total 2,415,000 2,415,000
SUMMARY OF ANSWERS:
1. C 2. B 3. C 4. A 5. A 6. B
PROBLEM 5-9
Question No. 1
Accounts/Notes receivable trade
Decrease in A/R 100,000 100,000 Increase in N/R
Sales on account 4,260,000 10,000 Write-off
(squeeze) 4,200,000 Collections
30,000 Sales discounts
20,000 Sales ret. and allow.
Total 4,360,000 4,360,000
7
Chapter 5: Cash to Accrual
Question No. 2
Accounts payable
Cash paid to creditors 2,800,000 200,000 Decrease in Accounts
payable
Purchase discounts 40,000 2,650,000 Gross purchases
(squeeze)
Purchase returns 10,000
Total 2,850,000 2,850,000
Question No. 3
Merchandise inventory
Decrease in Inventory 25,000 40,000 Purchase discounts
Gross purchases 2,650,000 10,000 Purchase returns
2,625,000 Cost of sales (squeeze)
Total 2,675,000 2,675,000
Question No. 4
Rental receivable/Unearned Rent Income
Rental revenue 454,000 14,000 Increase in Rental
(squeeze) receivable
40,000 Decrease in Unearned
E READER AND PC.Compatible in Acrobat rental
400,000 Collections from tenants
Total 454,000 454,000
Question No. 5
Prepaid interest/Interest Payable
Decrease in Prepaid 5,500 114,000 Interest expense
interest (squeeze)
Increase in Interest
SUMMARY OF ANSWERS:
1. D 2. D 3. A 4. A 5. D
8
Chapter 5: Cash to Accrual
PROBLEM 5-10
Question No. 1
Accounts Receivable/Notes receivable trade
Beg. Balance – A/R 200,000 250,000 Bal. end – A/R
Beg. Balance – N/R 300,000 100,000 Bal. end – N/R
Sales on account 1,000,000 20,000 Sales ret. and allow.
(squeeze) 10,000 Sales discount
1,120,000 Collections
Total 1,500,000 1,500,000
Question No. 2
Accounts payable/Notes payable
Balance end – A/P 25,000 50,000 Beg. Balance – A/P
Balance end – N/P 75,000 100,000 Beg. Balance – N/P
Purchase returns and 650,000 Gross purchases
40,000 (squeeze)
Purchase
allow discount 10,000
Payments 650,000
Total 800,000 800,000
E READERpurchases
AND PC.Compatible
inGross 650,000 Acrobat
Less: Purchase ret and allow 40,000
Purchase discounts 10,000 50,000
Net Purchases 600,000
Question No. 3
Sales 1,000,000
Less: Sales ret and allow 20,000
Sales discounts 10,000 30,000
Net Sales 970,000
Less: Cost of Sales
Merchandise inventory beg. 200,000
Add: Net Purchases
Purchases 600,000
Add: Freight-in -
Gross Purchases 650,000
Less: Purch. Ret and allow 40,000
Purchase discounts 10,000 600,000
Total goods available for sale 800,000
Less: Merchandise inventory, end 100,000 700,000
Gross Income / Gross Profit 270,000
9
Chapter 5: Cash to Accrual
Question No. 4
Prepaid/Accrued Salaries
Beg. Balance -Prepaid 100,000 125,000 Balance end - Prepaid
Salaries Salaries
Balance end - Accrued 50,000 75,000 Beg. Balance - Accrued
Salaries Salaries
Payments 350,000 300,000 Salaries expense
(squeeze)
Total 500,000 500,000
Question No. 5
Accrued rent/Unearned rent
Beg. Balance - Accrued 40,000 Balance end - Accrued
70,000 rent
Balance
rent end - Unearned 40,000 80,000 Beg. Balance - Unearned
rent rent
Rent income (squeeze) 490,000 300,000 Collection of rent
Total 600,000 600,000
SUMMARY OF ANSWERS:
1. A 2. B 3. C 4. B 5. B
E READER AND PC.Compatible in Acrobat
PROBLEM 5-11
Question No. 1
Accounts receivable trade
Beg. Balance 200,000 300,000 Balance end
Recoveries 8,000 20,000 Sales discounts
Sales (squeeze) 1,570,000 1,408,000 Collections including
recoveries (1,498,000-
80,000+20,00-30,000)
50,000 Accounts written-off
Total 1,778,000 1,778,000
Sales 1,570,000
Less: Sales discount 20,000
Net Sales 1,550,000
Question No. 2
Accounts payable trade
Payment (1,210,000- 150,000 Beg. Balance
20,000+30,000) 1,210,000 1,170,000 Purchases (squeeze)
Purchase ret. and allow. 10,000
Balance end 100,000
10
Chapter 5: Cash to Accrual
Purchases 1,170,000
Less: Purchases discount 10,000
Net Purchases 1,160,000
Question No. 3
Merchandise inventory
Beg. Balance 380,000 330,000 Balance end
Net Purchases 1,210,000 Cost of Sales (squeeze)
1,160,000
(1,170,000-10,000)
Total 1,540,000 1,540,000
Question No. 4
Rent Receivable
Beg. Balance 70,000 80,000 Balance end
Rent income (squeeze) 130,000 120,000 Collections
Total 200,000 200,000
E READER AND
Question No. 5 PC.Compatible
Allowance for Doubtful accounts
in Acrobat
Accounts written off 50,000 20,000 Beg. Balance
Balance end 30,000 52,000 Doubtful account
expense(squeeze)
8,000 Recoveries
Total 80,000 80,000
SUMMARY OF ANSWERS:
1. B 2. B 3. B 4. A 5. A
11
Chapter 5: Cash to Accrual
Question No. 2
Professional Fees (See No. 1) 5,250,000
Less: Rent expense (1.2M +100,000) 1,300,000
Supplies expense
(800,000+300,000-250,000) 850,000
Other operating expense 750,000
Interest expense (1M x 12% x 9/12) 90,000
Depreciation expense (2,500,000/10) 250,000 3,240,000
Net income 2,010,000
Question No. 3
Cash 1,500,000
Accounts Receivable 750,000
Supplies 250,000
Total Current Assets 2,500,000
Question No. 4
Furniture and fixtures 2,500,000
Less: Accumulated Depreciation
(125,000 + 250,000) 375,000
Total Noncurrent Assets 2,125,000
E READER AND
Question No. 5 PC.Compatible in Acrobat
Total current assets (See No. 3) 2,500,000
Total noncurrent assets (See No. 4) 2,125,000
Total Assets 4,625,000
Question No. 6
Notes Payable 1,000,000
Accrued rent 100,000
Accrued interest on notes payable
(1,000,000 x 12% x 9/12) 90,000
Total Current Liabilities 1,190,000
Question No. 7
Total assets (See No. 5) 4,625,000
Less: Total liabilities (See No. 6) – all are
current 1,190,000
Total Owner’s Equity 3,435,000
SUMMARY OF ANSWERS:
1. B 2. B 3. A 4. A 5. A 6. C 7. B
12
Chapter 5: Cash to Accrual
PROBLEM 5-13
Question No. 1
Accounts receivable trade
Beg. Balance 124,000 146,000 Balance end
Sales on account 13,000 Sales discount
(squeeze) 1,535,000 1,500,000 Collections
Total 1,659,000 1,659,000
Question No. 3
Accounts Payable
Payments 1,206,000 382,000 Beg. Balance
Balance end 410,000 1,234,000 Purchases (squeeze)
E READER
Total AND 1,616,000 1,616,000
PC.Compatible in Acroba
t
Purchases on account 1,234,000
Add: Cash purchases 120,000
Total Purchases 1,354,000
Question No. 4
Merchandise Inventory
Beg. Balance 186,000 190,000 Balance end
Net purchases 1,354,000 1,350,000 Cost of sales (squeeze)
Total 1,540,000 1,540,000
Question No. 5
Prepaid9,600
G&A/Accrued G&A
Interest
Beg. Balance - Prepaid 8,400Balance end - Prepaid
Interest
Balance end – Accrued 9,000 7,000 Beg. Balance – Accrued
Interest Interest
Payments 204,000 207,200 Expenses
Total 222,600 222,600
13
Chapter 5: Cash to Accrual
Question No. 6
General and administrative expense (see No. 5) 207,200
Depreciation expense 84,000
Warranty expense 6,400
Total operating expense 297,600
Question No. 7
Selling price of land 20,000
Less: Book value of land 16,000
Gain on sale of land 4,000
Question No. 8
Selling Price 12,000
Less Book value
Cost 25,000
Less: Accumulated depreciation 16,000 9,000
Gain on sale of warehouse equipment 3,000
Question No. 9
Selling Price 42,000
Less: Book value
Cost 48,000
Less: Accumulated depreciation 20,000 28,000
Gain on sale of boiler 14,000
E READER AND PC.Compatible in Acrobat
Question No. 10
Net Sales 1,682,000
Less: Cost of Sales 1,350,000
Gross Profit 332,000
Less: Operating expenses 297,600
Gain on sale (14,000+3,000+4,000) 21,000
Net income 55,400
SUMMARY OF ANSWERS:
1. B 2. C 3. D 4. A 5. B
6. A 7. A 8. C 9. B 10. A
14
Chapter 5: Cash to Accrual
Question No. 2
Sales on account 800,000
Add: Cash sales 100,000
Total sales 900,000
Less: Sales returns and allowances 10,000
Net sales 890,000
Less: Cost of sales (squeeze) 390,000
Gross profit (200,000/40%) 500,000
Merchandise inventory
Beg. Balance 190,000 220,000 Balance end
Net Purchases (squeeze) 420,000 390,000 Cost of Sales
Total 610,000 610,000
Question No. 3
Accounts Payable trade
Payments (squeeze) 470,000 230,000 Beg. Balance - Accounts
payable
Purchase returns and 428,000 Gross purchases
8,000 (420,000+8,000)
Balance end – Accounts 180,000
E READER AND PC.Compatible in Acrobat
allowances
payable
Total 658,000 658,000
Question No. 4
Total payment of Accounts payable and admin expenses 518,000
Less: Payment of Accounts payable 470,000
Payment of admin expenses 48,000
Question No. 5
Payment of admin expenses 48,000
Divided by: Percentage of cash expenses to total admin
expense 80%
Total admin expenses 60,000
Add: Selling expenses 200,000
Total selling and administrative expense 260,000
Question No. 6
Total administrative expenses 60,000
Less: Payment of administrative expense 48,000
Non-cash administrative expenses 12,000
Less: Depreciation for building
(440,000 x 60% x 5% x 9/12) 9,000
15
Chapter 5: Cash to Accrual
SUMMARY OF ANSWERS:
1. A 2. A 3. B 4. A 5. C 6. A
PROBLEM 5-15
Question No. 1
Cash Receipts:
From customers 360,000
From issue of ordinary shares 100,000
From bank loan 100,000 560,000
Cash disbursements:
Purchase of inventory 300,000
Rent 15,000
Salaries 30,000
Utilities 5,000
Insurance 3,000
E READER equipmentin AND
PC.Compatible
Purchase of
Acrobat
393,000 and furniture
40,000
Cash 167,000
Question No. 4
Accounts payable 20,000
Utilities payable 1,000
Loans payable 100,000
Interest on loans payable (100,000 x 12% x 9/12) 9,000
Total current liabilities 130,000
16
Chapter 5: Cash to Accrual
Question No. 5
Ordinary shares 100,000
Retained earnings (net income) 176,000
Shareholders’ equity 176,000
SUMMARY OF ANSWERS:
1. B 2. B 3. A 4. D 5. A
PROBLEM 5-16
Question No. 1
Notes receivable – December 31 210,000
Accounts receivable – December 31 950,000
Collection of notes and accounts 2,950,000
Note receivable discounted 200,000
Total 4,310,000
Less: Notes receivable – January 1 200,000
Accounts receivable – January 1 740,000 940,000
Sales on account 3,370,000
Question No. 2
Notes payable – December 31 580,000
Less: Note payable – bank 300,000
E READER ANDPC.Compatible in
Notes payable– trade 280,000
Acroba
t
Accounts payable – December 31 750,000
Payment of notes and accounts 2,100,000
Total 3,130,000
Less: Notes payable – January 1 750,000
Accounts payable – January 1 600,000 1,350,000
Purchases on account 1,780,000
Question No. 3
Equipment – January 1 1,000,000
Add: Acquisition 280,000
Total 1,280,000
Less: Equipment – December 31 1,200,000
Depreciation 80,000
Question No. 4
Interest accrued on note issued to bank (300,000 x 12% x 10/12) 30,000
Interest expense 30,000
Question No. 5
Volks Company
Income Statement
Year ended December 31, 2016
17
Chapter 5: Cash to Accrual
Sales 3,370,000
Cost of sales:
Inventory – January 1 1,600,000
Purchases 1,780,000
Goods available for sale 3,380,000
Less: Inventory – December 31 1,500,000 1,880,000
Gross income 1,490,000
Expenses:
*Expenses 820,000
Depreciation 80,000
**Loss on sale of investment 50,000
***Loss on note receivable discounted 10,000
Interest expense 30,000 990,000
Net income 500,000
OR
Retained earnings – December 31 600,000
Add: Dividends 400,000
Total 1,000,000
Less: Retained earnings – January 1 500,000
Net income 500,000
SUMMARY OF ANSWERS:
1. A 2. A 3. C 4. C 5. D
18
Chapter 6: Correction of Errors
Questions No. 7
Assuming errors were discovered in 2016
ADJUSTING ENTRIES Debit Credit
1) Miscellaneous income 25,000
Rent income 25,000
2) No entry
2) No entry
SUMMARY OF ANSWERS:
1. A 2. B 3. A 4. C 5. C 6. C
19
Chapter 6: Correction of Errors
Question No. 7
A. Errors were discovered in 2016
ADJUSTING ENTRIES Debit Credit
1) Interest expense 15,000
Interest payable 15,000
2) Interest receivable 20,000
Interest income 20,000
3) Prepaid insurance 6,000
Insurance expense6,000
E READER
4) AND PC.Compatible
Rent revenue
7,500
in Acrobat
Unearned rent revenue 7,500
B. Errors were discovered in 2017
Assuming errors are discovered when the cash flows related to the
transactions were processed and books are still open
ADJUSTING ENTRIES Debit Credit
1) Retained earnings 15,000
Interest expense 15,000
2) Interest income 20,000
Retained earnings 20,000
3) Insurance expense 6,000
Retained earnings 6,000
4) Retained earnings 7,500
Rent revenue 7,500
When books are already closed, no necessary adjusting entries to be
made.
C. Errors were discovered in 2018
No necessary adjusting entries to be made.
SUMMARY OF ANSWERS:
1. C 2. B 3. C 4. C 5. B 6. C
20
Chapter 6: Correction of Errors
Question No. 7
A. Errors were discovered in 2016
ADJUSTING ENTRIES Debit Credit
1) Purchases 60,000
Accounts payable 60,000
2) Accounts receivable 80,000
Sales 80,000
3) Cost of sales 20,000
Inventory 20,000
E READER AND PC.Compatible in Acrobat
B. Errors were discovered in 2017
Assuming errors are discovered when the cash flows related to the
transactions were processed and books are still open
ADJUSTING ENTRIES Debit Credit
1) Retained earnings 60,000
Purchases 60,000
2) Sales 80,000
Retained earnings 80,000
3) Retained earnings 20,000
Inventory, beginning 20,000
If books are already closed, no necessary adjusting entries to be made.
SUMMARY OF ANSWERS:
1. C 2. B 3. C 4. B 5. C 6. B
21
Chapter 6: Correction of Errors
Adjusted
balances 325,000 170,000 325,000 119,000 254,000 444,000
Question No. 7
A. Errors were discovered in 2016
ADJUSTING ENTRIES Debit Credit
1) Insurance expense 30,000
Prepaid insurance 30,000
2) Unearned rent income 20,000
Rent incomePC.Compatiblein
E READER AND
20,000Acroba
t
3) Accumulated depreciation 12,000
Depreciation expense 12,000
4) Building improvements 200,000
Repairs expense 200,000
Depreciation expense 50,000
Accumulated depreciation 50,000
5) Other income 20,000
Accumulated depreciation 48,000
Gain on sale 8,000
Building 60,000
6) Repairs expense 20,000
Building 20,000
Accumulated depreciation 5,000
Depreciation expense 5,000
B. Errors were discovered in 2017
ADJUSTING ENTRIES Debit Credit
1) Retained earnings 30,000
Insurance expense 6,000
Prepaid insurance 36,000
22
Chapter 6: Correction of Errors
SUMMARY OF ANSWERS:
1. D 2. A 3. D 4. A 5. A 6. D
Sales 70,000
Advances customers 70,000
4) Depreciation expense 20,000
Improvements 100,000
Accumulated depreciation 40,000
Retained earnings 80,000
5) Accumulated depreciation 15,000
Retained earnings, beg 25,000
Equipment 40,000
SUMMARY OF ANSWERS:
1. A 2. A 3. A 4. A 5. C
SUMMARY OF ANSWERS:
1. D 2. D 3. A 4. A 5. C
PROBLEM 6-7
Note to professor:
Item letter b - On December 31, “f” should be December 31, 2016.
Item letter e - Additional industrial robots were acquired at the beginning of
20X0 (should be 2015).
Adjusting entries:
a) Prepaid Insurance (₱35,000 / 5 x 2) 14,000
Insurance Expense (₱35,000 / 5 x 1) 7,000
Retained Earnings (₱35,000 / 5 x 3) 21,000
b) Retained earnings, beginning 25,000
Merchandise Inventory, beginning 25,000
c) Retained earnings, beg 15,500
Commission expense 15,500
d) This is not an error, rather it is a
E READER AND PC.Compatible in Acrobat
change in accounting estimate.
e) Equipment 100,000
Accumulated depreciation
(₱100,000/10 x 2) 20,000
Retained earnings 80,000
Depreciation expense (₱100,000/10) 10,000
Accumulated depreciation 10,000
Question No. 5
Item a 21,000
Item b (25,000)
Item c (15,500)
Item d -
Item e 80,000
Net adjustment to retained earnings (E) 60,500
SUMMARY OF ANSWERS:
1. B 2. B 3. A 4. B 5. (E)
26
Chapter 6: Correction of Errors
PROBLEM 6-8
Net
Income CA NCA CL RE
Unadjusted
balances 200,000 1,570,400 1,365,600 636,000 300,000
1. Advtg exp
over, NI under 50,000
2. Advances rec.
as sales
2016 60,000
2017 (100,000) 100,000 (100,000)
3. Advances rec.
as purchases
2016 (50,000)
2017 80,000 80,000 80,000
4. Gain
understated 64,000 64,000
Cost under (336,000)
Accumulated
depreciation 400,000
Depr. Over, NI
under 13,600 13,600 13,600
5. Rent revenue
E READER AND PC.Compatible
20,000 inunder
(60,000) Acroba
60,000
t
6. Bad debts
exp under
(5% x 480K)-
16,000) (8,000) (8,000) (8,000)
7. Purchases
under 20,000
EI under 20,000
8. Ins. Exp.
Under, NI over 15,000 15,000
Adjusted
balances 344,600 1,662,400 1,443,200 696,000 424,600
SUMMARY OF ANSWERS:
1. C 2. C 3. D 4. A 5. D
27
Chapter 8: Cash and Cash Equivalents
Question No. 2
Annual interest payment (3,500,000 x 12%) 420,000
Interest income on the loan proceeds in the
compensating balance [3.5M-3,375,000) x 4%] 5,000
Net interest 415,000
Divide by loan proceeds (3,500,000-175,000) 3,375,000
Effective interest rate 12.30%
Suggested answers:
1. C 2. C
29
Chapter 8: Cash and Cash Equivalents
30
Chapter 8: Cash and Cash Equivalents
Requirement No. 2
ADJUSTING ENTRIES Debit Credit
1) Employee advances 600
Petty cash fund 600
2) Expenses 1,217
Office supplies 50
Petty cash fund 1,267
3) Cash short or over 3,975
E READERPettycash
AND fund PC.Compatible
3,975 in Acroba
t
4) Cash short or over 3,975
Petty cash fund 3,975
Requirement No. 3
Bills and coins ₱ 6,258
Checks for deposit 500
Total Petty Cash Fund ₱ 6,758
32
Chapter 8: Cash and Cash Equivalents
Question No. 2
Deposits in transit, beg 300,000
Add: Deposits made 1,800,000
Total 2,100,000
Less: Deposits acknowledged by the bank 1,600,000
Deposits in transit, end 500,000
31-May Receipts Disb. 30-Jun
Unadjusted bal-bank 2,600,000 *2,190,000 **2,410,000 2,380,000
Deposit in transit-May
31 300,000 (300,000)
-June 30 500,000 500,000
Outstanding checks-
May 31 (100,000) (100,000)
E READER AND PC.Compatible in (400,000)
-June 30 Acrobat 400,000
(60,000)
Erroneous bank credit (60,000)
Erroneous bank charge 40,000 (40,000)
Adjusted balances 2,780,000 2,350,000 2,650,000 2,480,000
*(1,600,000+40,000+550,000)
**(2,200,000+60,000+50,000+100,000)
31-May Receipts Disb. 30-Jun
Unadjusted bal-book 2,190,000 ***2,400,000 2,500,000 2,090,000
Bank service charge-
May 31 (10,000) (10,000)
-June 30 50,000 (50,000)
CM for collection-May
31 600,000 (600,000)
-June 30 550,000 550,000
NSF checks for June 30 100,000 (100,000)
Adjusted balances 2,780,000 2,350,000 2,650,000 2,480,000
***(1,800,000+600,000)
SUMMARY OF ANSWERS:
1. A 2. B 3. A 4. A 5. A
33
Chapter 8: Cash and Cash Equivalents
Questions No 3 to 5
BANK 31-Jul Receipts Disb. Aug. 31
Unadjusted balances 180,250 1,830,752 *1,702,918 308,084
Outstanding checks
July 31 ( 50,944) ( 50,944)
August 31 67,122 ( 67,122)
Deposit in transit
July 31 32,844 ( 32,844)
35
Chapter 8: Cash and Cash Equivalents
36
Chapter 8: Cash and Cash Equivalents
t
Question
Zero, adjusted bank and book balance on December 31 is the same.
PROOF OF CASH
Nov. 30 Receipts Disb. Dec. 31
Unadjusted bank balance 69,000 171,500 113,000 *127,500
Deposit in transit
November 30 11,000 (11,000)
December 31 *20,000 20,000
Outstanding checks
November 30 (7,000) (7,000)
December 31 21,500 (21,500)
Error correction (500) (500)
NSF check, no entry on the
books on the return and
redeposit (40,000) (40,000)
Adjusted bal. 73,000 140,000 87,000 126,000
* (69,000+171,500-113,000)
** (18,000+2,000)
Nov. 30 Receipts Disb. Dec. 31
Unadjusted book balance 66,000 113,800 85,000 94,800
Credit memo for note
collected
37
Chapter 8: Cash and Cash Equivalents
Question No. 2
ANDbeg PC.Compatible Pin
E READERin transit,Deposit 12,500Acroba
t
Add: Deposits made by the company 152,500
Total 165,000
Less: Deposits acknowledged by the bank 145,000
Deposit in transit, end P 20,000
Question No. 3
Unadjusted cash in bank balance per ledger P 37,500
Add: Under-footing of cash receipts 2,500
Total 40,000
Less: Unrecorded bank service charges
(3,250 +1,500-2,500) 2,250
Adjusted cash in bank balance, 12/31 P 37,750
Question No. 4
Bank service charges per
bank statement in December P 3,250
Less: Bank service charge in December
recorded in December
Total BSC recorded in the books Dec P 2,500
Less: BSC in Nov. recorded in Dec. 1,500 1,000
Unrecorded BSC charge in December P 2,250
38
Chapter 8: Cash and Cash Equivalents
Question No. 5
Unadjusted cash in bank, November (squeeze) P 16,250
Add: Book Receipts (152,500 - 2,500) 150,000
Total 166,250
Less: Book disbursements 128,750
Unadjusted cash in bank, December P 37,500
SUMMARY OF ANSWERS:
1. C 2. D 3. C 4. D 5. B
Question No. 2
Total Outstanding checks:
E READER AND PC.Compatible
Account No.14360,000 in Acrobat
*Account No.144 1,860,000
Total outstanding check P 1,920,000
Question Nos. 3 to 4
December
Nov. 30 Receipts Disb. Dec. 31
Unadjusted bank balance 2,200,000 1,000,000 2,000,000 1,200,000
Deposit in transit:
November 30 90,000 (90,000)
December 31 **240,00 240,000
40
Chapter 8: Cash and Cash Equivalents
0
Outstanding check:
November 30 (250,000) (250,000)
December 31 1,860,000 (1,860,000)
Erroneous bank charge -
November 20,000 (20,000)
Adjusted balances 2,060,000 1,130,000 3,610,000 (420,000)
Unadjusted book
balance 1,980,000 1,420,000 3,500,000 (100,000)
Bank service charge:
November 30 (10,000) (10,000)
December 31 20,000 (20,000)
Unrecorded collections -
November 30 90,000 (90,000)
Uncollected customer's
note already recorded
as cash receipt (200,000) (200,000)
NSF - December 31 100,000 (100,000)
Adjusted balances 2,060,000 1,130,000 3,610,000 (420,000)
t
Question
Fund transfer No. 1 is recorded in the disbursing book during December while it
only cleared in the disbursing bank in January.
SUMMARY OF ANSWERS:
1. A 2. A 3. B 4. B 5. B
Question No. 2
Unadjusted book bal. P242,310.50
Credit memo for notes collection 30,000
Credit memo for int. 900
Balance (cash accountability) P273,210.50
Question No. 3
Adjusted bank bal. (Cash accounted) P221,052.50
43
Chapter 8: Cash and Cash Equivalents
Question No. 2
Unadjusted book bal. P 46,500
Credit memo proceeds clean draft 900
Debit memo for bank service charge ( 100)
Balance (cash accountability) P 47,300
Question No. 3
Adjusted bank bal. (Cash accounted) P 35,900
Cash in bank bal. (cash accountability) 47,300
E READER AND PC.Compatible in Acrobat
Shortage as of June 30 (P11,400)
Question No. 4
Additional cash shortage from July 1-15
July collection per duplicate O.R. P 18,800
Less: collections in July that were deposited in
July
Collection per duplicate slips P 11,000
Less :Undeposited collection, June 30 5,000 6,000
Cash that should be on hand on July 15 P 12,800
Less: Actual cash on hand on July 15 4,800
Cash shortage from July 1-15 P 8,000
Question No. 5
Understatement of cash in bank per books (46,500-45,600) P 900
Overstatement of cash in bank per bank (44,000-42,400) 1,600
Understatement of outstanding checks (11,500-3600) 7,900
Overstatement of undeposited collections (5,100-5,000) 100
Non-recording of credit memo-proceeds of clean draft 900
Cash shortage as of June 30 P11,400
SUMMARY OF ANSWERS:
1. C 2. D 3. B 4. D 5. D
44
Chapter 8: Cash and Cash Equivalents
Question No. 2
Outstanding checks, unadjusted balance P 246,760
Less: Unreleased check ( 14,750)
Company's post-dated check ( 37,210)
Adjusted Outstanding checks P 194,790
Question No. 3
Unadjusted bal. per bank P 350,000
Add: Deposit in transit (No. 1) 125,250
Less: Outstanding checks (No. 2) (194,790)
Erroneous bank credit ( 30,000)
Adjusted cash in bank bal. P 250,460
Question No. 4
Unadjusted bal. per books P 293,500
Add: Credit memo for note coll. 15,000
E READER AND Unreleased check PC.Compatible in
14,750 Acroba
t
Company's post-dated check 37,210
Total P 360,460
Less: Customer's post-dated check (50,000)
Cash in bank per books bal. P 310,360
Less: Adjusted cash in bank balance 250,460
Cash shortage (P60,000)
Question No. 5
Unadjusted bal. per books P293,500
Less: Adjusted cash in bank balance 250,460
Net adjustments P 43,040
SUMMARY OF ANSWERS:
1. B 2. D 3. B 4. C 5. A
45
Chapter 10: Loans and Receivables
E READER ANDDifferentFreight
PROBLEM 10-2 PC.Compatible
terms in Acro
bat
Question No. 1
FOB Destination, freight prepaid
Invoice price of merchandise sold 300,000
Less: Invoice price of merchandise returned -
Net invoice price 300,000
Less: Sales discount (300,000 x 2%) 6,000
Collection before freight 294,000
Less: Freight payment - FOB Destination, freight collect -
Add: Freight payment - FOB shipping point, freight prepaid -
Total Net Cash Collection (B) 294,000
Question No. 2
FOB Destination, freight collect
Invoice price of merchandise sold 300,000
Less: Invoice price of merchandise returned -
Net invoice price 300,000
Less: Sales discount (300,000 x 2%) 6,000
Net Payment before freight 294,000
Less: Freight payment - FOB Destination, freight collect 5,000
Add: Freight payment - FOB shipping point, freight prepaid -
Total Net Cash Collection (A) 289,000
47
Chapter 10: Loans and Receivables
Question No. 3
FOB Shipping point, freight prepaid
Invoice price of merchandise sold 300,000
Less: Invoice price of merchandise returned -
Net invoice price 300,000
Less: Sales discount (300,000 x 2%) 6,000
Net Receipt before freight 294,000
Less: Freight payment - FOB Destination, freight collect -
Add: Freight payment - FOB shipping point, freight prepaid 5,000
Total Net Cash Collection (C) 299,000
Question No. 4
FOB Shipping point, freight prepaid
Invoice price of merchandise sold 300,000
Less: Invoice price of merchandise returned -
Net invoice price 300,000
Less: Sales discount (300,000 x 2%) 6,000
Collection before freight 294,000
Less: Freight payment - FOB Destination, freight collect -
Add: Freight payment - FOB shipping point, freight prepaid -
Total Net Cash Collection (B) 294,000
SUMMARY OF ANSWERS:
E READER
1. B 2. 3. 4. B
AND PC.Compatible in Acroba
t
PROBLEM 10-3 Gross method and Net method
List price P 100,000
Less: Trade discounts
15%: (100,000 x 15%) 15,000
20%: (100,000 – 15,000) x 20% 17,000 32,000
Invoice price, gross of discount (C) 68,000
Less: Sales discount (68,000 x 3%) 2,040
Invoice price, net of discount (D) P 65,960
SUMMARY OF ANSWERS:
1. C 2. D
Question No. 1
Accounts written off minus Recoveries
Percentage =
Total credit sales
Total years from 2013 to 2017:
₱480,000 - ₱120,000
Percentage =
₱12,000,000
Percentage = 3.00 %
Question No. 2
Bad debts expense = 3% x ₱3,000,000
= ₱90,000
Question No. 3
Allowance for Bad debts
Write off 85,000 400,000 Beg. Balance
Balance end (squeeze) 445,000 90,000 Bad debts exp
40,000 Recovery
E READER AND PC.Compatible in Acrobat 520,000 520,000
CASE 2
Question No.4
Accounts written off minus Recoveries
Percentage =
Total credit sales
Total years from 2013 to 2015 (years should exclude the last two years):
₱330,000 - ₱50,000
Percentage =
₱7,000,000
Percentage = 4 %
Question No. 5
Bad debts expense = 4% x P3,000,000
= ₱120,000
Question No. 6
Credit Sales BD exp Recoveries Write-off Net AB
2016 2,000,000 80,000 65,000 30,000 115,000
2017 3,000,000 120,000 85,000 40,000 165,000
Allowance for BD (D) 280,000
49
Chapter 10: Loans and Receivables
CASE 3
Question No. 7
Percentage of bad
Total credit
Accounts written salesRecoveries
off minus
=
debts to AR
Total years from 2013 to 2016:
Percentage of bad
9,000,000
₱395,000 - ₱80,000
=
Percentage
debts to=AR
3.5%
Percentage of bad
Total credit
Accounts written salesRecoveries
off minus
=
Totaldebts
yearstofrom
AR 2013 to 2017:
Percentage of bad
₱12,000,000
₱480,000 - ₱120,000
=
Percentage
debts to=AR
3%
SUMMARY OF ANSWERS:
Case 1 Case 2 Case 3
1. B 4. D 7. C
2. B 5. D 8. D
3. B 6. D 9. C
SUMMARY OF ANSWERS:
1. A 2. A
51
Chapter 10: Loans and Receivables
Requirement No. 2
Interest income = (100,000 x 10%) = P10,000
Requirement No. 3
Zero. The principal amount is collectible beyond one year from the reporting
date and thus, reported as non-current.
Requirement No. 4
P100,000. The entire principal amount of notes receivable is treated as
noncurrent asset since it is collectible beyond one year from the reporting date.
Journal entries are as follows:
01/01/2016 Notes receivable 100,000
Accumulated depreciation 350,000
Loss on sale 50,000
Machinery 500,000
\
E READER AND
Question No. 1 PC.Compatible in
Present value of principal (2,000,000 x 0.7118) Acrobat
P 1,423,600
Add: Present value of interest payments
(2,000,000 x 10% x 2.4018) 480,366
Total present value / Selling price 1,903,966
Less: Carrying amount of machinery
Cost 1,000,000
Less: Accumulated depreciation 150,000 850,000
Gain on sale P1,053,966
Question Nos. 2 to 5
Amortization table
Date Interest Interest Discount Carrying
Collections Income Amortization amount
01/01/2016 1,903,960
12/31/2016 200,000 228,475 28,475 1,932,435
12/31/2017 200,000 231,892 31,892 1,964,327
12/31/2018 200,000 235,704 35,672 2,000,000
The total amount of 1,932,435 is reported as noncurrent receivable since it is
due to be collected beyond twelve months from the end of the reporting period.
SUMMARY OF ANSWERS:
1. B 2. B 3. A 4. A 5. C
52
Chapter 10: Loans and Receivables
Amortization table
Date Interest Interest Discount Carrying
Collections Income Amortization amount
01/01/2016 1,901,730
07/31/2016 100,000 114,104 14,104 1,915,834
12/31/2016 100,000 114,950 14,950 1,930,784
07/31/2017 100,000 115,847 15,815 1,946,599
12/31/2017 100,000 116,796 16,796 1,963,395
E READER AND
07/31/2018 100,000
17,804
117,804 in Acrobat
1,981,198
12/31/2018 100,000 118,602 18,802 2,000,000
Question No. 2
Interest income up to 07/31/2016 114,104
Interest income up to 12/31/2016 114,950
Total interest income 229,054
Question No. 3
1,930,784. See amortization table above.
SUMMARY OF ANSWERS:
1. B 2. B 3. B 4. A 5. D
Question No. 1
53
Chapter 10: Loans and Receivables
Question No. 2
E READER AND PC.Compatible in Acrobat
208,828. See amortization table above.
Question No. 3
1,169,062. See amortization table above.
Question No. 4
Principal collections – 2017 600,000
Less: Amortization – 2017 20,287
Current portion – 12/31/2016 579,713
Question No. 4
Carrying value – 12/31/2016 1,169,062
Less: Current portion – 12/31/2016 579,713
Non-current portion – 12/31/2016 589,350
SUMMARY OF ANSWERS:
1. B 2. B 3. A 4. B 5. A
Total
PV factor collections Total PV
0.8929 1,000,000 892,900
0.7972 600,000 478,320
0.7118 200,000 142,360
Total present value of the notes 1,513,580
Total present value / Selling price 1,513,580
Less: Carrying amount of machinery
Cost 1,000,000
Less: Accumulated depreciation 150,000 850,000
Gain on sale P663,580
Question Nos. 2 to 5
Amortization table
Interest Amortizatio Principal Carrying
Date
income n Collections amount
01/01/16 1,513,580
12/31/16 181,630 181,630 1,000,000 695,210
12/31/17 83,425 83,425 600,000 178,635
12/31/18 21,382 21,365 200,000 -
Question No. 2
181,630. SeeAND
E READER above.
amortizationPC.Compatible in Acrob
at
Question No. 3
695,210. See amortization table above.
Question No. 4
Principal collections – 2017 600,000
Less: Amortization – 2017 83,425
Current portion – 12/31/2016 516,575
Question No. 5
Carrying value – 12/31/2016 695,210
Less: Current portion – 12/31/2016 516,575
Non-current portion – 12/31/2016 178,635
SUMMARY OF ANSWERS:
1. B 2. B 3. A 4. B 5. D
Amortization table
Date Interest Income Amortization Carrying amount
01/01/16 1,281,240
12/31/16 153,749 153,749 1,434,989
12/31/17 172,199 172,199 1,607,187
12/31/18 192,812 192,812 1,800,000
Question No. 2
153,749. See amortization table above.
Question No. 3
1,434,989. See amortization table above.
Question No. 4 and 5
The total amount of 1,434,989 is reported as noncurrent receivable since it is
due to be collected beyond twelve months from the end of the reporting period.
SUMMARY OF ANSWERS:
1. B 2. B 3. A 4. B 5. A
E READER AND PC.Compatible in Acrobat
PROBLEM 10-13 Computation of Annual Payment or Collection
CASE 1: Based on the original data
Requirement No. 1
Present value of the notes
Annual collection =
Present value of ordinary annuity for 3 periods
1,500,000
Annual collection =
2.4018
Annual collection = P624,532
Requirement No. 2
Interest income (1,500,000 x 12%) = P180,000
CASE 2
Requirement No. 1
Present value of the notes
Annual collection =
Present value of annuity due for 3 periods
1,500,000
Annual collection =
2. 6901
Annual collection = P557,600
56
Chapter 10: Loans and Receivables
Requirement No. 2
Interest income (1,500,000 – 557,600) x 12% = P113,088
PROBLEM 10-14
PROBLEM 10-15
SOLUTION:
Requirement No. 1 PAS 18
2017:
Dec. 31 Accounts receivable ₱ 550,000
Sales ₱ 550,000
Cost of sales 300,000
Merchandise inventory 300,000
Sales returns (₱550,000 x 30%) 165,000
57
Chapter 10: Loans and Receivables
CASE NO. 2
Question No. 4
Carrying value – 12/31/2015 (see table below) 15,458,634
Less: *Present value of expected cash flows 7,705,280
Loan impairment (B) 9,894,720
Amortization table
Interest
Received Interest Carrying
Date Or Accrued Income Amortization amount
01/01/2013 ₱14,846,080
12/31/2013 1,600,000 1,781,530 181,530 15,027,610
12/31/2014 1,600,000 1,803,313 203,313 15,230,923
12/31/2015 1,600,000* 1,827,711 227,710 15,458,634
*Interest accrued.
59
Chapter 10: Loans and Receivables
CASE NO. 3
Question No. 5
Carrying value – 12/31/2015 (see table below) 17,058,634
Less: *Present value of expected cash flows 7,705,280
Loan impairment (C) 9,353,354
Amortization table
Interest
Received Interest Carrying
Date Or Accrued Income Amortization amount
01/01/2013 ₱14,846,080
12/31/2013 1,600,000 1,781,530 181,530 15,027,610
12/31/2014 1,600,000 1,803,313 203,313 15,230,923
12/31/2015 1,827,711 1,827,711 17,058,634
SUMMARY OF ANSWERS:
60
Chapter 10: Loans and Receivables
1. A 2. B 3. B 4. B 5. C 6. C
SUMMARY OF ANSWERS:
E READER
1. 2. 3. B 4. A
AND PC.Compatible in Acroba
t
PROBLEM 10-18 Pledge of Receivable
Principal amount borrowed P 900,000
Less: One year interest deducted in advance (900,000 x 10%) ( 90,000)
Cash received on December 1 (B) P810,000
63
Chapter 10: Loans and Receivables
COMPREHENSIVE PROBLEMS
PROBLEM 10-23
Question No. 1
Credit Sales Accounts written off Recoveries
2013 2,220,000 52,000 4,300
2014 2,450,000 59,000 7,500
2015 2,930,000 60,000 7,200
7,600,000 171,000 19,000
Accounts written off minus Recoveries
Percentage =
Total credit sales
Total years from 2013 to 2015:
171,000 - 19,000
Percentage =
7,600,000
Percentage = 0.02 or 2%
Question No. 2
Doubtful accounts expense (3,000,000 x 2%) = P60,000
Question No. 3
Reported doubtful account expense (bad debts written off) P 62,000
Less: Correct doubtful account expense (see No. 2) ( 60,000)
E READER AND PC.Compatible in Acrobat
Overstatement in doubtful account expenses P 2,000
Question No. 4
Accounts receivable trade
Beg. Balance 418,000 645,600 Balance end
Sales on account 3,000,000 62,000 Write-off
2,710,400 Collections excluding
advance from customers
Total 3,418,000 3,418,000
Question No. 5
Allowance for Doubtful accounts
Accounts written off 62,000 15,200 Beg. Balance
Balance end 21,600 60,000 Doubtful accounts expense
8,400 Recoveries
Total 83,600 83,600
SUMMARY OF ANSWERS:
1. A 2. A 3. B 4. B 5. A
64
Chapter 10: Loans and Receivables
PROBLEM 10-24
Question No. 1
Unadjusted accounts receivable, Dec. 1 (squeeze) P 21,800
Add: Adjusted net sales 255,000
Total 276,800
Less: Collections, net of discounts 156,800
Estimated uncollectible accounts charged to AR in Dec. 30,000
Unadjusted accounts receivable, Dec. 31 P 90,000
Subsidiary ledger balance, Dec. 1 P 59,000
Less: AR controlling account, Dec. 1 (see above) 21,800
Add: Estimated uncollectible account
charged to AR in Dec. 6,000 27,800
Customers’ credit balance (D) P31,200
Question No. 2
Collection, net of discount P 156,800
Divide by: (100%-2%) 98%
Total credit to AR for collection (A) P160,000
Question No. 3
Customer credit balance, Dec. 1 P 31,200
Less: sale to customer with credit balance 10,000
E READER AND
Customer Credit balance, PC.Compatible in Acrob
Dec. 31 (A) 21,200
at
Question No. 4
Unadjusted Sales, balance P 260,000
b) Sales, FOB shipping pt., not yet recorded 10,000
c) Sales, FOB destination ( 15,000)
Adjusted Sales balance (A) P 255,000
Question No. 5
Subsidiary ledger, balance, 12/1 P 59,000
Add: Adjusted Sales in December 255,000
Freight prepaid by the company 1,000
Total P 315,000
Less: total credit to AR for coll. 160,000
Adjusted accounts receivable in Dec. (B) P 155,000
SUMMARY OF ANSWERS:
1. D 2. A 3. A 4. A 5. B
65
Chapter 10: Loans and Receivables
PROBLEM 10-25
Question No. 1
Balance Accounts
Dec. 31 Not due 1-60 days 61-120 days Over 120
1 12,000 3,000 8,000 1,000
2 22,000 22,000
4 20,000 10,000 10,000
5 55,000 2,220 52,780
6 7,500 7,500
116,500 27,220 68,280 11,000 10,000
Multiply by: 0.50% 2% 5% 50%
136.10 1,365.60 550 5,000.00
Question Nos. 2 and 3
Required balance (P136.10+P1,365.60+P550+P5,000) P 7,051.70
Less: Allowance for doubtful accounts, beginning 5,000.00
Doubtful accounts expense P 2,051.70
SUMMARY OF ANSWERS:
1. D 2. C 3. B 4. D 5. A
PROBLEM 10-26
Question No. 1
Principal 4,000,000
Origination fees received (342,100)
Direct origination cost incurred 150,020
Initial Carrying amount of the loan 3,807,920
Question No. 2
By trial and error, 12% interest rate will have a present value equal to the
initial carrying amount of the loan.
Present value of Prin. (4,000,000 x .7118) 2,847,200
Present value of Int. (4M x 10% x 2.4018) 960,720
Present value of Loan Receivable 3,807,920
66
Chapter 10: Loans and Receivables
Question No. 5
Zero, As of December 31, 2016, the entire loan proceeds will be collectible on
December 31, 2018, that is two years from the reporting date.
SUMMARY OF ANSWERS:
1. A 2. C 3. B 4. A 5. A
PROBLEM 10-27
Question No. 1
Annual Cash PV
Date flows factor Amount
Dec. 31, 2015 P1,750,000 0.9091 P 1,590,925
Dec. 31, 2016 2,000,000 0.8264 1,652,800
Dec. 31, 2017 1,750,000 0.7513 1,314,775
E READER AND PC.Compatible in Acrobat
Total 4,558,500
Question No. 2
Carrying amount of the loan P 5,500,000
Less: Present value of the loan 4,558,500
Impairment loss P 941,500
Question Nos. 3 to 5
Interest Reduction to Carrying
Date Payment Income Principal amount
12/31/2014 P4,558,500
12/31/2015 P1,750,000 P455,850 P1,294,150 3,264,350
12/31/2016 2,000,000 326,435 1,673,565 1,590,785
12/31/2017 1,750,000 159,079 1,590,785 -
SUMMARY OF ANSWERS:
1. C 2. A 3. B 4. A 5. C
67
Chapter 10: Loans and Receivables
PROBLEM 10-28
Question Nos. 1 to 4
Accounts Allow Mdse. Net Cost of
Receivable for DA Inventory Sales Sales
Unadjusted balances 300,000 3,000 400,000 1,000,000 800,000
2) Sale return (30,000) (30,000)
Cost of return
Merchandise
(30,000 x 80%) 24,000 (24,000)
3)Sales FOB shipping
point
not recorded as
Sale 40,000 40,000
Cost of mdse sold
(40,000 x 80%) (32,000) 32,000
4) Goods shipped
FOB
Destination recorded
as sale (50,000) (50,000)
Cost of goods
(50,000 x 80%) 40,000 (40,000)
6) Doubtful accts exp (12,000)
Adjusted bal. 260,000 15,000 432,000 960,000 768,000
E READER
Question receivable
No. 5
Accounts ANDdoubtful
P 260,000
PC.Compatible
accounts ( in Acrobat
Less: Allowance for 15,000)
Net realizable value P245,000
SUMMARY OF ANSWERS:
1. B 2. B 3. B 4. B 5. C
PROBLEM 10-29
Question No. 1
Estimated
Classification Balance
Percentage Amount
1-60 days P 1,000,000 1% P 10,000
61-120 days 400,000 5% 20,000
121-180 days 300,000 10% 30,000
181-360 days 200,000 25% 50,000
More than one year 60,000 80% 48,000
Totals P 1,960,000 P 158,000
Question No. 2
Accounts receivable, adjusted (see no. 1) P 1,960,000
Less: Allowance for doubtful accounts, end (see no. 1) 158,000
Net realizable value P1,802,000
68
Chapter 10: Loans and Receivables
Question No. 3
Doubtful accounts per books (9,000,000 x 2%) P 180,000
Less: *Adjusted doubtful accounts expense 188,000
Understatement of doubtful accounts (P 8,000)
Question No. 4
Total carrying value P3,000,000
Less: **Present value of the loan 2,790,000
Impairment loss P 210,000
*Computation of present value
Annual Cash flow PV factor Total
P1,000,000 1.00 P 1,000,000
E READER AND PC.Compatible in Acrobat
1,000,000
1,000,000
0.93
0.86
930,000
860,000
Total Present value of the loan P 2,790,000
Question No. 5
Interest Amortizatio Carrying
Date Collections Income n amount
01/01/2016 2,790,000
12/31/2016 1,000,000 1,000,000 1,790,000
12/31/2017 1,000,000 143,200 856,800 933,200
SUMMARY OF ANSWERS:
1. A 2. B 3. D 4. B 5. B
PROBLEM 10-30
Question No. 1
Accounts receivable, unadjusted balance
Per subsidiary ledger P1,660,000
Note receivable included in the AR (200,000)
Factored Accounts receivable (160,000)
Sales FOB shipping point 100,000
Adjusted AR balance P1,400,000
69
Chapter 10: Loans and Receivables
Question No. 2
Allowance for doubtful accts, beg. P 100,000
Add: Doubtful accounts (P15,000,000 + P100,000) x 1% 151,000
Total P 251,000
Less: Accounts written off 28,000
Allowance for doubtful accts, end P 223,000
Question No. 3
Unadjusted Net Sales P15,000,000
Add: Sales, FOB shipping point 100,000
Total Sales P 15,100,000
Multiply by: rate 1%
Doubtful accounts P 151,000
Question No. 4
No effect. The audit adjustments did not result to any changes to inventory
account.
Question No. 5
Sales, FOB shipping point P 100,000
SUMMARY OF ANSWERS:
1. D 2. A 3. D 4. D 5. A
Question No. 5
Total Cash paid (see No. 3) 330,000
Add: Interest income (P330,000 x 12% x 2/12) 6,600
Cash received P 336,600
Question No. 6
Accounts receivable-unassigned
(2,000,000-3000,000-400,000-600,000) P 700,000
Add: Accounts receivable assigned 600,000
Total 1,300,000
Less: Less: Allowance for doubtful accounts (1,300,000 x 5%) 65,000
Net realizable value P1,235,000
SUMMARY OF ANSWERS:
1. B 2. C 3. A 4. B 5. D 6. D
PROBLEM 10-32
Question Nos. 1 to 3 days to
60 and 61 90 Over
days90
Total below days
Unadjusted Balance,
12/31/2016 1,900,000 1,000,000 500,000 400,000
E READER AND PC.Compatible in Acrobat
Adjustments:
Write Off (40,000)
(40,000)
Unrecorded sale 50,000 50,000
NSF Check 20,000 20,000
In transit shipment –
FOB Destination (45,000) (45,000)
Consignment (45,000) (45,000)
Erroneous unit price (7,500) (7,500)
Adjusted balance,
12/31/2016 1,832,500 930,000 492,500 410,000
Percentage of Uncollectibility 4% 5% 10%
Required allowance,
12/31/2016 108,825 37,200 24,625 41,000
Question No. 4
Allowance for Doubtful accounts
Write off 40,000 100,000 Beg. Balance
Balance end (required) 102,825 - Recoveries
42,825 Doubtful account expense
(squeeze)
Total 142,825 142,825
71
Chapter 10: Loans and Receivables
PROBLEM 10-33
Question Nos. 1 and 3
E READER AND PC.Compatible in Acroba
Adjusting entries for Accounts receivable
t
Item Accounts Debit Credit
1 Accounts receivable 20,000
Allowance for doubtful accounts 20,000
2 Sales discount 16,000
Accounts receivable 16,000
3 Accounts receivable 120,000
Allowance for doubtful accounts 120,000
4 Accounts receivable 30,000
Allowance for doubtful accounts 30,000
Miscellaneous income 30,000
Accounts receivable 30,000
Accounts receivable
Beg. Balance 220,000 2,720,000 Balance end
(20,000+200,000)
Sales 4,000,000 30,00 Recoveries
Recoveries 30,000 *1,500,000 Collections, gross of
discount
72
Chapter 10: Loans and Receivables
Interest Carrying
Date Collections Income Amortization amount
01/01/2015 3,711,520
12/31/2015 400,000 445,382 45,382 3,756,902
12/31/2016 400,000 450,828 50,828 3,807,731
12/31/2017 400,000 456,928 56,928 3,864,658
12/31/2018 400,000 463,759 63,759 3,928,417
12/31/2019 400,000 471,410 71,583 4,000,000
Initial carrying amount 3,711,520
1. B 2. C 3. D 4. D 5. A
73
SUMMARY OF ANSWERS:
Chapter 10: Loans and Receivables
PROBLEM 10-34
Question No. 1
Unrecorded gain on sale of machinery – 2015 (see below) 90,183
Unrecorded interest income – receivable from sale of machinery
(240,183 x 12%) 28,822
Unrecorded accrued interest – receivable from sale of plant
(1,500,000 x 12% x 9/12) 135,000
Net adjustment to R/E – 01/01/16 (B) 254,005
Cash consideration 200,000
Add: Present value of future cash flows (2.4018 x 100,000) 240,183
Total selling price 440,183
Less: Carrying value of machine (800,000 – 450,000) 350,000
Gain on sale of machine 90,183
Question No. 3
Current portion of note receivable from:
Sale of machinery (see amortization table above) 89,286
Sale of plant 500,000
Total current portion (B) 589,286
Question No. 4
Non-current portion of note receivable from:
Sale of plant 500,000
Sale of equipment (170,750 + 12,806) 183,556
Total non-current portion (D) 683,556
Question No. 5
Interest income from sale of machine 20,281
74
Chapter 10: Loans and Receivables
SUMMARY OF ANSWERS:
1. B 2. C 3. B 4. D 5. D
75
Chapter 12: Inventories
Question No. 2
Inventoriable cost (C) ₱ 850,000
76
Chapter 12: Inventories
Question No. 2
Variable cost:
Direct labor (₱3 x 3 DLH x 120,000 units) ₱1,080,000
Direct materials (₱2 excluding VAT x 120,000 units) 200,000
Fixed Cost (₱100,000 / 120,000 actual capacity) x 100,000 actual 100,000
Total cost (C) ₱1,420,000
Question No. 3
Variable cost:
Direct labor (₱3 x 3 DLH x 80,000 units) ₱ 720,000
Direct materials (₱2 excluding VAT x 80,000 units) 160,000
Fixed Cost (₱100,000 / 100,000 normal capacity) x 80,000 actual 80,000
Total cost (D) ₱ 960,000
E READER AND
PROBLEM 12-6 ItemsPC.Compatible
to be Included
warehouse in the
during the count
Inventory
in Acrobat
1 Items in the P1,090,000
2 Items out on consignment at another company's store 70,000
Items purchased FOB shipping point that are in transit at
4 December 31 500,000
5 Freight charges on goods purchased above 13,000
Items sold to another company, for which our company
has signed an agreement to repurchase at a set price that
covers all costs related to the inventory. Total cost of
7 merchandise is 200,000
Items sold FOB destination that are in transit at December
10 31, at cost 75,000
14 Items currently being used for window display 100,000
15 Items on counter for sale 400,000
17 Items included in thedept.,
count, damaged and unsalable (150,000)
receiving
(not thereturned
count) by customer, in good
18 condition included in 50,000
19 Merchandise inventories out on approval, at cost 100,000
Finished special article goods, made to order (included in
20 the count) (78,000)
Total (A) P2,370,000
77
Chapter 12: Inventories
SUMMARY OF ANSWERS:
CASE NO. 1 CASE NO. 2
1. B 5. C
2. C 6. C
3. D 7. A
4. A 8. D
SUMMARY OF ANSWERS:
1. C 2. C 3. A 4. A 5. B 6. B 7. B 8. B
SUMMARY OF ANSWERS:
1. B 2. A
PROBLEM 12-17
Question No. 1
A EI over (P129-P119) x 4,000 40,000
B EI under (70,000)
C EI over 100,000
Overstatement of ending inventory 70,000 (C)
Question No. 2
D. Ending inventory understated (140,000) (B)
Question Nos. 3 and 4
2015 2016
Unadjusted balance 1,000,000 1,200,000
A. EI over, NI over (P129-P119) x 4,000 (40,000) 40,000
B. EI under, NI under 70,000 (70,000)
C. EI over, NI over (100,000) 100,000
D. EI under, NI under 140,000
Adjusted balances 930,000 1,410,000
(A) (C)
E READER AND PC.Compatible in Acrobat
Question No. 5
Unadjusted net income (1,000,000+1,200,000) 2,200,000
Less: Adjusted net income (930,000+1,410,000) 2,340,000
Net adjustment to income-understated (140,000) (D)
SUMMARY OF ANSWERS:
1. C 2. B 3. A 4. C 5. D
PROBLEM 12-18
Question Nos. 1 and 2
Ledger
Count
Physical
Balances prior to adjustment PBalance
314,800 P 293,600
Add: Goods in transit sold, FOB destination 3,200 3,200
Less: unrecorded sale ( 8,400) -
Less: unrecorded purchase returns ( 6,000) -
Less: goods held on consignment - ( 8,800)
Add: unrecorded purchase 3,640- -
Add: Goods in transit purchased, FOB shipping point 1,600
Add: Goods out on consignment - 14,800
Adjusted balances P 307,240 P 304,400
84
Chapter 12: Inventories
(A) (C)
Question No. 3
Adjusted balances, per ledger P 307,240
Adjusted balances, physical count 304,400
Inventory shortage P 2,840 (B)
SUMMARY OF ANSWERS:
1. A 2. C 3. B
PROBLEM 12-19
Note to the professor: Use the following guide questions in answering this
question:
1. Accounts Payable and related accounts
Was there a valid purchase?
Was the purchase recorded?
Were the inventories INCLUDED in the count?
2. Accounts Receivable and related accounts
Was there a valid sale?
Was the sale recorded?
Were the inventories EXCLUDED in the count?
E READER
SOLUTION:AND PC.Compatible in Acrobat
Ending
Income
Unadjusted balances 550,000 1,000,000 600,000 450,000 120,000
Net
679 Inventory Sales Purchases AP
680
681
682 Purch over, COS over, NI
under (46,740) (46,740) (46,740)
EI over, COS under, NI
over (46,740) 46,740
683 EI over, COS under, NI
over (4,500) (4,500)
684 Purch under, NI over 1,060 1,060 (1,060)
685 No, No, No
686 No, No, No
310 Yes, Yes, Yes
311 Sales over, NI over (560) (560)
EI under, NI under (560 x
70%) 392 392
312 Sales over, NI over (31,940) (31,940)
EI under, NI under (31,940
x 70%) 22,358 22,358
313 Sales over, NI over (6,350) (6,350)
EI under, NI under (6,350
x 70%) 4,445 4,445
314 Sales over, NI over (1,930) (1,930)
315 No, No, No
316 No, No, No
85
Chapter 12: Inventories
SUMMARY OF ANSWERS:
1. A 2. A 3. A 4. A 5. D
PROBLEM 12-20
Ending Accounts Accounts
inventory receivable payable Sales Net income
Unadjusted
balance P220,000 P104,000 P138,000 P1,010,000 P180,400
A (20,000) 20,000
B (10,000) (10,000)
C 50,000 (64,000) (64,000) (14,000)
D 14,000 (16,000) (16,000) (2,000)
E ( 24,000) ( 24,000)
Adjusted P 250,000 P24,000 P108,000 P930,000 P160,400
(A) (C) (D) (D) (A)
SUMMARY OF ANSWERS:
1. A 2. C 3. D 4. D 5. A
E READER AND PC.Compatible in Acrobat
PROBLEM 12-21
Accounts Accounts Net
Inventory payable Receivable Net Sales Purchases Net income
Unadjusted
balances 250,000 400,000 1,000,000 4,000,000 2,500,000 600,000
A - - - - - -
B 35,000 - - - - 35,000
C 4,000 4,000 - - 4,000 -
D (25,000) - 40,000 40,000 - 15,000
E 10,000 - - - - 10,000
F - - (30,000) (30,000) - (30,000)
G 34,000 - (68,000) (68,000) - (34,000)
H - - (10,000) (10,000) - (10,000)
I - - - (90,000) - (90,000)
J 60,000 60,000 - - 60,000 -
Adjusted
balances 368,000 464,000 932,000 3,842,000 2,564,000 496,000
SUMMARY OF ANSWERS:
1. C 2. C 3. A 4. A 5. D 6. D
86
Chapter 12: Inventories
PROBLEM 12-22
Questions No. 1 to 5
R/E Sales EI A/P CGS
2016 Purchases under, CGS 36,000
under, NI over, RE over
2017 Purchases over, CGS 36,000
over
2016 EI under, NI under, RE (32,000)
under
2017 BI under, CGS under (32,000)
Sales under (20,000)
Purchases under, CGS under (24,000)
(24,000)
EI under, CGS over (8,000) 8,000
Purchases under, CGS under (4,000) (4,000)
EI under, CGS over (4,000) 4,000
Total 4,000 (20,000) (12,000) (28,000) (12,000)
Legend:
BI - Beginning inventory
EI - Ending inventory
NI - Net Income
CGS - Cost of goods sold
RE - Retained earnings – 12/31/2016 or 01/01/2017
4,000 – overstated
E READER AND PC.Compatible in Acroba
(4,000) – understated
t
Note: The effect of errors on December 2016 and January 2017 has no effect on
the ending balance of the accounts payable on December 31, 2017 since the
payable is expected to be settled before the end of the year.
SUMMARY OF ANSWERS:
1. C 2. B 3. B 4. D 5. C
PROBLEM 12-23
Question No. 1
Sales (475,000/80%) P593,750 100%
Less: Cost of sales 475,000 80%
Gross profit 118,750 20%
Inventory (in units)
Beg. Balance (60,000/P3) 20,000 25,000 Balance end (squeeze) or
(125,000/5)
Purchases 100,000 95,000 Cost of sales (475,000/5)
Total 120,000 120,000
PROBLEM 12-24
Question No. 1
The cumulative effect on change in accounting policy on January 1, 2016 or
December 31, 2015 Retained Earnings is understatement of 100,000, which is
the understatement of Ending Inventory on December 31, 2015. (B)
Question No. 2
Net income – weighted average P3,250,000
Beginning inventory under, CGS under, Net income over (150,000)
Ending inventory under, CGS over, Net income under 100,000
E READER AND PC.Compatible (B)in Acrobat
Adjusted net income – FIFO P3,200,000
Question No. 3
Computation of units sold:
Beginning inventory – units 10,000
Add: Total purchases – units 100,000
Total goods available for sale – units 110,000
Less: Units sold (P6,400,000 / P80/unit) 80,000
Ending inventory in units 30,000
The 30,000 ending inventory comes from the last two purchases as follows:
Units Unit cost Total cost
From 4th quarter purchases 10,000 68 680,000
From 3rd quarter purchases 20,000 66 1,320,000
Total 30,000 (B) 2,000,000
Question No. 4
Cost (refer to no. 3) 2,000,000
Net realizable value [(P70 – P5) x 30,000] 1,950,000
Loss on inventory write-down (B) 50,000
Question No. 5
Beginning inventory – FIFO 500,000
Add: Net Purchases (P6,480,000 – 980,000) 5,500,000
88
Chapter 12: Inventories
SUMMARY OF ANSWERS:
1. B 2. B 3. B 4. B 5. A
PROBLEM 12-25
Question No. 1
(10,500 - 1,000 + 3,000) = 12,000 units
No. of units Unit cost Total
3,000 14 P 42,000
2,000 13 26,000
4,000 15 60,000
3,000 16 48,000
12,000 P 176,000 (A)
Question No. 2
E READER AND PC.Compatible
(4,500+700+600)=5,800 units
No. of units Unit cost Total
in Acrobat
1,800 19 P 34,200
1,800 20 36,000
1,200 21 25,200
1,000 22 22,000
5,800 P 117,400 (A)
Question No. 3
T-shirts:
Net realizable value NRV Cost Lower
(12,000 x (P16-(10% x P16)) P172,800 P176,000 P 172,800
Jackets:
(5,800 x (P22-(10%xP22) 114,840 117,400 114,840
Lower of cost or NRV P287,640 P 293,400 P 287,640
Question No. 4
Total cost (see no. 3) P 293,400
Less: Lower of cost or NRV (see no. 3) 287,640
Loss on inventory write-down (B) P 5,760
Question No. 5
Beginning inventories:
T-shirts (9,000 x P11) P 99,000
Jackets (5,000 x P15) 75,000 P 174,000
89
Chapter 12: Inventories
Jackets
900 P16 P 14,400
1,100 18 19,800
1,500 19 28,500
2,000 19 38,000
1,800 20 36,000
E READER AND PC.Compatible in Acrobat
1,200
1,000
21
22
25,200
22,000
9,500 P 183,900
SUMMARY OF ANSWERS:
1. A 2. A 3. A 4. B 5. B
PROBLEM 12-26
This T-Account of Raw Materials will be the same under the three different
cases:
Raw Materials
Beginning balance 600,000 1,200,000 Balance end
Net Purchases 2,200,000 1,600,000 Direct materials used
Total 2,800,000 2,800,000
CASE NO. 1
Question No. 1
GP Rate: 2013 2014 2015 2016
Gross Profit 2,000,000 3,500,000 4,000,000
Divide by: Sales 1,700,000 2,800,000 3,000,000
Gross Profit Rate 0.15 0.20 0.25 0.30
90
Chapter 12: Inventories
The trend of gross profit for the past three years increases by 5% each year;
thus, if the trend continues, the gross profit for 2016 will be 30%. The cost ratio
then would be 70% (100% - 30%). Therefore, the cost of goods sold is
computed as follows:
Sales 6,000,000
Multiply by: Cost Ratio 0.70
Cost of goods sold 4,200,000 (B)
Question No. 2
Finished Goods
Beginning balance 2,800,000 2,000,000 Balance end
Cost of goods 4,200,000 Cost of goods sold
manufactured 3,400,000
Total 6,200,000 6,200,000
Work in Process
Beginning balance 2,000,000 2,600,000 Balance end (A)
Direct materials used 1,600,000 Cost of goods
Direct labor 1,600,000 3,400,000 manufactured
Factory overhead 800,000
E READER AND
Total 6,000,000 6,000,000
PC.Compatible in Acroba
t
Computation of factory overhead:
Direct labor cost 1,600,000
Multiply by: Predetermined rate 50%
Factory overhead 800,000
CASE NO. 2:
Question No. 3
GP Rate: 2013 2014 2015 2016
Gross Profit 340,000 630,000 1,000,000
Divide by: Sales 2,000,000 3,500,000 4,000,000
Gross Profit Rate 0.17 0.18 0.25 0.20
The GP rate in 2016 is computed as follows:
16% + 18% + 25%
Gross Profit Rate =
3
= 20%
The cost ratio then would be 80% (100% - 20%). Therefore, the cost of goods
sold is computed as follows:
Sales 6,000,000
Multiply by: Cost Ratio 0.80
Cost of goods sold 4,800,000 (B)
91
Chapter 12: Inventories
Question No. 4
Finished Goods
Beginning balance 2,800,000 2,000,000 Balance end
Cost of goods 4,800,000 Cost of goods sold
manufactured 4,000,000
Total 6,800,000 6,800,000
Work in Process
Beginning balance 2,000,000 2,000,000 Balance end (A)
Direct materials used 1,600,000 Cost of goods
Direct labor 1,600,000 4,000,000 manufactured
Factory overhead 800,000
Total 6,000,000 6,000,000
CASE NO. 3:
Question No. 5
The gross profit for 2016 is computed based on the overall gross profit for 2014
and 2015:
800,000 + 1,000,000
Gross Profit Rate =
3,500,000 + 4,000,000
E READER AND PC.Compatible in Acrobat
=
1,800,000
7,500,000
Gross Profit Rate = 24%
The cost ratio then would be 76% (100% - 24%). Therefore, the cost of goods
sold is computed as follows:
Sales 6,000,000
Multiply by: Cost Ratio 0.76
Cost of goods sold 4,560,000 (A)
Question No. 6
Finished Goods
Beginning balance 2,800,000 2,000,000 Balance end
Cost of goods 4,560,000 Cost of goods sold
manufactured 3,760,000
Total 6,560,000 6,560,000
Work in Process
Beginning balance 2,000,000 2,240,000 Balance end (A)
Direct materials used 1,600,000 Cost of goods
Direct labor 1,600,000 3,760,000 manufactured
Factory overhead 800,000
92
Chapter 12: Inventories
SUMMARY OF ANSWERS:
1. B 2. A 3. B 4. A 5. A 6. A
PROBLEM 12-27
Question No. 1
Accounts payable
Balance end 250,000 555,000 Beg. Balance
Purchase ret. and allow. 70,000 3,000,000 Purchases
Purchase discounts 80,000 100,000 Freight-in
Payments to supplier 3,255,000
(squeeze)
Total 3,655,000 3,655,000
Question No. 2
Direct materials inventory
Beg. Balance 200,000 320,000 Balance end
Net purchases 2,950,000 2,830,000 Direct materials used
E READER
Total AND 3,150,000 3,150,000
PC.Compatible in Acroba
t
Purchases 3,000,000
Add: Freight-in 100,000
Gross Purchases 3,100,000
Less: Purchase returns and allow 70,000
Purchase discounts 80,000
Net Purchases 2,950,000
Question No. 3
Work in process
Beg. Balance 250,000 280,000 Balance end
Direct materials used 2,950,000 4,375,000 Cost of goods
Direct labor 900,000 manufactured
Factory overhead 675,000
Total 4,655,000 4,655,000
Question No. 4
Sales P5,100,000 120%
Less: Cost of sales (5,000,000/120%) 4,250,000 100%
Gross profit 850,000 20%
93
Chapter 12: Inventories
Note: Do not deduct sales discount from the gross sales since sales discount
does not constitute actual return of merchandise.
Question No. 5
Finished goods
Beg. Balance 400,000 525,000 Balance end
Cost of goods 4,375,000 4,250,000 Cost of goods sold
manufactured
Total 4,775,000 4,775,000
Question No. 6
Cost of goods sold (80% x P5,100,000) = P4,080,000
Question No. 7
Sales (5,100,000-100,000) P5,000,000 100%
Less: Cost of sales (80% x P5,100,000) 4,080,000 80%
Gross profit 1,000,000 20%
E READER AND PC.Compatible in Acrobat
Finished goods
Beg. Balance 400,000 695,000 Balance end
Cost of goods 4,375,000 4,080,000 Cost of goods sold
manufactured
Total 4,775,000 4,775,000
SUMMARY OF ANSWERS:
1. A 2. A 3. A 4. B 5. B 6. A 7. A
PROBLEM 12-28
Question No. 1
Accounts payable, March 31 2,370,000
Less: Payment in April 300,000
Total 2,070,000
Accounts payable for April Purchases
94
Chapter 12: Inventories
Question No. 2
Purchases, as of March 31 4,200,000
Add: Purchases in April 600,000
Gross purchases 4,800,000
Less: Purchase returns 12,000
Net purchases (B) 4,788,000
Question No. 3
Accounts receivable
Beg. Balance 2,700,000 3,000,000 Bal. end
Collections including
Sales on account 1,488,000 938,000 recoveries
Recoveries 0 250,000 Writeoff
0 Sales returns
4,188,000 4,188,000
Net Sales
Sales as of March 31 9,040,000
E READER AND
April Sales 1,488,000
PC.Compatible in Acroba
t
Less: Sales return 100,000 1,388,000
Net Sales (C) 10,428,000
Question No. 4
Net Sales 10,428,000
Multiply by: Cost ratio 60%
Cost of Sales (C) 6,256,800
Cost of Sales 9,000,000 10,500,000
Divide by: Gross Profit 9,000,000 4,500,000
50.000% 30.000%
Average gross profit = (50%+30%)/2 = 40%
Cost ratio = 100% - 40% = 60%
Question No. 5
Estimated inventory 3,031,200
Less: Shipment in transit 40,000
Undamaged goods at cost 120,000
Salvage value 25,000
Inventory fire loss (C) 2,846,200
SUMMARY OF ANSWERS:
95
Chapter 12: Inventories
1. B 2. B 3. C 4. C 5. C
PROBLEM 12-29
Questions No. 1 and 2
Purchases ending
11 mos 12 mos
Unadjusted balance 2,700,000 3,200,000
Shipment in Nov. included in December purchases 30,000 -
Unsalable shipments received (4,000) (6,000)
Deposits in October shipped February (8,000) (8,000)
Deposits made vendor in November (22,000) -
Adjusted balance 2,696,000 2,186,000
1. (D) 2. (D)
Question No. 3
Beginning inventory – January 1, 2015 350,000
Add: Purchases for 11 months (see No. 1) 2,696,000
Less: Ending inventory – Nov. 30, 2015 (360,000- 358,000
22,000 + 20,000)
Cost of sales 2,688,000 (A)
Question No. 4
Sales ending December 31, 2015 3,840,000
Less: Sales ending Nov. 30, 2015 (3.4M-40,000) 3,360,000
Sales – December 2015 480,000
Less: Sales at cost 40,000
Sales in December 2015 made at a profit 440,000
Multiply: Cost ratio (2,688,000 / 3,360,000) 80%
Cost of sales made at profit 352,000
Add: Cost of sales made at cost 40,000
Total Cost of Sales -December 392,000 (A)
Question No. 5
Beginning inventory – Nov. 30, 2015 358,000
Add: Purchases for December (3,186,000 – 2,696,000) 490,000
Less: Cost of Sales – December 392,000
Ending inventory – December 31, 2015 456,000 (A)
SUMMARY OF ANSWERS:
1. D 2. D 3. A 4. A 5. A
PROBLEM 12-30
96
Chapter 12: Inventories
Cost Retail
Inventory, Jan 1 300,000 1,200,000
Purchases 6,000,000 8,500,000
Purchase returns (400,000) (800,000)
Purchase discounts (150,000) -
Purchase allowance (50,000) -
Freight-in 20,000 -
Departmental Transfer-In 600,000 1,100,000
Departmental Transfer-Out (560,000) (1,334,000)
Totals 5,760,000 8,666,000
Cost ratios:
Conservative
E READER
Cost ratio AND
=
5,760,000
PC.Compatible in Acro
bat 9,216,000
Cost ratio = 62,50%
Average
5,760,000
Cost ratio =
9,000,000
Cost ratio = 64%
FIFO
5,760,000 – 300,000
Cost ratio =
9,000,000 – 1,200,000
Cost ratio = 70%
Question Nos. 1 to 6
Ending inventory at cost Cost of goods sold
Cost method (EI @ retail x cost ratio) (TGAS @cost – EI @cost)
Conservative (62.5%) P 1,375,000 4,385,000
FIFO (70%) 1,540,000 4,220,000
Average (64%) 1,408,000 4,352,000
SUMMARY OF ANSWERS:
1. A 2. B 3. B 4. C 5. C 6. D
PROBLEM 12-31
Question No. 1
Subsidiary General
Ledger Ledger
Unadjusted bal. P 760,000 P 1,020,000
Undelivered sales ( 100,000)
Valid Sales 60,000
Sales FOB destination ( 100,000)
NSF check 50,000 50,000
Collection by the bank ( 60,000) ( 60,000)
Sales in 2015 recorded in 2016 DR No. 38740 3,360 3,360
E READER AND PC.Compatible
( in
( Acroba
Receivable ins. Co DRNo. 38741 10,080) 10,080)
t
Sales in 2016 recorded in 2015 DR No. 38743 ( 19,200) ( 19,200)
Adjusted balance (D) P 784,080 P 784,080
Question No. 2
Current:
Unadjusted beginning Balance 97,500
Add: Valid Sales in 2015 (60,000 + 3,360) 63,360
Total 160,860
Less: Receivable ins. Co (DR # 38741) 10,080
Sales in 2016 recorded in 2015 (DR # 38743) 19,200
Current Accounts Receivable balance 131,580
Past Due:
Adjusted Accounts Receivable balance (see no. 1) 784,080
Less: Current Accounts Receivable balance 131,580
Past due Accounts Receivable *652,500
*or (662,500+50,000-60,000)
Age classification Amount Percentage Total
98
Chapter 12: Inventories
Question No. 3
Allowance for doubtful accounts, beginning 7,000.00
Less: Accounts written off -
Less: Allowance for doubtful accounts, ending 73,144.80
Doubtful accounts expense (A) 66,144.80
Question No. 4
Unadjusted Merchandise Inventory, ending 316,000
Add: Cost of merchandise sold of DR # 38743(19,200/120%) 16,000
Doubtful accounts expense (B) 332,000
Question No. 5
Unadjusted Net Sales balance P 3,000,000
Undelivered sales ( 100,000)
Sales FOB destination ( 100,000)
Sales in 2015 recorded in 2016 DR No. 38740 3,360
Sales in 2016 recorded in 2015 DR No. 38743 ( 19,200)
Adjusted balance (B) P 2,784,160
SUMMARY OF ANSWERS:
1. D 2. A 3. A 4. B 5. B
PROBLEM 12-33
Accounts Accts. Net Net
E READER
Unadj.
AND PC.Compatible in Acrobat
Inventory
625,000
payable
500,000
Receivable Net Sales
500,000 4,500,000
Purchases income
1,607,500 1,086,000
(77,500) (77,500) - - (77,500) -
(11,000) - - - - (11,000)
- - 20,000 20,000 - 20,000
105,000 - - - - 105,000
12,500 12,500 - - 12,500 -
1,000 1,000 - - 1,000 -
(2,650) (2,650) - - (2,650) -
Adj. 652,350 433,350 520,000 4,520,000 1,540,850 1,200,000
SUMMARY OF ANSWERS:
1. D 2. B 3. B 4. B 5. C
PROBLEM 12-34
SUMMARY OF ANSWERS:
1. C 2. A 3. A 4. A 5.
PROBLEM 12-35
SUMMARY OF ANSWERS:
1. C 2. D 3. D 4. D 5. B
PROBLEM 12-36
SUMMARY OF ANSWERS:
1. A 2. A 3. C 4. C 5. B
99