!"#$%&' )
!*''&+%,*- *. /''*'0
!"#$%&' )
12/31/17 Assets
U
O
U
U
U
1.
2.
3.
4.
5.
2017 Profit
U
U
U
U
O
12/31/18 Assets
U
O
U
U
U
2018 Profit
O
U
O
NE
O
*+,,-./01/234 56,37 2. 830 92.:-..234 ;-0;3.6 34,<
**=::3-4/ /2/,6. 106 43/ .;6:282: 56:> /?6 ;035,6@ 06A-2069 34,< /3 /1B6 24/3 6886:/ /?6 CD)E 149 CD)F =..6/. 149
!0382/
Correct Entry
1. Assume, Expense = 100,000
Per Client
Interpretation
Year 2017
Year 2017
1/1
Equipment
Cash
100,000
100,000
12/31 Dep exp
Acc Dep
20,000
20,000
1/1 Expense
Cash
12/31
2017 Asset
Understated by 80,000
100,000
100,000 2017 Profit
Overstated Expense by 80,000
therefore Understated Profit by
80,000
-no entryYear 2018
Year 2018
12/31 Dep exp
20,000
Acc Dep
20,000
12/31
2018 Asset
Understated by 60,000
-no entry-
2018 Profit
Understated expense by 20,000
Overstated profit by 20,000
2.
Year 2016
1/1 Expense
Cash
12/31
30,000
30,000
Year 2017
-no entry-
1/1
Asset
Cash
12/31
-no entry
30,000
2017 Asset
30,000 Overstated by 18,000
12/31 Exp Acc. Amort(Asset)
6,000 6,000 2017 Profit
Overstated Expense by 6,000
Year 2017
therefore Understated Profit by 6,000
12/31 Exp
Year 2018
*Training costs are not
capitalizable; they are period costs
Year 2016
6,000
2018 Asset
Acc. Amort(Asset) 6,000 Overstated by 12,000
Year 2018
12/31 Exp
6,000
Acc. Amort(Asset) 6,000
2018 Profit
Overstated Expense by 6,000
therefore Understated Profit by 6,000
!"#$%&' )
!*''&+%,*- *. /''*'0
3.* *Assuming Qualifying Asset = 40,000
Year 2017
Year 2017
1/1 Qualifying Asset
40,000
Cash1
40,000
1/1 Expense
Cash
12/31 Dep exp
Acc Dep
12/31
1,000
1,000
-no entry-
2017 Profit
Overstated expense by 39,000
therefore Understated profit by
39,000
Year 2018
Year 2018
12/31 Dep exp
Acc Dep
40,000
40,000
2017 Asset
Understated by 39,000
1,000
1,000
12/31
-no entry-
2018 Asset
Understated by 38,000
2018 Profit
Understated Expense by 1,000
therefore Overstated Profit by 1,000
4. Assume
Land bought for parking lot = Land
improvement
Useful Life = 10 years
Year 2017
1/1 Land Improvement
Cash
12/31 Dep. Exp
Acc. Dep
Year 2017
120,000
120,000
12,000
12,000
1/1 Expense
Cash
12/31
2017 Asset
Understated by 108,000
120,000
120,000 2017 Profit
Overstated expense by 108,000
therefore
-no entryUnderstated profit by 108,000
Year 2018
12/31 Dep exp
Acc Dep
Year 2018
12,000
12,000
12/31
2018 Asset
Understated by 96,000
-no entry2018 Profit
Understated Expense by 12,000
therefore
Overstated Profit by 12,000
*After the land is purchased, it must be
leveled and graded for drainage.
Concrete or blacktop can then be
poured over the dirt and line can be
painted for parking spots.
spots. Like all land
improvements, a parking lot has a
limited life. And should therefore be
Depreciated annually.
!"#$%&' )
!*''&+%,*- *. /''*'0
Assume
Land bought for parking lot was not
treated as Land Improvements but as
Land.
1/1 Expense
Cash
120,000
120,000 2017 Profit
Overstated expense by 120,000
Year 2017
1/1 Land
Cash
120,000
120,000
2017 Asset
Understated by 120,000
Year 2017
12/31
therefore Understated profit by
120,000
-no entryYear 2018
12/31 -no entry12/31
2018 Asset
Understated by 120,00
-no entry-
2018 Profit
No Effect
Year 2018
12/31 -no entry-
5.
Assume
Useful Life = 5 years
FV of Dismantling Cost after 5 yrs =
133,815
Discount Rate = 6%
Year 2017
Year 2017
1/1
Equipment
Cash
500,000
Equipment
PFDC
100,000
100,000
500,000
12/31
Depreciation
Acc. Dep
120,000
Interest Expense
PFDC
1/1
Equipment
Cash
6,000
Interest Expense
PFDC
500,000 2017 Profit
Understated expense by 26,000
therefore Overstated profit by 26,000
100,000
100,000
-no entry6,000
Year 2018
12/31
Depreciation
Acc. Dep
500,000
-no entry-
12/31
Depreciation
120,000
Acc. Dep
2017 Asset
Understated by 80,000
Year 2018
120,000
120,000
6,360
12/31
Depreciation
Acc. Dep
-no entry-
6,360
Legend
PFDC= Provision for Dismantling Cost
2018 Asset
Understated by 60,000
100,000
100,000 2018 Profit
Overstated Expense by 26,360
therefore
Understated Profit by 26,360
!"#$%&' )
!*''&+%,*- *. /''*'0
!035,6@ C
Under(Over) statement in Profit of
Nature of error
Retained
Earnings
2016
2017
29,000
(29,000)
30,000
2018
01/01/18
(30,000)
34,000
30,000
2018 Accounts Affected
Account
Dr.
Cr.
Omission of prepaid
expenses
12/31/16
12/31/17
12/31/18
Omission of unearned
revenue:
12/31/16
12/31/17
12/31/18
Omission of accrued
expenses:
12/31/16
12/31/17
12/31/18
Omission of accrued
revenues
12/31/16
12/31/17
12/31/18
Net
under(over)statement
Reported profit(loss)
Corrected profit(loss)
(20,000)
(27,500)
20,000
(28,000)
27,500
(25,000)
28,000
(15,000)
25,000
(27,000)
(28,000)
(25,000)
Expenses
Prepaid expenses
Expenses
Revenue
Revenue
Unearned revenue
Expenses
Expenses
30,000
34,000
34,000
28,000
15,000
15,000
25,000
27,000
Accrued expenses
expenses
42,500
24,000
(120,000)
(96,000)
(42,500)
45,000
( 2,000)
100,000
98,000
CD)F =9G-./24H I3-041, &4/026.
1>
(45,000)
41,000
11,000
200,000
211,000
45,000
Revenues
Accrued revenues
Revenues
27,000
45,000
41,000
22,000
&J;64.6.
KDLDDD
"6/12469 &10424H.
KDLDDD
:>
&J;64.6
CELDDD
=::> &J;64.6
CELDDD
!06;129 &J;64.6.
&J;64.6.
"6/12469 &10424H.
&J;64.6
COLDDD
COLDDD
9>
=::> "6N
+4:3@6
M)LDDD
M)LDDD
5>
"6/12469 &10424H.
"6N64-6
KMLDDD
KMLDDD
CFLDDD
CFLDDD
"6N64-6
)OLDDD
P4610469 "6N64-6 )OLDDD
"6N64-6
MOLDDD
"6/12469 &10424H. MOLDDD
41,000
!"#$%&' )
!*''&+%,*- *. /''*'0
!035,6@ K
Correct Entry
1.
Per Client
Year 2017
Wages Expense 160,000
Acc. Expense
160,000
Year 2018
Acc. Expense
160,000
Cash
160,000
2.
Year 2017
Interest Receivable 48,000
Unearned. Revenue 48,000
2018 Adjusting Entry
Year 2017
-no entry-
Retained Earnings 160,000
Wages Expense
160,000
Year 2018
Wages Expense
160,000
Cash
160,000
Year 2017
None
-no entry-
Year 2018
Year 2018
Unearned Revenue 48,000
Cash
48,000
Interest Income
48,000
Interest Income
Cash
48,000
Interest Receivable 48,000
3.
Year 2017
Prepaid Insurance
Cash
Year 2017
60,000
-No entry60,000
Insurance Expense 15,000
Insurance Expense
Prepaid Insurance
15,000
Cash
4.
5.
Year 2018
Insurance Expense 20,000
Prepaid Insurance 20,000
Year 2017
Unused Supplies 45,000
Cash
45,000
Supplies Expense 20,000
Unused Supplies
20,000
Year 2018
Supplies Expense 52,000
Cash
52,000
Unused Supplies 28, 000
Supplies Expense 28,000
Year 2017
1/1
R&D Expense 120,000
Cash
120,000
12/31
-no entryYear 2018
12/31
-no entry-
6.
48,000
Prepaid Insurance 25,000
Insurance Expense 20,000
Retained Earnings 45,000
60,000
60,000
Year 2018
-No entryYear 2017
Supplies Expense 45,000
Cash
45,000
Year 2018
Supplies Expense 52,000
Cash
52,000
Unused Supplies 25,000
Retained Earnings 25,000
Unused supplies 28,000
Supplies Expense
28,000
Year 2017
Retained Earnings
120,000
1/1
Intangible Asset
120,000
Intangible Asset 120,000
Cash
120,000 Acc. Amort. 40,000
12/31
Amort. Exp.
40,000
Amortization Expense
40,000
Acc. Amortization
40,000 Acc. Amort 40,000
Year 2018
Retained Earnings 40,000
Amortization Expense 40,000
Acc. Amortization
40,000
Year 2017
Year 2017
Retained Earnings 93,333
5/1
5/1
Unearned Service Rev. 53,333
Cash
120,000
Cash
120,000
Service Revenue
40,000
Service Revenue
120,000
Service Revenue
120,000
!"#$%&' )
!*''&+%,*- *. /''*'0
12/31
12/31
Service Rev.
93,333
-noneUnearned Service Rev
Rev 93,333 Year 2018
Year 2018
-noneUnearned Service Rev.
Rev. 40,000
Service Revenue
40,000
7.
Year 2017
Cash xx
Rent Income
xx
Rent Income 36,000
Unearned Rent
36,000
Year 2018
Unearned Rent 36,000
Rent Income 36,000
8.
Year 2016
1/1
PPE
1,500,000
Cash
1,500,000
12/31
Dep. Exp
300,000
Acc. Dep
300,000
Year 2017
12/31
Dep. Exp
300,000
Acc. Dep
300,000
Year 2018
12/31
Dep. Exp
300,000
Acc. Dep
300,000
Year 2017
Cash xx
Rent Income
Retained Earnings 36,000
Rent Income
36,000
xx
-no entryYear 2018
-no entryYear 2016
1/1
Maintenance Exp.
Cash
Year 2017
-No entryYear 2018
-No entry-
1,500,000
1,500,000
PPE 1,500,000
Retained Earnings 1,500,000
Retained Earnings 600,000
Acc. Dep 600,000
Dep Exp 300,000
Acc. Dep.
300,000
or
Compound entry:
PPE
1,500,000
Dep. Exp
300,000
Acc. Dep
900,000
RE
900,000
!"#$%&' )
!*''&+%,*- *. /''*'0
!035,6@ M
QR-4:/234 38 &J;64.6 '6/?39S
Per Audit
1.
Assume
Merch Inv. understated is 10,000
Per Client
2018 Adjusting Entry
Year 2017
-no entry-
Year 2017
MI end. 10,000
CGS
10,000
or
MI beg. 10,000
Retained Earnings 10,000
CGS
10,000
MI,Beg
10,000
Year 2018
CGS
10,000
MI, Beg.
10,000
Year 2018
CGS
xx
MI, end
xx
Retained Earnings 10,000
Year 2018
-no entry-
2.
Compound entry
CGS 10,000
Year 2018
-no entry-
2018 AJE
CGS xx
MI,end xx
*Assuming error was discovered in
2019
2019
AJE
RE beg
CGS
3.
4.
5.
6.
Year 2018
CGS/Purch
xx
AP
xx
Year 2018
-no entry-
Mi, end xx
CGS
xx
-no entry-
2017
Purch Yearxx
AP
xx
2017
Purch Yearxx
AP
xx
MI xx
CGS
xx
Year 2017
A/R xx
Sales xx
-no entryYear 2017
-No entry-
xx
xx
RE beg. xx
Purchase xx
2018 AJE
CGS /Purch
xx
AP
xx
MI,end
CGS
xx
xx
Merch
Inv. Earnings
xx
Retained
xx
Sales xx
Retained Earnings
xx
!"#$%&' )
!*''&+%,*- *. /''*'0
!035,6@ O
!"# %&'()*+( ,- &-./*,( &-00(&, /0-12,3
Under(over)statement in Profit
Under(over)statement
2016
2017
Omission of accrued wages
12/31/16
12/31/17
12/31/18
Omission
of unused supplies
12/31/16
12/31/17
12/31/18
Omission of accrued interest income
12/31/17
Sale of equipment - Proceeds
Gain on sale
Recorded depreciation
Omission of unearned rent
Net under(over)statemen
under(over)statementt
Reported Profit
Corrected Profit
(80,000)
80,000
(60,000)
2018
60,000
RE, 1/1/18
(60,000)
(78,000)
32,000
(32,000)
25,000
18,000
(25,000)
7,000
4,200
4,200
(61,800)
450,000
388,200
35,200
290,000
325,200
(25,000)
22,400
(18,000) 18,000
4,200
(40,000)
(74,400)
440,000
365,600
(2) Audit adjusting entries:
Retained Earnings
Wages Expense
60,000
Wages Expense
Wages Payable
78,000
Supplies Expense
Retained Earnings
25,000
Unused Supplies
Supplies Expense
22,400
Interest Income
Retained Earnings
18,000
Retained Earnings
Accumulated Depreciation
Equipment
Depreciation Expense
9,600
36,600
60,000
78,000
25,000
22,400
18,000
42,000
4,200
(3) Correcting entries in 2019
Retained Earnings
Wages Expense
78,000
Supplies Expense
Retained Earnings
22,400
25,000
78,000
22,400
(9,600)
(26,600)
!"#$%&' )
!*''&+%,*- *. /''*'0
Retained Earnings
Accumulated Depreciation
Equipment
5,400
36,600
42,000
!035,6@ T
Correct Entry
1.
2.
2018 Adjusting Entry
Year 2016
Year 2016
1/1
1/1
Equipment
550,000
Equipment
550,000
Cash
550,000
Cash
550,000
12/31
12/31
Depreciation Expense 82 500 Depreciation Expense 91,667
Acc. Dep.
82 500
Acc. Dep.
91,667
Year 2017
Year 2017
12/31
12/31
Depreciation Expense 82 500 Depreciation Expense 91,667
Acc. Dep.
82 500
Acc. Dep.
91,667
Acc. Dep 18,334
RE, beg
18,334
Year 2018
Year 2018
12/31
12/31
Depreciation Expense 82 500 Depreciation Expense 91,667
Acc. Dep.
82 500
Acc. Dep.
91,667
Acc. Dep
9,167
Dep Exp
9,167
Year 2017
Salaries Expense 65 000
Salaries Payable 65 000
RE, beg.
65 000
Salaries Payable
Year 2018
Salaries Payable 65 000
Cash
65 000
3.
Per Client
Year 2017
-no entryYear 2018
Salaries Expense 65 000
Cash
65 000
Salaries Payable 65 000
Salaries Expense
65 000
Year 2017
Year 2017
Loss on damages 450 000
Loss on damages 450 000
Provision for damages 450 000
Provision for damages 450 000
Year 2018
Year 2018
Provision for damages 450 000 Provision for damages 450 000
Loss on damages
135 000 Retained Earnings
135 000
Cash
585 000
Cash
585 000
4.
65 000
Year 2017
1/1
Goodwill 240 000
Cash
240 000
12/31
Amortization Expense 24 000
Accumulated Amort.
24 000
Loss on damages 135 000
Retained Earnings 135 000
Year 2017
1/1
Goodwill 240 000
Cash
240 000
12/31
Amortization Expense 12 000 Goodwill 12 000
Goodwill
12 000 RE, beg. 12 000
Accumulated Amort. 24 000
!"#$%&' )
!*''&+%,*- *. /''*'0
Year 2018
Amortization Expense 24 000
Year 2018
Accumulated Amort.
24 000 Amortization Expense
Goodwill
Goodwill
12 000
12 000 Amortization Expense 12 000
12 000
Accumulated Amort. 24 000
(Note: SMEs amortize Goodwill
over ten years )
5.
6.
Year 2018
Year 2018
Cash 340 000
Cash 340 000
Advances fr. customers 340 000
Sales 340 000
Year 2017
Expense 60 000
Cash
60 000
Year 2017
Equipment 60 000
Cash
60 000
Depreciation Expense 6 000
Acc. Dep.
6 000
Year 2018
Equipment 50 000
Cash
50 000
Depreciation Expense 11 000
Acc. Dep.
11 000
Year 2018
Expense 50 000
Cash
50 000
7.
Sales
340 000
Advances fr. customers 340 000
Expense 50 000
Equipment 50 000
Acc. Dep.
11 000
Depreciation Exp. 11 000
Year 2016
Year 2016
Merchandise Inventory 42 000 -no entryCGS
42 000
Merch. Inv. 42 000
RE, beg. 42 000
RE, beg. 42 000
Merch. Inv. 42 000
Year 2017
Year 2017
Merchandise Inventory 51 000
CGS
51 000 -no entry-
Merch. Inv. 51 000
RE, beg. 51 000
CGS
51 000
Merch. Inv. 51 000
Year 2018
Year 2018
CGS
30 000
-no entryMerchandise Inventory 30 000
8.
RE, beg. 60 000
Equipment 60 000
Acc. Dep. 6 000
RE, beg. 6 000
Year 2017
Purchases
153 000
Accounts Payable 153 000
Year 2017
-no entry-
Year 2018
A/P
Cash
Year 2018
Purchases
Cash
153,000
153,000
CGS
30 000
Merch. Inv. 30 000
-no entry-no entry153,000
153,000
!"#$%&' )
!*''&+%,*- *. /''*'0
!035,6@ E
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CD)F =PU+V =I&
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!*''&+%,*- *. /''*'0
(a)
Gloria Company
Comparative Statements of Comprehensive Income
For the Years Ended December 31, 2018 and 2017
'()*+
/0+1 02 '()*+
,
780++ ,80291
:1;*8 :<*8(19=> ?=@0A*
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,
,
,
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(b) Effect on total assets, December 31, 2017 (see audit adjusting entries for 2017)
4 "56777 8 96777 8 :76777 ; :6777 4 <=:6777 *>)(0?,@,()
(c) Effect on total assets, December 31, 2018 (see audit adjusting entries for 2018)
4 :"6777 8 ":6777 8 :76777 ; :6777 ; =6777 4 <=A6777 *>)(0?,@,()B
(d) Effect on total liabilities, December 31, 2018 (see audit adjusting entries for 2018)
4 56=77 8 C767778::6777 4 ""96=77 *>)(0?,@,()
!035,6@ F
Particulars
Omission of unused supplies
12/31/16
12/31/17
Repairs charged to equipment on 1/1/16
AFS securities
securities were measured at cost
Correct cost of equipment, P746,070
Recorded cost
900,000
Difference
153,930
Difference in depreciation
2017 153,930 x 10% x 3/12 = 33,848
,848
2018 153,930 / 10
= 15,393
Interest expense
2017 P74,607 x 3/12 =
Net under (overstatement)
*CV of Client = 787,500 vs Correct CV = 652,811
!035,6@ Z
1>S W3@;-/1/234 38 :3006:/ ;0382/ Q,3..S
2017 Profit
Retained earnings,
Dec. 31, 2017
15,000
15,000
8,500
"#$%$$$&
(68,000)
(20,000)
3,848
3,848
(18,652)
(11,304)
(18,652)
(87,804)
Non- current
Assets, 12/31/18
12/31/18
Retained earnings
January 1, 2017
(59,500)
(2,400,000)
(76,500)
*(134,689)
(2,594,189)
(76,500)
!"#$%&' )
!*''&+%,*- *. /''*'0
W3@;-/1/234 38 06/12469 610424H.
Balance, January 1
Particulars
Profit (loss)
Omissions of
Dividends declared
Accrued expenses,
expenses, 12/31/17
Balance, December 31
12/31/18
12/31/19
Accrued income
income
12/31/17
12/31/18
12/31/19
Prepaid expenses 12/31/17
12/31/18
12/31/19
Unearned income 12/31/17
12/31/18
12/31/19
Omission in the ending inventory
2018
2019
Machine charged to expense on August 31, 2017
Depreciation on the machine
Net understatement (overstatement)
Reported profit (loss)
Correct profit (loss)
(b) 2019 Audit Adjusting Entries
P
2016
2017
2018
0
2017
(164,333)
P(164,333)
2018
342,000
(60,000)
20,000
P117,667
(25,000)
P117,667
2019
405,000
(100,000)
422,667
25,000
(30,000)
(20,000)
P(164,333)
32,000
12,000
15,000
(10,000)
80,000
(3,333)
85,667
(250,000)
164,333
25,000
Operating Expenses
Accrued Expenses
Expenses
30,000
Income
Retained Earnings
30,000
Accrued Income
Income
Income
26,000
Expenses
Retained Earnings
18,000
Prepaid Expenses
Expenses
24,000
Retained Earnings
Income
10,000
Inventory, beginning/Cost of Sales
Retained Earnings
(12,000)
18,000
(15,000)
Retained Earnings
Operating Expenses
Income
Unearned Income
(32,000)
30,000
25,000
30,000
30,000
26,000
18,000
24,000
10,000
8,000
8,000
28,000
28,000
(30,000)
26,000
(18,000)
24,000
10,000
(8,000)
28,000
(28,000)
64,000
(10,000)
(10,000)
22,000
320,000
342,000
25,000
380,000
405,000
!"#$%&' )
!*''&+%,*- *. /''*'0
Inventory, end
Income Summary/ Cost of Sales
64,000
Machinery
Operating Expenses
Retained Earnings
Accumulated Depreciation
80,000
10,000
64,000
66,667
23,333
!035,6@ )D
2017 AUDIT AJE
2018 AUDIT AJE
Allowance for Bad Debts
Bad Debts Expense
Unrealized Loss-P/L 3,000
Held for Trading Securities (FVPL) 3,000
5,000
5,000
Retained Earnings
3,000
Held for Trading Securities (FVPL) 3,000
Held for Trading Securities(FVPL) 10,000
Unrealized Gain P&L
10,000
COGS
Inventory, end
8,900
8,900
Equipment
Expense
36,000
36,000
Dep. Exp
Acc. Dep
3,000
3,000
Retained Earnings
COGS
8,900
8,900
COGS
Inventory, end
Equipment
Retained Earnings
Retained Earnings
Operating Expenses
Acc Dep
13,600
13,600
36,000
36,000
3,000
3,000
6,000
Acc. Dep
20,000
Equipment
17,000
Gain on Sale of Equipment 3,000
!06;129 +4.-014:6 TLDDD
+4.-014:6 &J;64.6 KLDDD
"6/12469 &10424H.
ZLDDD
!06;129 +4.-014:6 KLDDD
+4.-014:6 &J;64.6 KLDDD
"6/12469 &10424H.
TLDDD
%*D2E@D2 F-0/-0@,2->
%,@,(.(>, -1 F-./0('(>?2G( H>&-.(
I-0 ,'( J(@0? K>)() L(&(.M(0 N"6 :7"9 @>) :7"A
Sales
Cost of Sales
GrossonProfit
Gain
Sale of Equipment
Unrealized Gain on Trading Securities
Total Income
2018
P1,000,000
434,700
2017
P900,000
403,900
P 565,300
3,000
P 496,100
10,000
578,300
496,100
!"#$%&' )
!*''&+%,*- *. /''*'0
Operating Expenses
Unrealized Loss on Trading Securities
Profit
(351,000)
P227,300
%*D2E@D2 F-0/-0@,2->
%,@,(.(>, -1 I2>@>&2@+ <-?2,2->
L(&(.M(0 N"6 :7"9 @>) :7"A
2018
Current Assets
Cash
Held for Trading Equity Securities
Accounts Receivable,
Receivable, net
Merchandise Inventory
Prepaid Expenses
Total Current Assets
Non-Current Assets
Property, Plant and Equipment, net of Acc. Deprn
Total Assets
(280,000)
(3,000)
P 213,100
2017
P183,000
85,000
360,000
193,400
3,000
P 824,400
P 2,000
75,000
278,000
193,100
6,000
P554,100
P 78,400
P902,800
P 96,100
P650,200
F*00(>, O2@M2+2,2(?
P&&-*>,? <@E@M+(
<":"6=77
<"C56"77
%'@0('-+)(0?Q KR*2,E
Ordinary Share
Share Premium
Retained Earnings
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
P260,000
20,000
501,400
P781,400
P902,800
P180,000
0
274,100
P 454,100
P650,200
F@?' I+-S %,@,(.(>,
I-0 ,'( J(@0 K>)() L(&(.M(0 N"6 :7"9
F@?' I+-S I0-. T/(0@,2>U P&,2G2,2(?
F-++(&,2-> 10-. &*?,-.(0?
<@E.(>, ,- %*//+2(0?
<@E.(>, 1-0 (W/(>?(?
X(, &@?' 1+-S 10-. -/(0@,2->?
F@?' I+-S I0-. H>G(?,2>U P&,2G2,2(?
Sale of equipment
Purchase of equipment
Net cash flow from investing activities
Cash Flow From Financing Activities
Issue of ordinary share (80,000 + 20,000)
Increase in cash
Cash Balance, January 1, 2018
Cash Balance, December 31, 2018
<C7=6777
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P 3,000
( 500)
2,500
100,000
P181,000
2,000
P183,000
!"#$%&' )
!*''&+%,*- *. /''*'0
Computations:
Accounts Receivable
Receivable
Allowance for Uncollectible
Uncollectible Accounts
AR, Net
2018
P392,000
32,000
P360,000
2017
P296,000
18,000
P278,000
P186,000
107,600
P205,500
109,400
Carrying value
P 78,400
P 96,100
Accounts Receivable,
Receivable, beg.
Sales
Accounts Receivable,
Receivable, end
Collections from customers
P296,000
1,000,000
(392,000)
P904,000
Inventory, end
Cost of sales
Inventory, beg.
Purchases
Accounts Payable,
Payable, beginni
beginning
ng
Accounts Payable,
Payable, end
Payment to suppliers
P193,400
434,700
(193,400)
P434,700
196,100
(121,400)
P509,700
Accumulated depreciation, end
end
Accumulated depreciation of equipment sold
P107,600
20,000
Property, Plant and Equipment
Cost
Accumulated Depreciation
Problem 11 (Tahoma Corporation)
Adjusting Entries
Entries – December 331,
1, 2018
Sales
100,000
100,000
Retained Earnings
Accounts Receivable
Receivable
Sales
250,000
Retained Earnings
Purchases
175,000
Purchases
Accounts Payable
Payable
140,000
Sales
250,000
175,000
140,000
20,000
20,000
Adv. From customers
customers
Retained Earnings
Expenses
35,000
35,000
Expenses
Accrued Expenses
Expenses
50,000
Inventory, beginning
Retained Earnings
75,000
Inventory, end
COGS (Income Summary)
110,000
50,000
75,000
110,000
!"#$%&' )
!*''&+%,*- *. /''*'0
Advances to Suppliers
Suppliers
Purchases
Retained Earnings
Expenses
Accumulated Depreciation
Depreciation – P
Printing
rinting Equipment
Equipment
50,000
50,000
3,333
10,000
13,333
Expenses
Retained Earnings
Accumulated Depreciation
Depreciation – B
Building
uilding
37,500
12,500
KW/(>?(?
P++-S@>&( 1-0 Y>&-++(&,2M+( P&&-*>,?
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50,000
:V6777
H>,(0(?, KW/(>?( !V776777 W ":Z W 9["V#
=76777
\(,@2>() K@0>2>U? !V776777 W ":Z W =["V#
:76777
T/(0@,2>U KW/(>?(?
576777
!X-,(3 : ?(.2]@>>*@+ /@E.(>,? S(0( .@)( 2> :7"9^ M-,' S(0( &'@0U() ,- -/(0@,2>U (W/(>?(?6 M@+@>&( -1
_-0,U@U( /@E@M+( M(1-0( ,'( @>>*@+ /@E.(>, 2> P*U*?, :7"9 2? =V76777 8 V76777#
H>,(0(?, KW/(>?(
H>,(0(?, <@E@M+(
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"96777
%,@,(.(>, -1 F-./0('(>?2G( H>&-.(
Sales
Cost of Sales
Inventory, January 1
Purchases
Inventory, Dec. 31
Cost of Sales
Gross Profit
Selling and Administrative Expenses
Profit before interest expense
Interest expense
Profit
P 2,130,000
75,000
915,000
(110,000)
880,000
1,250,000
777,500
472,500
58,000
414,500
%,@,(.(>, -1 I2>@>&2@+ <-?2,2->
Current Assets
Cash
Accounts receivable,
receivable, net of allowance
allowance for uncollectible
uncollectible accounts
accounts of P25,000
P25,000
Advances to suppliers
suppliers
Inventory
Total current assets
Non-current assets
Land
Building, net of P50,000 accumulated depreciation
Printing equipment, net of P13,333 accumulated depreciation
Total property, plant and equipment
P 750,000
225,000
50,000
110,000
P1,135,000
P 400,000
700,000
86,667
P1,186,667
!"#$%&' )
!*''&+%,*- *. /''*'0
Total assets
P2,321,667
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable
payable
Accrued expenses
expenses
Current portion of mortgage payable
Interest payable
Unearned revenue
Total current liabilities
P 140,000
50,000
50,000
18,000
20,000
P278,000
Non-current liabilities
Mortgage payable, net of current portion
Total liabilities
P 400,000
P 678,000
Shareholders’ Equity
Ordinary share capital
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
`\(,@2>() (@0>2>U?6 a@>*@0E "6 :7"9 M(1-0( @)b*?,.(>,
F-00(&,2-> -1 /02-0 /(02-) (00-0?
<0-12, 1-0 :7"9
\(,@2>() (@0>2>U?6 L(&(.M(0 N"6 :7"9
P 1,000,000
*643,667
P 1,643,667
P2,321,667
< N776777
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F'@/,(0 :
_2??,@,(.(>,? 2> ,'( I2>@>&2@+ %,@,(.(>,?
Accumulated depreciation, beg.
Accumulated
beg.
Depreciation expense
(109,400)
P18,200
Operating expenses
Depreciation
Doubtful accounts expense 32,000 – 18,000
Decrease in prepaid expenses
P351,000
( 18,200)
( 14,000)
( 3,000)
Operating expenses paid
P315,800
Property, Plant and Equipment, cost, end
Cost of equipment sold
Property, plant and equipment, cost, beg.
Equipment purchased
P186,000
20,000
(205,500)
P 500
'-,/2;,6 W?32:6
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13..
14.
15.
A
C
A
A
B
A
A
B
B
D
B
B
C
B
A
16.
17.
18.
D
C
C
19
20.
A
A
700,000 + 29,000 – 33,000 – 15,000 – 22,000+ 18,000
-33,000 – 15,000 – 15,000 + 18,000 = ( 45,000 )
- 29,000 – 15,000 + 22,000 = (22,000)
5,000,000 + 200,000 – 250,000 – 300,000 + 100,000 = 4,750,000
(300,000) + (50,000) + 100,000 = (250,000)
- 16,000 – 15,000 – 10,000 + 10,800 = (30,200)
- 15,000 + 10,800 = (4,200)
5,000,000 – 200,000 – 150,000 = 4,650,000
2,500,000 – 1,000,000 + 1,500,000 – 500,000 – 200,000 + 600,000 = 2,900,000
1,500,000 + 600,000 = 2,100,000
1,000,000 + 500,000 + 200,000 = 1,700,000
200,000 / 5
1,550,000 + 10,000 – 80,000 + 120,000 – 55,000 – 100,000 = 1,445,000
3,000,000 – 400,000 = 2,600,000
Profit is understated by 70,000 + 30,000; RE is understated by P30,000; P7,000 has been
counterbalanced.
50,400 / 9 = 5,600
54,000 – 11,200 = 42,800
400,000 + 300,000 + 500,000 – 350,000 = 850,000 net overstatement
-300,000 – 500,000 + 200,000 = 600,000 overstated