Documente Academic
Documente Profesional
Documente Cultură
P90,000
50,000
60,000
1. How much depreciation expense was recorded by Pera in 2009, 2010, and 2011?
2009
2010
2011
A. P18,000 P28,000
P40,000
B. 36,000 36,000
36,000
C. 16,200 36,000
36,000
D. 16,200 25,200
36,000
P450,000
895,000
Weighted
Average
P560,000
999,000
Prepare the entry, if any, that should be made to record the change iin inventory costing method.
Ignore income tax considerations.
PROBLEM 9:
The audited income statement of URUGUAY CO. shows a net income of P175,000 for the
year ended December 31, 2012. Adjustments were made for the following errors:
1. December 31, 2011, inventory overstated by P22,500
2. December 31, 2011, inventory understated by P37,500
3. A P10,000 customers deposit received in December 2012, was credited to sales in 2012.
The good were actually shipped in January 2013.
What is the unadjusted net income of Uruguay Co. for the year ended December 31, 2012?
A. P234,000
C. P170,000
B. P125,000
D. P200,000
An insurance premium of P330,00 was prepaid in 2011 covering the years 2011, 2012, and 2013.
The entire amount was charged to expense in 2011. In addition, on December 31, 2012, a fully
depreciated machinery was sold for P75,000 cash, but the sale was not recorded until 2013.
There were no other errors during 2011 and 2012, and no corrections have been made for any of
the errors. Ignore income tax effects.
1. What is the total effect of the errors on Sandras 2012 net income?
A. P123,500 overstatement
C. P192,500 understatement
B. P27,500 overstatement
D. P177,500 understatement
2. What is the total effect of the errors on the amount of Sandras working capital at
December 31, 2012?
A. P75,500 overstatement
C. P225,500 understatement
B. P144,500 overstatement
D. P144,500 understatement
3. What is the total effect of the errors on the balance of Sandras retained earnings at
December 31, 2012?
A. P156,000 overstatement
C. P133,000 understatement
B. P87,000 overstatement
D. P85,000 understatement
PROBLEM 11:
The first audit of the financial statements of KABIT CO. was made for the year ended December
31, 2012. In reviewing the books, the auditor found out that certain adjustments had been
overlooked at the end of 2011 and 2012. He also discovered that other items had been
improperly recorded. These omissions and other failures for each year are summarized as
follows:
Salaries payable
Interest receivable
Prepaid insurance
Advances form
customers(1)
Equipment (2)
December
2011
2012
145,60 130,000
0
43,200
35,500
64,000
51,300
78,400
93,500
94,000
87,000
(1)
Collections from customers had been recorded as sales but should have been recognized
as advances from customers because goods were not shipped until the following year.
(2)
Capital expenditures had been recorded as repairs but should have been charged to
equipment; the depreciation rate is 10% per year, but depreciation in the year of the
expenditure is to be recognized at 5%.
Required:
Assuming that the nominal accounts for 2012 have not yet been closed into the income
summary account, prepare all the necessary adjusting journal entries on December 31,
2012.
PROBLEM 12:
The retained earnings account of ANTONIA CORP. is reproduced below:
item
Balance
RETAINED EARNINGS
Debit
Credit
P81,000
18,000
P15,000
32,000
11,200
15,000
89,800
P131,000
P131,0
00
The audit of the December 31, 2012, financial statements of the company reveals the following:
a) Dividends declared on December 10, 2010 ad 2011 had not been recorded in the books
until paid.
b) Improvements in buildings and equipment of P9600 had been charged to expense at the
end of April 2009. Improvements are estimated to have an 8-year life. Antonia computes
depreciation to the nearest month and uses the straight-line depreciation.
c) The physical inventory of merchandise had been understated by P3,000 at the end of
2010, and P4,300 at the end of 2011.
d) Merchandise in transit and to which the company had title ad December 31, 2011 and
2012 was not included in the year-end inventories. These shipments of P3,800 and P5,500
were recorded as purchases in January of 2012 and 2013, respectively.
e) The company had failed to record sales commissions payable of P2,100 and P1,700 at the
end of 2011 and 2012, respectively.
f) The company had failed to recognize supplies on hand of P1,200 and P2,500 at the end of
2011 and 2012, respectively.
g) The company reported a net loss of P12,400 for the year ended December 31, 2012.
1. Prepare the necessary adjusting journal entries at December 31, 2012.
2. What is the corrected net loss of ANTONIA Corp. for the year ended December 31, 2012?
A. P7,600
C. P6,000
B. P17,000
D. P16,200
PROBLEM 13:
NARUTU CO. reported the following for the first two years of operations
2010
P735,000
net income
2011
P925,000
net income
Early in 2012, the following errors were discovered:
1. Depreciation of building for 2010 were overstated by P85,000
2. Depreciation of building for 2011 was understated by P192,500
3. December 31, 2010, inventory was understated by P250,000
4. December 31, 2011, inventory was overstated by P81,000
Required:
Prepare the necessary adjusting journal entries. Assume the books are closed. Ignore income tax
considerations.
PROBLEM 14:
The following selected accounts are included in the trial balance of PALA CORP. on December 31,
2012:
Debit
Credit
Supplies on hand
P135,000
Accrued salaries payable
P75,000
Interest receivable
255,000
Prepaid insurance
4,500,00
750,000
P1,000,000
600,000
400,000
150,000
P250,000
The December 31, 2012, audit of the companys financial statements disclosed the following
errors:
1. December 31, 2012, inventory understated P31,000
2. Accrued Expenses of P4,000 and prepaid expenses of P6,000 were nit recognized in the
companys books
3. Sales of P5,000 were not recorded until January 2013, although the goods were shipped in
December 2012, and were excluded from the December 31 physical inventory
4. Purchases of P30,000 made in December 2012, were not recorded although the goods were
received and properly included in the December 31 physical inventory
5. A machine was sold for P10,000 on July 1, 2012, and the proceeds were credited to the Sales
account. The machine was acquired on January 1, 2009 for P60,000. At that time, it had an
estimated life of 6 years with no residual value. No depreciation was recorded on this machine
in 2012
1. Prepare the necessary adjusting journal entries on December 31, 2012.
2. What is the corrected net income for the year ended December 31, 2012?
A. P228,000
C. P258,000
B. P166,000
D. P224,000
PROBLEM 17:
SILI CO. reported pretax incomes of P505,000 and P378,000 for the years ended December 31,
2011 and 2012, respectively. However, the auditor noted that the following errors had been
made:
a. Sales for 2011 included amounts of P191,000 which had been received in cash during
2011, but for which the related goods were shipped in 2012. Title did not pass to the buyer
until 2012.
b. The inventory on December 31, 2011, was understated by P43,200
c. The companys accountant, in recording interest expense for both 2011 and 2012 on
bonds payable, made the following entry on an annual basis:
Interest Expense
75,000
Cash
75,000
The bonds have a face value of P1,250,000 and pay a nominal interest rate of 6%. They
were issued at a discount of P75,000 on January 1, 2011, to yield an effective interest rate
of 7% .
d. Ordinary repairs to equipment had been erroneously charged to the Equipment account
during 2011 and 2012. Repairs of P42,500 and P47,000 had been incurred in 20011 and
2012, respectively. In determining depreciation charges, Sili applies a rate of 10% to the
balance in the Equipment account at the end of the year.
1. What is the corrected pretax income for 2011?
P607,000
P980,500
1,300,000
1,300,000
2,335,000
3,635,000
P4,242,0
00
1,235,000
2,535,000
P3,515,50
0
Bartek Co.
COMPARATIVE INCOME STATEMENTS
For the Year Ended December 31, 2012 and 2011
2012
2011
Sales
P5,000,000
P4,500,000
Cost of Goods Sold
2,150,000
1,975,000
Gross Income
2,850,000
2,525,000
Operating Expenses:
Selling Expenses
1,150,000
1,025,000
Administrative
600,000
525,000
Expenses
1,750,000
1,550,000
Total Operating
Expenses
Net Income
P1,100,000
P975,000
The 2012 audit revealed the following facts:
A. On January 5, 2011, Bartek had charged a 5-year insurance premium to expense. The
premium totaled P31,000
B. The amount of loss due to bad debts has steadily decreased over the last 2 years. Bartek
has decided to reduce the amount of bad debt expense from 2% to 1 % of sales,
beginning with 2012. (A charge of 2% has already been made for 2012.)
C. Senegal uses the periodic inventory system. The following are the inventory errors for the
last 2 years.
2011
ending inventory overstated by P75,500
2011
ending inventory overstated by P99,000
D. An equipment costing P150,000 was acquired on January 3, 2011. The purchase was
recorded by a charge to operating expense. The equipment has a useful life of 10 years and
a residual value of P25,000. Bartek uses the straight-line method in depreciating its assets.
1. Prepare the adjusting journal entries to correct the books at December 31, 2012. Assume that
the books for 2012 have not yet been closed.
2. What is Barteks corrected net income for the year ended December 31, 2011?
A. P1,012,200
C. P786,800
B. P1,212,800
D. P1,061,800
3. What is Barteks corrected net income for the year ended December 31, 2012?
A. P1,095,200
C. P1,082,800
B. P1,126,800
D. P1,107,800
PROBLEM 20:
In the course of your examination of the December 31, 2012, financial statements of DIONISIA
COMPANY, you discovered certain errors that had occurred during 2011 and 2012. No errors were
corrected during 2011. The errors are summarized below:
1. Beginning merchandise inventory (January 1, 2011) was understated by P259,200