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ACTBAS1/ACCTBA1 INDIVIDUAL BUSINESS CASE nd 2 Term, Academic Year 2011-2012 Williams, J., Haka, S., Bettner, M.

, & Carcello, J. (2012) th Financial Accounting, 15 edition, McGraw-Hill Irwin (with modifications)

BILLBOARD SCREEN is a service-type enterprise in the advertising field, and its ownermanager, Billy Beard, has only a limited knowledge of accounting. Billy prepared the following statement of financial position, which, although arranged satisfactorily, contains certain errors with respect to such concepts as the business entity and asset valuation. BILLBOARD SCREEN Statement of Financial Position December 31, 2012 Liabilities & Owners Equity P 206,000 Liabilities: 108,000 Notes Payable P680,000 98,000 Accounts Payable 332,200 800,000 Total Liabilities P1,012,200 720,000 Owners Equity: 354,000 Billy, Capital 1, 363,400 89,600 P2,375,600 Total Liabilities & Owners Equity P2,375,600

Assets Cash Notes Receivable Accounts Receivable Land Building Office Furniture Other Assets Total Assets

In discussion with Billy and by inspection of the accounting records, you discover the following facts: 1. The amount of cash, P206,000 includes P136,000 in the companys bank account, P21,600 on hand in the companys safe, and P48,400 in Billys personal savings account. 2. One of the notes receivable in the amount of P20,000 is an IOU that Billy received in a game several years ago. The IOU is signed by Ms. Panga Co whom Billy met at the game but has not heard from since. 3. Office furniture includes P116,000 for a Persian rug for the office purchased on December 19. The total cost of the rug was P376,000. The business paid P116,000 in cash and issued a note payable to Sultan Carpet for the balance due (P260,000). As no payment of the note is due until January, this debt is not included in the liabilities above. 4. Also included in the amount for office furniture is a computer that cost P101,000 but is not on hand because Billy donated it to a local charity. 5. The Other Assets of P89, 600 represent the total amount of income taxes Billy has paid the government over a period of years. Billy believes the income tax law to be unconstitutional, and a friend who attends law school has promised to help Billy recover the taxes paid as soon as he passes the bar exam.

6. The asset Land was acquired at a cost of P560,000 but was increased to a valuation of P800,000 when one of Billys friends offered to pay that much for it if Billy would move the building off the lot. 7. The accounts payable includes debts of P308,000 and the P24,200 balance owed on Billys personal credit card. Instructions: a. Prepare a corrected balance sheet at December 31, 2012. b. For each of the seven numbered items above, use a separate numbered paragraph to explain whether the treatment followed by Billy is in accordance with generally accepted accounting principles.
Format: Short bond paper Double spaced One inch margin in all sides Minimum of two pages (not including the cover page) Font: Arial 12 Cover page:

BUSINESS CASE Presented to the Accountancy Department De La Salle University In partial fulfillment Of the course requirements In ACTBAS1/ACCTBA1 (sec) Surname, First Name, M.I. Date

Deadline: MW class: October 29, 2012 TH class: October 30, 2012