Cordillera Career Development College COLLEGE OF BUSINESS EDUCATION AND ADMINISTRATION Buagan! "o#la$ion! La Trinidad! Benguet
PROBLEM 1: On %anuar &! '())! GU*ANA! INC+ pur$,a-ed $omputer ,ard.are /or "0((!(((+ On t,e date o/ a$1ui-ition! Guana2- management e-timated t,at t,e $omputer- .ould ,ave an e-timated u-e/ul li/e o/ 3 ear- and .ould ,ave a re-idual value o/ "0(!(((+ T,e $ompan u-ed t,e dou#le4de$lining4#alan$e met,od to depre$iate t,e $omputer ,ard.are+ In %anuar '()'! Guana2- management reali5ed t,at te$,nologi$al te$,nologi$al advan$ement ,ad made t,e $omputer- virtuall o#-olete and t,at t,e .ould ,ave to #e repla$ed+ Management de$ided to $,ange t,e e-timated u-e/ul li/e o/ t,e $omputer ,ard.are ,ard.are to ' ear-+ 6o. mu$, depre$iation on $omputer ,ard.are -,ould #e re$orded in '()'7 A+ ") ")&&!((( C+ "8((!((( B+ ") ")'(!((( D+ "80(!(((
PROBLEM 2: TONGA COM"AN* COM"AN* de$ided on %anuar '! '()'! '()'! to revie. it- a$$ounting a$$ounting pra$ti$e-+ T,i- idue to $,anging e$onomi$ $ondition- and to ma9e it- :nan$ial -tatement- more $ompara#le to t,o-e o/ ot,er $ompanie- in it- indu-tr+ The following changes will be eective as of January 1, 2012: a; Tonga de$ided to $,ange $,ange it- allo.an$e /or #ad #ad de#t- /rom '< to &< &< o/ it- out-tanding out-tanding re$eiva#le- #alan$e+ Tonga2- re$eiva#le #alan$e at De$em#er 8)! ')'! .a- "0=(!(((+ Allo.an$e /or #ad de#t- ,ad a de#it #alan$e o/ "'!((( #e/ore ad>u-tment+ ad>u-tment+ #; Tonga de$ided to u-e u-e t,e -traig,t?line met,od met,od o/ depre$iation depre$iation on it- e1uipment in-tead in-tead o/ t,e -um?o/?ear-?digit- met,od+ It .a- al-o de$ided t,at t,i- a--et ,a- )( more ear- o/ u-e/ul li/e a- o/ %anuar '! '()'+ T,e e1uipment .a- pur$,a-ed pur$,a-ed on %anuar )! '(('! at a $o-t o/ ")!(((!(((+ On t,e a$1ui-ition date! it .a- e-timated t,at t,e e1uipment .ould ,ave a )3? ear u-e/ul li/e .it, no re-idual value+ )+ T,e entr to re$ord re$ord t,e $urrent $urrent ear provi-ion provi-ion o/ #ad de#t- iA+ Bad de#t e@pen-e '=!0(( Allo.an$e /or #ad de#t'=!0(( B+ Allo.an$e /or #ad de#t'=!0(( Bad de#t e@pen-e '=!0(( C+ Bad de#t e@pen-e '3!0(( Allo.an$e /or #ad de#t'3!0(( D+ Allo.an$e /or #ad de#t'3!0(( Bad de#t e@pen-e '3!0(( '+ ,at i- t,e t,e amount amount o/ o/ depre$iation depre$iation on e1uipment e1uipment /or t,e $urrent $urrent ear7 A+ "& "&3!88 C+ ")8!3( B+ "=!)0 D+ "8'!(8
PROBLEM 3: In t,e pa-t! "ERA COM"AN* ,a- depre$iated it- $omputer ,ard.are u-ing t,e -traig,t?line met,od+ T,e $omputer ,ard.are ,ard.are ,a- a )(< -alvage value and an e-timated u-e/ul li/e o/ 3 ear-+ A- a re-ult o/ t,e rapid advan$ement in in/ormation te$,nolog! management o/ "era ,adetermined t,at it re$eive- mo-t o/ t,e #ene:t- /rom it- $omputer /a$ilitie- in t,e :r-t /e. earo/ o.ner-,ip+ 6en$e! a- o/ %anuar )! '()'! "era propo-e- $,anging to t,e -um?o/?ear-?digitmet,od /or depre$iating it- $omputer ,ard.are+ T,e /ollo.ing $omputer pur$,a-e- .ere made # "era at t,e #eginning o/ ea$, ear+ '((= '()( '())
"=(!((( 3(!((( 0(!(((
)+ 6o. mu$, depre$iatio depre$iation n e@pen-e e@pen-e .a- re$orded re$orded # # "era in '((=! '()(! and '())7 2009 2010 2011 A+ ")!((( "'!((( "&(!((( B+ 80!((( 80!((( 80!((( C+ )0!'(( 80!((( 80!((( D+ )0!'(( '3!'(( 80!(((
Cordillera Career Development College COLLEGE OF BUSINESS EDUCATION AND ADMINISTRATION Buagan! "o#la$ion! La Trinidad! Benguet '+ T,e amount o/ depre$iation e@pen-e t,at -,ould #e re$ogni5ed in '()' iA+ "')!'&( C+ "3'!8( B+ "08!'( D+ "8&!'(( 8+ ,at >ournal entr! i/ an! -,ould #e prepared on %anuar )! '()'! to ad>u-t t,e a$$ount-7 A+ Retained earning8'!&(( A$$umulated depre$iation 8'!&(( B+ A$$umulated depre$iation 8'!&(( Retained earning8'!&(( C+ Depre$iation e@pen-e 8'!&(( A$$umulated depre$iation 8'!&(( D+ No entr i- ne$e--ar
PROBLEM 4: On %anuar )! '()'! management o/ TUALU COM"AN* de$ided to ma9e a revi-ion in t,e e-timate- a--o$iated .it, it- produ$tion e1uipment+ T,e e1uipment .a- a$1uired on %anuar 8! '()(! /or "((!((( and ,ad #een depre$iated u-ing -traig,t?line met,od+ At t,e date o/ a$1ui-ition! it ,ad an e-timated u-e/ul li/e o/ )( ear- .it, an e-timated -alvage value o/ "3(!(((+ Management ,a- determined t,at t,e e1uipment2- remaining u-e/ul li/e i- & ear- and t,at it ,a- an e-timated re-idual value o/ "0(!(((+ )+ ,at i- t,e annual depre$iation e@pen-e re$ogni5ed in '()( and '())7 A+ "(!((( C+ "&!((( B+ "3!((( D+ ")'3!((( '+ ,at i- t,e amount o/ depre$iation e@pen-e t,at -,ould #e re$ogni5ed in '()' a- a re-ult o/ t,e $,ange in e-timate-7 A+ ")&!3(( C+ ")'3!((( B+ "3!((( D+ ")3(!(((
PROBLEM 5: ECUADOR COR"+ .a- organi5ed on %anuar )! '((=+ An anal-i- o/ t,e $ompan2- allo.an$e /or #ad de#t- a$$ount- reveal- t,e /ollo.ing Estimated Bad !ctual Bad ebts ebts '((= ")3!((( "8!((( '()( '0!((( 3!((( '()) 83!((( =!3(( '()' No provi-ion et !((( In t,e pa-t! #ad de#t- ,ad #een e-timated at 8< o/ $redit -ale-+ T,e E$uador Corp+2- a$$ountant ,a- determined t,at t,e 8< rate i- inappropriate and -ugge-ted t,at it #e revi-ed do.n.ard to )<+ Credit -ale- /or t,e ear ended De$em#er 8)! '()'! totaled "=3(!(((+ )+ "repare t,e entr to re$ord #ad de#t e@pen-e /or t,e ear+ '+ ,at ad>u-ting entr! i/ an! .ould #e made to $orre$t t,e ina$$urate e-timate- /or prior period-7
PROBLEM 6: On %anuar )! '((=! COLUMBIA! INC+ pur$,a-ed an e1uipment /or "03(!(((+ T,e ma$,ine ,ad an e-timated u-e/ul li/e o/ ear- .it, no re-idual value; at t,e a$1ui-ition date+ On %anuar )! '()'! Colum#ia determined! a- a re-ult o/ additional in/ormation! t,at t,e e1uipment ,ad an e-timated u-e/ul li/e o/ )( ear- /rom t,e a$1ui-ition date .it, no re-idual value+ )+ "repare t,e >ournal entr! i/ an! to re$ord t,e $umulative ee$t o/ t,e $,ange on prior ear-+ '+ ,at i- t,e amount o/ depre$iation e@pen-e on t,e e1uipment /or t,e ear ended De$em#er 8)! '()'7 A+ "03!((( C! "&(!0'3 B+ "='!3( D+ "3!(80
PROBLEM 7: T,e /ollo.ing in/ormation pertain- to ELIHABET6 COM"AN*2- depre$ia#le a--et-
Cordillera Career Development College COLLEGE OF BUSINESS EDUCATION AND ADMINISTRATION Buagan! "o#la$ion! La Trinidad! Benguet )+ Ma$,ine .a- pur$,a-ed /or ")3(!((( on %anuar )! '((+ T,e entire $o-t .a- e@pen-ed in t,e ear o/ a$1ui-ition+ T,e e-timated u-e/ul li/e o/ t,i- ma$,ine i- )3 ear- .it, no re-idual value+ '+ Ma$,ine * $o-t "3'3!((( and .a- a$1uired on %anuar )! '((+ On t,e a$1ui-ition date! t,e e@pe$ted u-e/ul li/e .a- )' ear- .it, no re-idual value+ T,e -traig,t?line depre$iation met,od .a- u-ed+ On %anuar '! '()'! it .a- e-timated t,at t,e remaining li/e o/ t,e a--et .ould #e & ear- and t,at t,ere .ould #e a "'3!((( re-idual value+ 8+ A #uilding .a- pur$,a-ed on %anuar 8! '((=! /or "8!(((!(((+ T,e #uilding .a- e@pe$ted to ,ave a u-e/ul li/e o/ '( ear- .it, no re-idual value+ T,e -traig,t?line depre$iation met,od .a- u-ed+ On %anuar )! '()'! a $,ange .a- made to t,e -um?o/?t,e?ear-?digit- met,od o/ depre$iation+ No $,ange .a- made to t,e e-timated u-e/ul li/e and re-idual value o/ t,e #uilding+ )+ T,e ad>u-ting entr on %anuar )! '()'! relative to ma$,ine -,ould in$lude a $redit to A+ A$$umulated depre$iation o/ "0(!((( C+ Ma$,iner o/ ")3(!((( B+ Retained earning- o/ ")((!((( D+ No ad>u-ting entr i- ne$e--ar '+ ,at i- t,e $arring value o/ ma$,ine * on %anuar )! '()'7 A+ "83(!((( C+ "8(0!'3( B+ "8'3!((( D+ "3'3!((( 8+ ,at i- t,e depre$iation e@pen-e on Ma$,ine * /or '()'7 A+ "!3(( C+ ")!'3( B+ "!(8 D+ "&)!00 &+ ,at i- t,e #oo9 value o/ t,e #uilding at De$em#er 8)!'())7 A+ "'!)3!)& C+ ")!=&'!3 B+ "'!33(!((( D+ "'!'00!00 3+ ,at i- t,e #oo9 value o/ t,e #uilding on De$em#er 8)!'()'7 A+ "'!)3!)& C+ ")!=&'!3 B+ "'!33(!((( D+ "'!'00!00
PROBLEM 8: 6ONDURAS! INC+ ,a- #een u-ing t,e FIFO met,od o/ inventor $o-ting -in$e it #egan operation- in '())+ In '()'! t,e $ompan de$ided to $,ange to t,e .eig,ted average met,od+ T,e /ollo.ing are t,e De$em#er 8) inventor #alan$e- under ea$, met,od+ FIFO '()) '()'
"&3(!((( =3!(((
Weighted Averge "30(!((( ===!(((
"repare t,e entr! i/ an! t,at -,ould #e made to re$ord t,e $,ange iin inventor $o-ting met,od+ Ignore in$ome ta@ $on-ideration-+
PROBLEM 9: T,e audited in$ome -tatement o/ URUGUA* CO+ -,o.- a net in$ome o/ ")3!((( /or t,e ear ended De$em#er 8)! '()'+ Ad>u-tment- .ere made /or t,e /ollo.ing error- )+ De$em#er 8)! '())! inventor over-tated # "''!3(( '+ De$em#er 8)! '())! inventor under-tated # "8!3(( 8+ A ")(!((( $u-tomer2- depo-it re$eived in De$em#er '()'! .a- $redited to -ale- in '()'+ T,e good .ere a$tuall -,ipped in %anuar '()8+ ,at i- t,e unad>u-ted net in$ome o/ Urugua Co+ /or t,e ear ended De$em#er 8)! '()'7 A+ "'8&!((( C+ ")(!((( B+ ")'3!((( D+ "'((!(((
Cordillera Career Development College COLLEGE OF BUSINESS EDUCATION AND ADMINISTRATION Buagan! "o#la$ion! La Trinidad! Benguet
PROBLEM 10: T,e De$em#er 8) ear Jended :nan$ial -tatement- o/ SANDRA COM"AN* $ontained t,e /ollo.ing error-
Ending inventor Depre$iation e@pen-e
Dec. 31, 2011
Dec. 31, 2012
"&!((( under-tated "))!3(( under-tated
"&(!3(( over-tated ????????????????
An in-uran$e premium o/ "88(!(( .a- prepaid in '()) $overing t,e ear- '())! '()'! and '()8+ T,e entire amount .a- $,arged to e@pen-e in '())+ In addition! on De$em#er 8)! '()'! a /ull depre$iated ma$,iner .a- -old /or "3!((( $a-,! #ut t,e -ale .a- not re$orded until '()8+ T,ere .ere no ot,er error- during '()) and '()'! and no $orre$tion- ,ave #een made /or an o/ t,e error-+ Ignore in$ome ta@ ee$t-+ )+ ,at i- t,e total ee$t o/ t,e error- on Sandra2- '()' net in$ome7 A+ ")'8!3(( over-tatement C+ ")='!3(( under-tatement B+ "'!3(( over-tatement D+ ")!3(( under-tatement '+ ,at i- t,e total ee$t o/ t,e error- on t,e amount o/ Sandra2- .or9ing $apital at De$em#er 8)! '()'7 A+ "3!3(( over-tatement C+ "''3!3(( under-tatement B+ ")&&!3(( over-tatement D+ ")&&!3(( under-tatement 8+ ,at i- t,e total ee$t o/ t,e error- on t,e #alan$e o/ Sandra2- retained earning- at De$em#er 8)! '()'7 A+ ")30!((( over-tatement C+ ")88!((( under-tatement B+ "!((( over-tatement D+ "3!((( under-tatement PROBLEM 11: T,e :r-t audit o/ t,e :nan$ial -tatement- o/ KABIT CO+ .a- made /or t,e ear ended De$em#er 8)! '()'+ In revie.ing t,e #oo9-! t,e auditor /ound out t,at $ertain ad>u-tment- ,ad #een overloo9ed at t,e end o/ '()) and '()'+ 6e al-o di-$overed t,at ot,er item- ,ad #een improperl re$orded+ T,e-e omi--ion- and ot,er /ailure- /or ea$, ear are -ummari5ed a/ollo.- De$em#er Salarie- paa#le Intere-t re$eiva#le "repaid in-uran$e Advan$e- /orm $u-tomer-); E1uipment ';
2011
2012
)&3!0( ( &8!'(( 0&!((( !&((
)8(!(((
=&!(((
!(((
83!3(( 3)!8(( =8!3((
) "
#ollections from customers had been recorded as sales but should have been recogni$ed as advances from customers because goods were not shi%%ed until the following year&
';
#a%ital e'%enditures had been recorded as re%airs but should have been charged to e(ui%ment) the de%reciation rate is 10* %er year, but de%reciation in the year of the e'%enditure is to be recogni$ed at +*&
Re!"ired: A--uming t,at t,e nominal a$$ount- /or '()' ,ave not et #een $lo-ed into t,e in$ome -ummar a$$ount! prepare all t,e ne$e--ar ad>u-ting >ournal entrie- on De$em#er 8)! '()'+
PROBLEM 12: T,e retained earning- a$$ount o/ ANTONIA COR"+ i- reprodu$ed #elo.
Cordillera Career Development College COLLEGE OF BUSINESS EDUCATION AND ADMINISTRATION Buagan! "o#la$ion! La Trinidad! Benguet RETAINED EARNINGS
date 2010# %an ) De$+ 8) 2011! %an )( Mar+ 0
item Balan$e Net in$ome /or t,e ear Dividend- paid Sto$9 -old J e@$e-- over par Net lo-- /or t,e ear Dividend- paid
De$+ 8) 2012! %an+ = De$+ 8) #alan$e
De#it
Credit ")!((( )!(((
")3!((( 8'!((( ))!'(( )3!((( =!(( P131#000
P131#0 00
T,e audit o/ t,e De$em#er 8)! '()'! :nan$ial -tatement- o/ t,e $ompan reveal- t,e /ollo.ing a; Dividend- de$lared on De$em#er )(! '()( ad '()) ,ad not #een re$orded in t,e #oo9until paid+ #; Improvement- in #uilding- and e1uipment o/ "=0(( ,ad #een $,arged to e@pen-e at t,e end o/ April '((=+ Improvement- are e-timated to ,ave an ?ear li/e+ Antonia $omputedepre$iation to t,e neare-t mont, and u-e- t,e -traig,t?line depre$iation+ $; T,e p,-i$al inventor o/ mer$,andi-e ,ad #een under-tated # "8!((( at t,e end o/ '()(! and "&!8(( at t,e end o/ '())+ d; Mer$,andi-e in tran-it and to .,i$, t,e $ompan ,ad title ad De$em#er 8)! '()) and '()' .a- not in$luded in t,e ear?end inventorie-+ T,e-e -,ipment- o/ "8!(( and "3!3(( .ere re$orded a- pur$,a-e- in %anuar o/ '()' and '()8! re-pe$tivel+ e; T,e $ompan ,ad /ailed to re$ord -ale- $ommi--ion- paa#le o/ "'!)(( and ")!(( at t,e end o/ '()) and '()'! re-pe$tivel+ /; T,e $ompan ,ad /ailed to re$ogni5e -upplie- on ,and o/ ")!'(( and "'!3(( at t,e end o/ '()) and '()'! re-pe$tivel+ g; T,e $ompan reported a net lo-- o/ ")'!&(( /or t,e ear ended De$em#er 8)! '()'+ )+ "repare t,e ne$e--ar ad>u-ting >ournal entrie- at De$em#er 8)! '()'+ '+ ,at i- t,e $orre$ted net lo-- o/ ANTONIA Corp+ /or t,e ear ended De$em#er 8)! '()'7 A+ "!0(( C+ "0!((( B+ ")!((( D+ ")0!'((
PROBLEM 13: NARUTU CO+ reported t,e /ollo.ing /or t,e :r-t t.o ear- o/ operation'()( 4 "83!((( net in$ome '()) 4 "='3!((( net in$ome Earl in '()'! t,e /ollo.ing error- .ere di-$overed )+ Depre$iation o/ #uilding /or '()( .ere over-tated # "3!((( '+ Depre$iation o/ #uilding /or '()) .a- under-tated # ")='!3(( 8+ De$em#er 8)! '()(! inventor .a- under-tated # "'3(!((( &+ De$em#er 8)! '())! inventor .a- over-tated # ")!(((
Re!"ired: "repare t,e ne$e--ar ad>u-ting >ournal entrie-+ A--ume t,e #oo9- are $lo-ed+ Ignore in$ome ta@ $on-ideration-+ PROBLEM 14: T,e /ollo.ing -ele$ted a$$ount- are in$luded in t,e trial #alan$e o/ "ALA COR"+ on De$em#er 8)! '()' $e%it &redit Supplie- on ,and ")83!((( A$$rued -alarie- paa#le "3!((( Intere-t re$eiva#le '33!((( "repaid in-uran$e &!3((!((
Cordillera Career Development College COLLEGE OF BUSINESS EDUCATION AND ADMINISTRATION Buagan! "o#la$ion! La Trinidad! Benguet ( Unearned rent A$$rued intere-t paa#le
4 3(!(((
!dditional information is as follows: )+ A p,-i$al $ount o/ -upplie- on ,and on De$em#er 8)! '()'! totaled "33!(((+ '+ T,e a$$ountant /ailed to ad>u-t t,e A$$rued Salarie- "aa#le a$$ount+ A$$rued -alariepaa#le on De$em#er 8)! '()'! totaled "''(!(((+ 8+ T,e intere-t Re$eiva#le a$$ount .a- al-o le/t unad>u-ted at De$em#er 8)! '()'+ A$$rued intere-t re$eiva#le on De$em#er 8)! ()'! amounted to "')!3((+ &+ T,e une@pired portion- o/ t,e in-uran$e poli$ie- totaled "8!'3(!((( a- o/ De$em#er 8)! '()'+ 3+ A total o/ ")!&((!((( .a- re$eived on %anuar )! '()') /or t,e rent o/ a #uilding /or #ot, '()' and '()8+ T,e total amount re$eived .a- re$ogni5ed a- revenue in '()'+ 0+ T,e $orre$t amount o/ depre$iation /or t,e ear .a- "'!3((!((( #ut .a- erroneou-l re$orded a- "'3(!(((+ + "rior ear-2 depre$iation .a- under-tated # "80(!(((+
Re!"ired: "repare t,e ne$e--ar ad>u-ting >ournal entrie- on De$em#er 8)! '()'+ A--ume t,at t,e #oo9,ave not #een $lo-ed+
PROBLEM 15: *ou ,ave #een engaged to audit t,e :nan$ial -tatement- o/ "OM"OM COR"+ /or t,e ear ended De$em#er 8)! '()'+ *our audit reveal- t,e /ollo.ing -ituation- )+ Depre$iation o/ ")0!((( /or '()' on e1uipment .a- not re$orded+ '+ T,e p,-i$al inventor $ount on De$em#er 8)! '())! improperl e@$luded mer$,andi-e $o-ting "=3!((( t,at ,ad #een temporaril -tored in a pu#li$ .are,ou-e+ "ompom u-e- a periodi$ inventor --tem+ 8+ T,e p,-i$al inventor $ount on De$em#er 8)! '()'! improperl in$luded mer$,andi-e .it, a $o-t o/ "&'!3(( t,at ,ad #een re$orded a- a -ale on De$em#er '=! '()'! and ,eld /or t,e $u-tomer to pi$9 up on %anuar '! '()8+ &+ A $olle$tion o/ "'!((( on a$$ount /rom a $u-tomer re$eived on De$em#er 8)! '()'! .anot re$orded until %anuar 8! '()8+ 3+ In '()'! "ompom -old ")!3(( /ull depre$iated e1uipment t,at originall $o-t "))(!(((+ T,e pro$eed- /rom t,e -ale .ere $redited to t,e E1uipment a$$ount+ 0+ During De$em#er '()'! a $omputer $ompan :led a pated in/ringement -uit again-t "ompom $laiming damage- o/ ")!(((!(((+ T,e $ompan2- legal $oun-el ,a- indi$ated t,at an un/avora#le out$ome i- pro#a#le and a rea-ona#le e-timate o/ t,e $ourt2- a.ard to t,e $ompetitor i- "0((!(((+ T,e $ompan ,a- not ree$ted or di-$lo-ed t,i- -ituation in t,e :nan$ial -tatement-+ + "ompom ,a- a port/olio o/ $urrent mar9eta#le e1uit -e$uritie- a$1uired in '()) /or trading purpo-e-+ No valuation entr ,a- #een made+ In/ormation on $o-t and mar9et value i- a/ollo.- &'(t Mr)et De$em#er 8)! '()) "&3!((( "&3!((( De$em#er 8)! '()' "&3!((( "3((!((( + At De$em#er 8)! ()'! an anal-i- o/ paroll in/ormation -,o.- a$$rued -alarie- o/ "0)!(((+ T,e A$$rued Salarie- "aa#le a$$ount ,ad a #alan$e o/ "(!((( at De$em#er 8)! '()'! .,i$, .a- un$,anged /rom it- #alan$e at De$em#er 8)! '())+ =+ A pie$e o/ e1uipment .a- a$1uired on %anuar '! '()'! /or ")0(!((( and .a- $,arged to Repair- E@pen-e+ T,e e1uipment i- e@pe$ted to ,ave a u-e/ul li/e o/ ear- and no re-idual value+ "ompom normall u-e- t,e -traig,t?line met,od to depre$iate t,i- tpe o/ e1uipment+ )(+A "3!((( in-uran$e premium paid on %ul )! '())! /or a poli$ t,at e@pire- on %une 8(! '()&! .a- $,arged to In-uran$e E@pen-e+ ))+A patent .a- a$1uired at t,e #eginning o/ '()) /or "'3(!(((+ No amorti5ation ,a- #een re$orded -in$e it- a$1ui-ition+ T,e patent ,ad a )(?ear u-e/ul li/e on t,e date o/ a$1ui-ition+
Cordillera Career Development College COLLEGE OF BUSINESS EDUCATION AND ADMINISTRATION Buagan! "o#la$ion! La Trinidad! Benguet
Re!"ired: "repare t,e ne$e--ar ad>u-ting >ournal entrie- at De$em#er 8)! '()'+ Ignore in$ome ta@ $on-ideration-+
PROBLEM 16: T,e $onden-ed in$ome -tatement o/ SUNRISE! INC+ /or t,e ear ended De$em#er 8)! '()'! ipre-ented #elo. Sunri-e! In$+ I*&OME +,A,EME*, For t,e ear ended De$em#er 8)! '()' SaleCo-t o/ good -old Gro-- in$ome Operating e@pen-eNet in$ome
")!(((!((( 0((!((( &((!((( )3(!(((
P250#000
T,e De$em#er 8)! '()'! audit o/ t,e $ompan2- :nan$ial -tatement- di-$lo-ed t,e /ollo.ing error- )+ De$em#er 8)! '()'! inventor under-tated "8)!((( '+ A$$rued E@pen-e- o/ "&!((( and prepaid e@pen-e- o/ "0!((( .ere nit re$ogni5ed in t,e $ompan2- #oo98+ Sale- o/ "3!((( .ere not re$orded until %anuar '()8! alt,oug, t,e good- .ere -,ipped in De$em#er '()'! and .ere e@$luded /rom t,e De$em#er 8) p,-i$al inventor &+ "ur$,a-e- o/ "8(!((( made in De$em#er '()'! .ere not re$orded alt,oug, t,e good- .ere re$eived and properl in$luded in t,e De$em#er 8) p,-i$al inventor 3+ A ma$,ine .a- -old /or ")(!((( on %ul )! '()'! and t,e pro$eed- .ere $redited to t,e Salea$$ount+ T,e ma$,ine .a- a$1uired on %anuar )! '((= /or "0(!(((+ At t,at time! it ,ad an e-timated li/e o/ 0 ear- .it, no re-idual value+ No depre$iation .a- re$orded on t,i- ma$,ine in '()' )+ "repare t,e ne$e--ar ad>u-ting >ournal entrie- on De$em#er 8)! '()'+ '+ ,at i- t,e $orre$ted net in$ome /or t,e ear ended De$em#er 8)! '()'7 A+ "''!((( C+ "'3!((( B+ ")00!((( D+ "''&!(((
PROBLEM 17: SILI CO+ reported preta@ in$ome- o/ "3(3!((( and "8!((( /or t,e ear- ended De$em#er 8)! '()) and '()'! re-pe$tivel+ 6o.ever! t,e auditor noted t,at t,e /ollo.ing error- ,ad #een made a+ Sale- /or '()) in$luded amount- o/ ")=)!((( .,i$, ,ad #een re$eived in $a-, during '())! #ut /or .,i$, t,e related good- .ere -,ipped in '()'+ Title did not pa-- to t,e #uer until '()'+ #+ T,e inventor on De$em#er 8)! '())! .a- under-tated # "&8!'(( $+ T,e $ompan2- a$$ountant! in re$ording intere-t e@pen-e /or #ot, '()) and '()' on #ond- paa#le! made t,e /ollo.ing entr on an annual #a-i- Intere-t E@pen-e 3!((( Ca-, 3!((( T,e #ond- ,ave a /a$e value o/ ")!'3(!((( and pa a nominal intere-t rate o/ 0<+ T,e .ere i--ued at a di-$ount o/ "3!((( on %anuar )! '())! to ield an ee$tive intere-t rate o/ < + d+ Ordinar repair- to e1uipment ,ad #een erroneou-l $,arged to t,e E1uipment a$$ount during '()) and '()'+ Repair- o/ "&'!3(( and "&!((( ,ad #een in$urred in '(()) and '()'! re-pe$tivel+ In determining depre$iation $,arge-! Sili applie- a rate o/ )(< to t,e #alan$e in t,e E1uipment a$$ount at t,e end o/ t,e ear+ )+ ,at i- t,e $orre$ted preta@ in$ome /or '())7
Cordillera Career Development College COLLEGE OF BUSINESS EDUCATION AND ADMINISTRATION Buagan! "o#la$ion! La Trinidad! Benguet A+ "8(8!'(( C+ "8))!(( B+ "''3!8(( D+ "8(!&3( '+ ,at i- t,e $orre$ted preta@ in$ome /or '()'7 A+ "&!==' C+ "&&!'=' B+ "&(!(&' D+ "33!8'
PROBLEM 18: BARBAS! INC+ ,a- #een u-ing t,e a$$rual #a-i- o/ a$$ounting+ 6o.ever! an e@amination o/ t,e re$ord- reveal- t,at -ome e@pen-e- and revenue- ,ave #een ,andled on a $a-, #a-i- # t,e ine@perien$ed #oo99eeper o/ t,e $ompan+ In$ome -tatement- prepared # t,e #oo99eeper reported ")&3!((( net in$ome /or '()) and ")3!((( net in$ome /or '()'+ Furt,er revie. o/ t,e re$ord- reveal- t,at t,e /ollo.ing item- .ere ,andled improperl+ )+ Rent o/ "0!3(( .a- re$eived /rom a le--ee on De$em#er '8! '())+ It .a- re$orded a- in$ome at t,at time t,oug, t,e rental pertain- to '()'+ '+ Salarie- paa#le on De$em#er 8) ,ave #een $on-i-tentl omitted /rom t,e re$ord- o/ t,at date and ,ave #een re$orded a- e@pen-e- .,en paid in t,e /ollo.ing ear+ T,e -alar a$$rual- re$orded in t,i- manner .ere De$em#er 8)! '()( "3!3(( De$em#er 8)! '()) !3(( De$em#er 8)! '()' &!(( 8+ Invoi$e- /or o$e -upplie- pur$,a-ed ,ave #een $,arged to e@pen-e a$$ount- .,en re$eived+ Inventorie- o/ -upplie- on ,and at t,e end o/ ea$, ear ,ave #een ignored! and no entr ,a- #een made /or t,em+ De$em#er 8)! '()( "0!3(( De$em#er 8)! '()) 8!(( De$em#er 8)! '()' !)(( )+ ,at i- t,e $orre$ted net in$ome /or '()&7 A+ ")88!(( C+ ")&0!(( B+ ")&&!'(( D+ ")8=!8(( '+ ,at i- t,e $orre$ted net in$ome /or '()'7 A+ ")&!(( C+ ")3!0(( B+ ")=!(( D+ ")=(!=((
PROBLEM 19 BARTEK CO+ i- in t,e pro$e-- o/ o#taining a loan at Metropoli- Ban9+ T,e #an9 ,a- re1ue-ted audited :nan$ial -tatement-+ Barte92- :nan$ial -tatement- ,ave never #een audited #e/ore+ It ,a- prepared t,e /ollo.ing $omparative :nan$ial -tatement- /or t,e ear ended De$em#er 8)! '()' and '())+ Barte9 Co+ &OMPARA,I-E +,A,EME*,+ OF FI*A*&IAL PO+I,IO* De$em#er 8)! '()' and '()) A((et( 2012 2011 Current A--et- Ca-, and $a-, e1uivalent")!'(3!(( "((!((( ( A$$ount- Re$eiva#le )!=0(!((( )!&(!((( Allo.an$e /or #ad De#t)3!(((; =(!(((; Inventor )!(83!((( )!()(!((( Total Current A--et&!()3!((( 8!'((!((( Non$urrent A--et- "ropert! plant! and e1uipment 83!((( &!3(( A$$umulated Depre$iation 0(!(((; 38'!(((; Total non$urrent A--et''!((( 8)3!3(( P4#242#0 P3#515#50 Total A--et00 0
Li%i.itie( /d (hreh'.der( e!"it
Cordillera Career Development College COLLEGE OF BUSINESS EDUCATION AND ADMINISTRATION Buagan! "o#la$ion! La Trinidad! Benguet Lia#ilitie- A$$ount- "aa#le S,are,older-2 E1uit Ordinar -,are-! "'( par value )3(!((( -,are- aut,ori5ed 03!((( -,are- i--ued and out-tanding Retained EarningTotal -,are,older-2 E1uit Total Lia#ilitie- and S,are,older-2 e1uit
"0(!(((
"=(!3((
)!8((!(((
)!8((!(((
'!883!((( 8!083!((( P4#242#0 00
)!'83!((( '!383!((( P3#515#50 0
Barte9 Co+ &OMPARA,I-E I*&OME +,A,EME*,+ For t,e *ear Ended De$em#er 8)! '()' and '()) 2012 2011 Sale"3!(((!((( "&!3((!((( Co-t o/ Good- Sold '!)3(!((( )!=3!((( Gro-- In$ome '!3(!((( '!3'3!((( Operating E@pen-e- Selling E@pen-e)!)3(!((( )!('3!((( Admini-trative 0((!((( 3'3!((( E@pen-e)!3(!((( )!33(!((( Total Operating E@pen-eP1#100#000 P975#000 Net In$ome The 2012 audit revealed the following facts: A+ On %anuar 3! '())! Barte9 ,ad $,arged a 3?ear in-uran$e premium to e@pen-e+ T,e premium totaled "8)!((( B+ T,e amount o/ lo-- due to #ad de#t- ,a- -teadil de$rea-ed over t,e la-t ' ear-+ Barte9 ,a- de$ided to redu$e t,e amount o/ #ad de#t e@pen-e /rom '< to ) < o/ -ale-! #eginning .it, '()'+ A $,arge o/ '< ,a- alread #een made /or '()'+; C+ Senegal u-e- t,e periodi$ inventor --tem+ T,e /ollo.ing are t,e inventor error- /or t,e la-t ' ear-+ '()) 4 ending inventor over-tated # "3!3(( '()) 4 ending inventor over-tated # "==!((( D+ An e1uipment $o-ting ")3(!((( .a- a$1uired on %anuar 8! '())+ T,e pur$,a-e .are$orded # a $,arge to operating e@pen-e+ T,e e1uipment ,a- a u-e/ul li/e o/ )( ear- and a re-idual value o/ "'3!(((+ Barte9 u-e- t,e -traig,t?line met,od in depre$iating it- a--et-+ )+ "repare t,e ad>u-ting >ournal entrie- to $orre$t t,e #oo9- at De$em#er 8)! '()'+ A--ume t,at t,e #oo9- /or '()' ,ave not et #een $lo-ed+ '+ ,at i- Barte92- $orre$ted net in$ome /or t,e ear ended De$em#er 8)! '())7 A+ ")!()'!'(( C+ "0!(( B+ ")!')'!(( D+ ")!(0)!(( 8+ ,at i- Barte92- $orre$ted net in$ome /or t,e ear ended De$em#er 8)! '()'7 A+ ")!(=3!'(( C+ ")!('!(( B+ ")!)'0!(( D+ ")!)(!((
PROBLEM 20: In t,e $our-e o/ our e@amination o/ t,e De$em#er 8)! '()'! :nan$ial -tatement- o/ DIONISIA COM"AN*! ou di-$overed $ertain error- t,at ,ad o$$urred during '()) and '()'+ No error- .ere $orre$ted during '())+ T,e error- are -ummari5ed #elo. )+ Beginning mer$,andi-e inventor %anuar )! '()); .a- under-tated # "'3=!'((
Cordillera Career Development College COLLEGE OF BUSINESS EDUCATION AND ADMINISTRATION Buagan! "o#la$ion! La Trinidad! Benguet '+ Mer$,andi-e $o-ting "'!((( .a- -old /or ")'(!((( no Naval Compan on De$em#er '! '())! #ut t,e -ale .a- re$orded in '()'+ T,e mer$,andi-e .a- -,ipped FOB -,ipping point and .a- not in$luded in ending inventor+ Dioni-ia u-e- a periodi$ inventor --tem+ 8+ A T.o?ear :re in-uran$e .a- pur$,a-ed on mat )! '())! /or ")'!((+ T,e .,ole amount .a- $,arged to "repaid In-uran$e+ No ad>u-ting entr .a- prepared in '()) and '()'+ &+ A one ea note re$eiva#le o/ "'!((( .a- ,eld # Dioni-ia #eginning O$to#er )! '())+ "ament o/ t,e )(< note and a$$rued intere-t .a- re$eived upon maturit+ No ad>u-ting entr .a- made on De$em#er 8)! '())+ 3+ E1uipment .it, a )(?ear li/e .a- pur$,a-ed on %anuar )! '())! /or ")!)0!(((+ No depre$iation e@pen-e .a- re$orded during '()) or '()'+ A--ume t,at t,e e1uipment ,a- no re-idual value and t,at Dioni-ia u-e- t,e -traig,t?line met,od /r re$ording depre$iation+
Re!"ired: "repare >ournal entrie- to $orre$t ea$, o/ t,e error- de-$ri#ed a#ove+ A--ume t,at t,e nominal a$$ount- /or '()' ,ave not et #een $lo-ed into t,e in$ome -ummar a$$ount+
