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Problem 1 Audit Adjusting Entries: Equipment Acquisition Fund Cash Purchases Accounts Payable Treasury Shares Investments Depreciation Expense Accumulated Depreciation Total Furniture and Equipment P402,000 Acquired June 30, 2011 20,000 Acquired at inception P382,000 Annual depreciation 60,000 60,000 50,000 50,000 30,000 30,000 39,200 39,200
= P 76,400/2 = P38,200 Annual depreciation rate = 38,200/382,000 = 10% 2012 Depreciation: on beginning balance P38,200 on new (10% x 20,000 x 6/12) = 1,000 Total P39,200 Insurance Expense Prepaid Expenses Unearned Rent Income Rent Income 12,800 10,000 = 2,800 decrease Miscellaneous Expenses Accrued Expenses 54,000 51,000 = 3,000 increase Inventory, end Cost of Goods Sold Purchases Inventory, beg. 1,200 1,200 2,800 2,800 3,000 3,000 650,000 2,408,000 2,474,000 584,000
Adjustments Debit
Credit
60,000 9,750 584,000 1,200 30,000
Credit
2,800 50,000
2,474,000
3,500,000 50,800 400,000 124,000 80,000 32,000 12,000 14,000 16,000 26,000 60,000 9,750 650,000 2,408,000 30,000 39,200 1,200 3,162,150 388,650 3,550,800 116,595 272,055 388,650 116,595 272,055 1,974,800
3,253,950
388,650
1,974,800
Problem 2 Audit Adjusting Entries: Accounts receivable Cash in bank Doubtful accounts expense Allowance for doubtful accounts 15,000 15,000 15,650 15,650
Accumulated depreciation equipment *11,000 Gain on sale of equipment Furniture and equipment (40,000 35,000) 40,000 x 10% x 2.75 years) = 11,000 Depreciation expense furniture and equipment 64,300 Accumulated depreciation furniture and equipment Furniture and equipment, per client P618,000 Adjustment above ( 5,000) Furniture and equipment, per audit P613,000 Depreciation expense: On remaining equipment 613,000 x 10% =P61,300 On equipment sold: 40,000 x 10% x 9/12 3,000 Depreciation for the year P64,300 Prepaid insurance (8,400 x 6/12) Insurance expense Prepaid rent 130,000 x 1/13 Rent expense Discount on notes payable Interest expense 100,000 x 12% x 11/12 Retained earnings Goodwill 4,200
64,300
Adjustments Debit
15,000
Credit
15,000 15,650
Credit
300,000
2,209,300
50,000 36,500
10,000
4,200
11,000
96,100 288,500 152,000 29,900 120,000 197,200 15,000 6,600 47,800 163,400 30,200 9,100
Income before income tax Income tax expense Income tax payable Profit
348,550
2,575,400
816 816 1,500 1,500 4,200 4,200 18,400 18,400 1,300 1,300 145,200 145,200
P179,400 P346,000 12,550 358,550 P537,950 108,300 P 429,650 P 1,400 14,300 37,000 P 52,700 Gen. and Adm. Other Operating Exp. P 4,450 17,000
3,000 4,500 7,500 35,000 35,000 40,000 40,000 48,300 48,300 20,000 20,000
B. Marketing and Administrative Expense 166,800 Accumulated Depreciation-Building 150,000 Accumulated Depreciation-Leasehold Improvements 16,800 8. Marketing and Administrative Expense Accumulated Amortization - Franchise 50,000 50,000
9. Marketing and Administrative Expense 72,000 Licensing Agreement 144,000 Accumulated Amortization - Licensing Agreement 216,000 10. A. Accounts Payable De la Cruz Accounts payable De Leon 126,000 126,000
Karkits Corporation Statement of Financial Position As of December 31, 2012 Assets CURRENT ASSETS Cash and Cash Equivalents Trading Securities, market value Accounts receivable, net Inventories Prepaid Insurance Notes 3 4 P 304,400 350,000 2,743,100 4,976,900 23,150
Liabilities and Shareholders Equity CURRENT LIABILITIES Trade And Other Payables 7 Unearned Revenues Income Tax Payable CURRENT LIABILITIES NON CURRENT LIABILITIES Mortgage Payable Bonds Payable NON CURRENT LIABILTIES Total liabilities SHAREHOLDERS EQUITY Ordinary Share Capital Additional Paid-in Capital Retained Earnings SHAREHOLDERS EQUITY Total Liabilities and Shareholders Equity NOTES 3. Cash Petty Cash Cash in bank Cash and Cash Equivalents 4. Trade and other receivables Accounts receivable, net Advance to Officers and Employees Allowance for uncollectible account Trade and Other Receivables
P 4,983,020 130,000 66,239 P 5,179,259 P 1,500,000 1,885,800 3,385,800 P 8,565,059 P 5,000,000 1,350,000 5,021,191 11,371,191 19,936,250
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7. Trade and Other Payables Accounts Payable Accrued Expense Interest Payable Dividends Payable Current portion of Long Term Debt Trade and Other Payables 8. Amortized cost of bonds payable Bonds Payable Discount on Bonds payable Bonds Payable, Net of Discount
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Answers: 1. Petty Cash 2. Cash in bank 3. Trading Securities 4. Accounts Receivable 5. Allowance for doubtful accounts 6. Advances to Officers & Employees 7. Inventories 8. Prepaid Insurance 9. Land 10. Building 11. Accumulated Depreciation Building 12. Net book Value of Leasehold Improvement 13. Franchise 14. Licensing agreement, net 15. Accounts Payable 16. Accrued Expenses 17. Unearned Revenues 18. Interest Payable 19. Income Taxes Payable 20. Dividends Payable 21. Current portion of long term debt 22. Discount on Bonds Payable 23. Ordinary share capital 24. Retained Earnings 25. Sales 26. Cost of Good Sold 27. Marketing & administrative expense 28. Other income 29. Interest expense 30. Net income
7,500 296,900 350,000 2,758,900 137,900 123,000 4,976,900 23,150 1,720,000 7,750,000 150,000 151,200 500,000 144,000 2,204,200 648,820 130,000 380,000 163,477 1,250,000 500,000 114,200 5,000,000 5,021,191 31,589,000 17,606,300 8,368,650 40,000 792,120 3,306,113
c a b d d d d c b b b c a b c c d c a d b c a c d c c a b a
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