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SOLUTION MANUAL

Financial Accounting Valix and Peralta Volume One - 2008 Edition 1
CHAPTER 1
Problem 1-1
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. D C D D C C B C D A

Problem 1-2
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. A A D B D B D C C D

Problem 1-3
1. 2. 3. 4. 5. C D D A D

Problem 1-4
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. A C A A D A D B D D

Problem 1-5
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. A A A D D D B D C D

Problem 1-6
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. A A C A A A B C A B

Problem 1-7
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. D D C A A C D D B D

Problem 1-8
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. B B C C A B D D A B

Problem 1-9
1. 2. 3. 4. 5. D D C B C

Problem 1-10
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. A B D B A D C A D A

Problem 1-11
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. C B D A F E J G H I

Problem 1-12
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. E D B C G H I F J A

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Problem 1-13
1. Systematic and rational allocation as a matching process 2. Comparability or consistency 3. Monetary unit 4. Income recognition principle 5. Time period 6. Going concern and cost principle 7. Accounting entity 8. Materiality 9. Completeness or standard of adequate disclosure 10. Conservatism or prudence

Problem 1-14
1. Materiality 2. Going concern 3. Income recognition principle 4. Accounting entity 5. Standard of adequate disclosure 6. Comparability 7. Matching principle 8. Cost principle 9. Reliability 10. Time period

Problem 1-15
1. The cost of leasehold improvement should not be recorded as outright expense, but should be amortized as expense over the life of the improvement or life of the lease, whichever is shorter. This is in conformity with the systematic and rational allocation principle of expense recognition. 2. The fact that the customer has not been seen for a year is not a controlling factor to write off the account. If the account is doubtful of collection, an allowance should be set up. It is only when there is proof of uncollectibility that the account should be written off. 3. Advertising cost should be treated as outright expense, by reason of the uncertainty of the benefit that may be derived therefrom in the future, in conformity with “immediate recognition principle”. 4. The balance of the cash surrender value should not be charged to loss. In reality, this is conceived as a prospective receivable if and when the policy is canceled because of excessive premium in the early stage of policy. The CSV should be classified as noncurrent investment. 5. The cost of obsolete merchandise should not be included as part of inventory but charged to expense, as a conservative approach. 6. The excess payment represents goodwill which should not be amortized but subject to impairment. Conservatism dictates that goodwill should be recognized when paid for. 7. The depreciation is not dependent on the amount of profit generated during the year. Depreciation is an allocation of cost and therefore should be provided regardless of the level of earnings.

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8. An entry should be made to recognize the inventory fire loss, and such loss should be treated as component of income. 9. Revenues and expenses of the canteen should be separated from the revenues and cost of regular business operations in order to present fairly the financial position and performance of the regular operations. 10. The increase in value of land and building should not be taken up in the accounts. The use of revalued amount is permitted only when the revaluation is made by independent and expert appraiser. The expected sales price of P5,000,000 is not necessarily the revalued amount of the land and building. Moreover, increase in value is not an income until the asset is sold.

Problem 1-16
1. Accrual assumption 6. Income recognition principle 2. Going concern assumption 7. Expense recognition principle 3. Asset recognition principle 8. Cause and effect association principle 4. Cost principle 9. Systematic and rational allocation principle 5. Liability recognition principle 10. Immediate recognition principle

Problem 1-17
1. Monetary unit assumption 2. Cost principle 3. Materiality 4. Time period 5. Matching principle 6. Substance over form 7. Income recognition principle 8. Comparability or consistency 9. Conservatism or prudence 10. Adequate disclosure or completeness

Problem 1-18
1. The cost of the asset should be the amount of cash paid. No income should be recognized when an asset is purchased at an amount less than its market value. Revenue arises from the act of selling and not from the act of buying. 2. The entry should be reversed because the pending lawsuit is a mere contingency. The contingent loss is simply disclosed. To be recognized in accordance with conservatism, the contingent loss must be both probable and measurable. 3. The new car should be charged against the president and debited to receivable from officer, because the car is for personal use.

2. 3. goodwill is not amortized anymore but on each balance sheet date it should be assessed for impairment. 6. 4. The entry is incorrect because no revenue shall be recognized until a sale has taken place.4 4. Under the new standard. Accrual Going concern Accounting entity Monetary unit Time period . Purchased goodwill should be recorded as an asset. 5. Problem 1-19 1.

due in 5 years Note payable.350.500.500.000 800.000 650.000 500.500. plant and equipment Long-term investments Intangible asset Total noncurrent assets Total assets Note 800.000 (1) (2) (3) 450.000 6.000 1. P100 par Share premium Retained earnings Total shareholders’ equity Total liabilities and stockholders’ equity (4) 450.000.000 1.000 200.000 2.000 8.000 200.000 Note 1 .000 .400.350.000 950.000 5.000 2.000 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Trade and other payables Note payable.000 8.000 900.150.Prepaid expenses Office supplies 50. short-term debt Total current liabilities Noncurrent liabilities: Mortgage payable. long-term debt Total noncurrent liabilities Shareholders’ equity: Share capital.000.000 500.000 4.000 4.5 CHAPTER 2 Problem 2-1 Easy Company Statement of Financial Position December 31. 2008 ASSETS Current assets: Cash and cash equivalents Accounts receivable Inventories Prepaid expenses Total current assets Noncurrent assets: Property.850.

000 2.Prepaid rent Total prepaid expenses 150.Trade and other payables Accounts payable Accrued expenses Total 350. 2008 ASSETS Current assets: Cash Trading securities Trade and other receivables Inventories Prepaid expenses Total current assets Noncurrent assets: Property.000 200.000 100.000 (2) .000) 4.400.640.940.000 2. plant and equipment Long-term investments Intangible assets Total noncurrent assets Total assets Note (1) 1.000 450.000 (3) 20. plant and equipment Accumulated depreciation Net book value Note 3 . plant and equipment Property.Property.000 420.000 300.000 5.000.000 9.000 (4) (5) (6) 4.Intangible asset Patent Note 4 .200.500.000 250.000 620.000 6 Note 2 .600.000 800.250.000 Problem 2-2 Simple Company Statement of Financial Position December 31.000 6.560.000 (1.

000 500.000.Prepaid expenses Prepaid insurance Note 4 .000 1.000.7 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Trade and other payables Serial bonds payable .500.000 200.000 5.250.Inventories Finished goods Goods in process Raw materials Factory supplies Total Note 3 .000 6.000 50.000 2.remaining portion Shareholders’ equity: Share capital Share premium Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity Note 1 .380.500.000 1.000 400.000 Land .500.000 620.120. plant and equipment Cost 1.current portion Total current liabilities Noncurrent liabilities: Serial bonds payable .000 880.000 20.Trade and other receivables Accounts receivable Allowance for doubtful accounts Notes receivable Claim receivable Total Note 2 . Book value 1.000 500.000 Note (7) 620.000 20.Property. depr.000) 150.000 Accum.000 9.000 600.000 500.000 ( 50.

000 100.600.000 500.000 1.000 620.790.000 .000 200.Long-term investments Investment in bonds Plant expansion fund Total Note 6 .Intangible assets Franchise Goodwill Total Note 7 .000.000 40.Building Machinery Tools Total 4.000 7.000 100.000 2.000 2.000 300.500.000 40.000 1.000 4.000 280.000 60.000 Problem 2-3 Exemplar Company Statement of Financial Position December 31.000 700.000 100.640.000 2.300.000 30.300.Trade and other payables Accounts payable Notes payable Income tax payable Advances from customers Accrued expenses Accrued interest on note payable Employees income tax payable Total 300.000 640.000 70.000.000 2.000 20. 2008 ASSETS Current assets: Cash and cash equivalents Trading securities Trade and other receivables Inventories Prepaid expenses Total current assets Noncurrent assets: Property.000 1.900.000.000 1.000 2.540.400.000 8 Note 5 . plant and equipment Note (1) 500.000 10.300.000 (2) 5.

000 Note 1 .000.000 1.000 9 LIABILITIES AND SHAREHOLDERS’ EQUITY Note Current liabilities: Trade and other payables Noncurrent liabilities: Bonds payable Premium on bonds payable Total noncurrent liabilities Shareholders’ equity: Share capital Reserves Retained earnings (deficit) Total shareholders’ equity Total liabilities and shareholders’ equity (6) 5.000 3.000 12.900.000 150.000 Book value 1. plant and equipment Cost 1.000 2.300.000.000.800.500.000) 5.000 400.110.000 5.000 10.200.000. 2.000 200.000.Trade and other receivables Accounts receivable Allowance for doubtful accounts Notes receivable Accrued interest on notes receivable Total Note 2 .900.000 10.500.310.Long-term investments Intangible assets Other noncurrent assets Total noncurrent assets Total assets (3) (4) (5) 1.350.000 6.000 1.000 5.000 7.000 700.000 12.000.000 ( 20.000.900.000 3.000 800.000 (7) (8) 7.000 Land Building Equipment Total Note 3 .000.000.Long-term investments .000 Accum.500.000 640.000 1.000) 250.000 (1. depr.Property.

000 30.000 7.000 200.000.350. not collectible currently Long-term refundable deposit Total Note 6 .000 400.000 60.000.000 10 Note 5 .000 100.000 50.000 300.Intangible assets Computer software Lease rights Total 500.000 100.000.000 350. 2008 ASSETS .000 2.000 5.000 150.000 Problem 2-4 Relax Company Statement of Financial Position December 31.000.Trade and other payables Accounts payable Notes payable Unearned rent income SSS payable Accrued salaries Dividends payable Withholding tax payable Total Note 7 – Share capital Preference share capital Ordinary share capital Total Note 8 .000 700.000 10.Reserves Share premium – preference Share premium – ordinary Total 500.000 400.Other noncurrent assets Advances to officers.000 1.000 3.000 120.000 1.000 40.310.000 100.Land held for speculation Sinking fund Preference share redemption fund Cash surrender value Total Note 4 .000 3.250.

000 3.000 1.000 5.350. due June 30.000.000 9. depr.600.000 Accum.000.400.500.000 9.000 (2) (3) 5.000.000.650.000 3.200.000 350.000 1.000 1.300.600.250. plant and equipment Investment in associate Intangible assets Total noncurrent assets Total assets Note (1) 400.Property.000.000 Book value 500.Trade accounts receivable Accounts receivable Allowance for doubtful accounts Net realizable value Note 2 .000 100. plant and equipment Cost 500.000 ( 50.000 300.500.000 750.000 3.000 (4) 1.000 (5) Land Building Machinery Equipment Total .300.000 1.000 3. 2010 Total noncurrent liabilities Shareholders’ equity: Share capital Reserves Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity Note 1 .000 500.000 2.000 400.900.000 1.000 1.000 2.600.000 1.000) 750.000 800.000.000 8.250.100.000 5.000 1.250.000 7.000 5.800. 2.Current assets: Cash Trade accounts receivable Inventories Prepaid expenses Total current assets Noncurrent assets: Property.000 11 LIABILITIES AND SHAREHOLDERS’ EQUITY Note Current liabilities: Trade and other payables Mortgage note payable-current portion Total current liabilities Noncurrent liabilities: Mortgage note payable.000 400. remaining position Bank loan payable.000 100.750.

Trade and other payables Notes payable Accounts payable Income tax payable Accrued expenses Estimated liability for damages Total Note 5 .500.000 1.000.000 700.Reserves Additional paid in capital Retained earnings appropriated for plant expansion Retained earnings appropriated for contingencies Total 300.000 100.350.400.830.000 350.000 50.000 6.000 2.400.000 .000 200.000 100.000 LIABILITIES AND EQUITY Note Current liabilities: Trade and other payables (5) 2.000 1.000 830.000 150.000 1.000 11.000 (3) (4) 5.000 60.000 140.000 750.000 350. plant and equipment Investment property Intangible asset Total noncurrent assets Total assets Note (1) (2) 700.000 4.570.Note 3 .050.200.000 1.000. 2008 ASSETS Current assets: Cash Bond sinking fund Trade and other receivables Inventory Prepaid expenses Total current assets Noncurrent assets: Property.000 370.000 12 Problem 2-5 Summa Company Statement of Financial Position December 31.Intangible assets Trademark Secret processes and formulas Total Note 4 .

000 13 Note 1 .000 30.400.000 650.500.000 500. plant and equipment Cost 1.000 Land Building Furniture and equipment Total Note 4 .000 900.000 Book value 1.Bonds payable due June 30.000 50.Trade and other payables Accounts payable Notes payable Accrued taxes Other accrued liabilities Total 370. depr.000 850.000 650.000 Accum.000 ( 50.050.000) 200.000 3.000 2.000.000 8.000 2.000 5.000.700.000.500.000 5.000 50.000 3.700.000.Trade and other receivables Accounts receivable Allowance for doubtful accounts Notes receivable Accrued interest receivable Total Note 3 .Intangible asset Patent Note 5 .000 650.000 830.000 .000 3.400.050.000 2.900.500.000 1.000 4. 2.Cash Cash on hand Cash in bank Note 2 .400.000 150.000 1.000 700.500.Property.000.500.000 11.000 6. 2009 Total current liabilities Noncurrent liability: Deferred tax liability Equity: Share capital Reserves Retained earnings Total equity Total liabilities and equity (6) (7) 2.

000 400.000 5.000.250.850.000) 2.000.000 ( 140. 10.000) ( 10.000.000) 500.000) 7.500.000 shares Subscription receivable Paid in capital Note 7 .100.700.000.000 14 Problem 2-6 (Functional method) Karla Company Income Statement Year ended December 31.000) 1.000 ( 500.Note 6 – Share capital Authorized share capital.000.000.000 shares.Reserves Share premium Retained earnings appropriated for contingencies Total 300.000 .000 (5.000.000 ( 250.000 3. 2008 Note Net sales revenue Cost of sales Gross income Other income Total income Expenses: Selling expenses Administrative expenses Other expenses Income before tax Income tax Net income (1) (2) (3) (4) (5) (6) 950. P100 par Unissued share capital Issued share capital Subscribed share capital. January 1 1.000 100.000 200.000 1.000 (2.000 800. 50.700.700.000 1.000) 3.000 7.850.000 Note 1 – Net sales revenue Gross sales Sales returns and allowances Sales discounts Net sales revenue 7.000 Note 2 – Cost of sales Inventory.000 3.000 1.000 500.

000 Note 5 – Administrative expenses Officers’ salaries Depreciation – office equipment Total administrative expenses 500.000 15 Note 4 – Selling expenses Freight out Salesmen’s commission Depreciation – store equipment Total selling expenses 175.000) ( 100.000 650. 2008 Net sales revenue Note (1) 7.000 Note 6 – Other expenses Loss on sale of equipment Loss on sale of investment Total other expenses 50.000) 5.500.500.000 125.000 (1.000 100.000 .000 6.000 400.000 300.000) 5.000 Natural method Karla Company Income Statement Year ended December 31.000.700.000 ( 150.000 950.000 50.Purchases Freight in Purchase returns and allowances Purchase discounts Net purchases Goods available for sale Inventory. December 31 Cost of sales 5.000 Note 3 – Other income Rental income Dividend revenue Total other income 250.000 800.500.000 150.000 500.250.

000 150.000 500.100.500.000 6.000) 5.000 ( 140.000) 1.500.000) 7.Other income Total Expenses: Increase in inventory Net purchases Freight out Salesmen’s commission Depreciation Officers’ salaries Other expenses Income before tax Income tax Net income (2) (3) (4) (5) (6) ( 500.000 650.000 425.000 500.000 175.000) ( 10.700.000 500.000) 5.850.000 Note 2 – Other income Rental income Dividend revenue Total other income 250.500.000 ( 250.250.000 1.000 .000 1.250.000 8.000 400.000) ( 100.000 100.850.000 Note 3 – Increase in inventory Inventory.000 16 Note 1 – Net sales revenue Gross sales Sales returns and allowances Sales discounts Net sales revenue 7.000. January 1 Increase in inventory 1. December 31 Inventory.000 Note 4 – Net purchases Purchases Freight in Purchase returns and allowances Purchase discounts Net purchases 5.000 400.000.000 ( 150.

000.000 3.000 210.000 5.000 950.920.000 3.230.000 170.000 50.000 50.000 110.200.990.000 240.000 60.000 320.000 280.000 300.000 Cost of sales method Masay Company . heat and power Rent – factory building Repair and maintenance – machinery Factory supplies used Depreciation – machinery Total manufacturing cost Goods in process – January 1 Total Cost of goods in process Less: Goods in process – December 31 Cost of goods manufactured 200.000 17 Problem 2-7 Masay Company Statement of Cost of Goods Manufactured Year Ended December 31.000 100.Note 5 – Depreciation Depreciation – store equipment Depreciation – office equipment Total 125.000 425.120.000 2.000 Note 6 – Other expenses Loss on sale of equipment Loss on sale of investment Total 50. 2008 Raw materials – January 1 Purchases Raw materials available for use Less: Raw materials – December 31 Raw materials used Direct labor Factory overhead: Indirect labor Superintendence Light.000 5.000 250.000 4.060.000 1.000 120.

060.000 210.000 50.000 (5.000 Note 3 – Other income Gain from expropriation Interest income Gain on sale of equipment 100.120.000 ( 320.000 590.000) 500.000 Note 4 – Selling expenses Sales salaries Advertising Depreciation – store equipment 400.000 100.000 2.000) 5.500.420.450.330.000 10. 2008 Net sales revenue Cost of goods sold Gross income Other income Total income Expenses: Selling expenses Administrative expenses Other expense Income before tax Income tax expense Net income Note (1) (2) (3) (4) (5) (6) 830.000 160.450.000 1.000 ( 300.000 70.000 Note 2 – Cost of goods sold Finished goods – January 1 Cost of goods manufactured Goods available for sale Finished goods – December 31 Cost of goods sold 360.000 5.000 .Income Statement Year ended December 31.000 820.540.000 300.720.000 5.000) 2.000) 7.120.000 7.000 210.000 18 Note 1 – Net sales revenue Sales Sales returns and allowances Net sales revenue ( 7.

000 (8) 300.000 820.660.000 (6) 550.920.000 160.000 830.000 7.120.000 150.000 2.000 .000 (7) 110.000) 500.000 210.000 40.450.000 (5) 1.000 19 Nature of expense method Masay Company Income Statement Year Ended December 31.000 200.000 250. 2008 Net sales revenue Other income Total income Expenses: Decrease in finished goods and goods in process Raw materials used Direct labor Factory overhead Salaries Advertising Depreciation Delivery expenses Accounting and legal fees Office expenses Other expense Income before tax Income tax expense Net income Note (1) (2) 7.000 950.000 Note 5 – Administrative expenses Office salaries Depreciation – office equipment Accounting and legal fees Office expenses Total 150.000 6.000 590.000 150.000 Note 6 – Other expense Earthquake loss 300.000 (4) (3) 130.000 ( _320.000 250.840.Delivery expenses Total 200.

000 60.000 150.120.000 470.000 100.000 10.000 50.000 Note 5 – Factory overhead Indirect labor Superintendence Light.000 Note 7 – Depreciation .000 110.000 50.000 Note 3 – Decrease in finished goods and goods in process Finished goods Goods in process Total January 1 360.450.200.920.500.000 170.000 2.000 Note 6 – Salaries Sales salaries Office salaries Total 400.000 3.000 Note 2 – Other income Gain from expropriation Interest income Gain on sale of equipment 100.000) 7.000 240.000 210.000 550.000 120.000 1.000 Decrease 60.000 70.000 280.000 20 Note 4 – Raw materials used Raw materials – January 1 Purchases Raw materials available for use Raw materials – December 31 Raw materials used 200. heat and power Rent – factory building Repair and maintenance – machinery Factory supplies used Depreciation – machinery Total 250.000 3.Note 1 – Net sales revenue Sales Sales returns and allowances Net sales revenue ( 7.000 130.000 210.000 December 31 300.000 320.000.000 600.

000) 2.000) 1.900.000 ( 360.000 Note 8 – Other expense Earthquake loss 300.000 110.000 ( 200.000 8.300.800.000 .610.070.Depreciation – store equipment Depreciation – office equipment Total 70.000 7.000 500.000 150.750.000.000 Note 3 – Selling expenses Depreciation – store equipment Store supplies Sales salaries Total 110.900.000 40.000 1.000) 8.000 Note 2 – Cost of goods sold Beginning inventory Purchases Transportation in Purchase discounts Goods available for sale Ending inventory Cost of goods sold 1.000 580.400.000 21 Note 1 – Net sales revenue Sales Sales returns and allowances Net sales revenue 9.000) 5.000 ( 100.000 80.000 Problem 2-8 Youth Company Income Statement Year ended December 31.000 1.000) 5.000 5. 2008 Net sales revenue Cost of goods sold Gross income Expenses: Selling expenses Administrative expenses Other expense Income before tax Income tax expense Net income Note (1) (2) (3) (4) (5) 690.000 690.870.000 (5.000 340.870.360.970.500.000 (1.

000 120.000 80.000 120.Note 4 – Administrative expenses Officers’ salaries Depreciation – building Office supplies Total 400.000 150.000 Note 5 – Other expense Uninsured flood loss 340.000 1.000 50.000 580.000 130.000 220.000 60.900.000 4.000 600.000 480.000 ( 100.000 1.000 90.480.000 22 Problem 2-9 Christian Company Statement of Cost of Goods Manufactured Year Ended December 31.000) 1.000 .000 1.750.680.810.600.580. 2008 Purchases Freight in Total Increase in raw materials Raw materials used Direct labor Factory overhead: Indirect labor Depreciation – machinery Factory taxes Factory supplies expense Factory superintendence Factory maintenance Factory heat. light and power Total manufacturing cost Decrease in goods in process Cost of goods manufactured 1.000 4.

000 930.000 Note 1 – Cost of goods sold Cost of goods manufactured Decrease in finished goods Cost of goods sold 4.900.000 Office salaries 800.000.170.000 Total 930.Christian Company Income Statement Year Ended December 31.000.000 1.000 200.000 Note 3 – Administrative expenses Office supplies expense 30.100.000) 1.000 23 Note 2 – Selling expenses Sales salaries 520.000 Doubtful accounts 100.000 8.900.000 5.000 Delivery expense 160.000 Total 800.000 1.000 Advertising 120.000 ( 170.000 (5. 2008 Note Sales revenue Cost of goods sold Gross income Expenses: Selling expenses Administrative expenses Income before tax Income tax expense Net income (1) (2) (3) 800.000 .000) 2.730.100.

360.000 220.000 280.560.000 5.000 1. light and power Repairs and maintenance Indirect labor Other factory overhead Factory supplies used (300.000.000 2.000 2.000 (5.580.000) 1.400.500.000 – 540.000 160.460. 2008 Materials – January 1 Purchases Freight on purchases Purchase discounts Materials available for use Less: Materials – December 31 Materials used Direct labor Factory overhead: Heat.000 2.000 24 Ronald Company Income Statement Year Ended December 31.000 5.000 360.980.000 1.600.000 5.Problem 2-10 Ronald Company Statement of Cost of Goods Manufactured Year Ended December 31.000 420.000 .820.000 360.000 100.000 340.800.100.000 600.000) Depreciation – factory building Total manufacturing cost Goods in process – January 1 Total cost of goods in process Less: Goods in process – December 31 Cost of goods manufactured 1.000 1.920.000 + 660. 2008 Note Net sales revenue Cost of goods sold Gross income Other income (1) (2) (3) 6.000 ( 20.120.000) 1.000 320.

000 Note 3 – Other income Interest revenue 160.000 Note 1 – Net sales revenue Sales Sales returns and allowances Net sales revenue 7.000 1.000) 6.000 150.000 ( 520.000 5. 2008 Retained earnings – January 1 Prior period error – overdepreciation in 2007 Change in accounting policy from FIFO to weighted average method – credit adjustment Corrected beginning balance 200.000) 1.200.740.000.000 ( 200.000 340.000 ( 140.120.000 100.400.Total income Expenses: Selling expenses Administrative expenses Income before tax Income tax expense Net income 1.000 200.000 540.000 25 Problem 2-11 Reliable Company Statement of Retained Earnings Year Ended December 31.000 450.980.000 Note 2 – Cost of goods sold Finished goods – January 1 Cost of goods manufactured Goods available for sale Finished goods – December 31 Cost of goods sold 420.500.000) 5.000 .000 5.920.

Net income Decrease in appropriation for treasury share Total Cash dividends paid to shareholders Current appropriation for contingencies Retained earnings – December 31

1,300,000 200,000 1,950,000 ( 500,000) ( 100,000) 1,350,000

Problem 2-12
Net income Loss from fire Goodwill impairment Loss on sale of equipment Gain on retirement of bonds payable Gain on life insurance settlement Adjusted net income 3,000,000 ( 50,000) ( 250,000) ( 200,000) 100,000 450,000 3,050,000

Gondola Company Statement of Retained Earnings Year ended December 31, 2008 Balance – January 1 Compensation of prior period not accrued Correction of prior period error – credit Adjusted beginning balance Net income – adjusted Stock dividend Loss on retirement of preference share Appropriated for treasury share Balance – December 31 2,600,000 ( 500,000) 400,000 2,500,000 3,050,000 ( 700,000) ( 350,000) (1,000,000) 3,500,000

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CHAPTER 3
Problem 3-1
1. 2. 3. 4. 5. D A A C B 6. 7. 8. 9. 10. D B C C A

Problem 3-2
1. 2. 3. 4. 5. D D C A C 6. 7. 8. 9. 10. D D B D B

Problem 3-3
a. Undeposited collections Cash in bank – PCIB Cash in bank – PCIB (for payroll) Cash in bank - PCIB (savings deposit) Money market instrument – 90 days Total cash and cash equivalents b. Accounts receivable (15,000 + 25,000) Cash in foreign bank Advances to officers Sinking fund cash Trading securities Bank overdraft Cash 60,000 500,000 150,000 100,000 2,000,000 2,810,000 40,000 100,000 30,000 450,000 120,000 50,000 690,000

Problem 3-4
Adjusting entries on December 31, 2008 a. Cash Accounts payable b. Cash Accounts payable c. Accounts receivable Cash 100,000 100,000 50,000 50,000 200,000 200,000

d. Accounts receivable (20,000 + 60,000 + 30,000) 110,000 Money market placement 1,000,000 Cash in closed bank 50,000 Advances to employee 30,000 Pension fund 400,000 Cash

1,590,000

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Cash and cash equivalents: Demand deposit (see below) Time deposit – 30 days Petty cash fund Total Demand deposit per book Undelivered check Postdated check delivered 1,450,000 500,000 10,000 1,960,000 1,500,000 100,000 50,000

Window dressing of collection Adjusted balance

( 200,000) 1,450,000

Problem 3-5
1. Cash on hand Postdated check Adjusted cash on hand 2. Petty cash fund Unreplenished petty cash expenses Postdated employee check Adjusted petty cash 3. Security Bank current account Postdated company check delivered Adjusted balance 4. Cash on hand Petty cash fund Security Bank current account PNB current account No. 1 PNB current account No. 2 BSP Treasury bill – 60 days Total cash and cash equivalents 500,000 (100,000) 400,000 20,000 ( 2,000) ( 3,000) 15,000 1,000,000 200,000 1,200,000 400,000 15,000 1,200,000 400,000 50,000) 3,000,000 4,965,000

(

*The BPI Time deposit of P2,000,000 is shown as noncurrent investment because it is restricted for land acquisition. 5. Accounts receivable Cash on hand Expenses Receivable from employee Petty cash fund Security Bank current account Accounts payable 100,000 100,000 2,000 3,000 5,000 200,000 200,000

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Problem 3-6
1. Cash on hand NSF customer check Postdated customer check Adjusted on hand 2. Currency and coins Check drawn payable to petty cashier 500,000 ( 40,000) ( 60,000) 400,000 1,000 14,000

000 100.000 15. Accounts receivable Cash on hand Receivable from officer Expenses Cash short or over Petty cash 50.000 2.000 2.Adjusted petty cash 3.000 5.000 5.000 11.000 50.250.000 3.000 5.000.000 ( 35. Cash on hand NSF customer check Postdated customer check Adjusted cash on hand 2.000 29 5.000 Problem 3-7 1.000 4.000 + 60. Cash on hand Petty cash fund Philippine Bank current Manila Bank current Asia Bank time deposit Total cash and cash equivalent 200.000 12.000 5.000 25.070.000.225. Accounts receivable (40. Cash in bank Undelivered company check Postdated company check delivered Adjusted cash in bank 4.000) ( 15.000 250.000 15.000 1.000 5.000) Cash on hand Advances to employees Cash short or over Petty cash fund Cash in bank (100.000 2.000 150.070.000 2.000 5.000) Accounts payable 100.000 45.000 2. Petty cash fund: Currency and coins 3.000 250.000.000 .000 100.000 + 150.000.000 150.000) 150. Philippine Bank current account Undelivered company check Postdated company check delivered Adjusted balance 4.

Petty cash fund Cash in bank 2.000 10.000 70.000 Problem 3-9 Fluctuating Fund System 1.000 Imprest Fund System 5.000 10.000 30 Fluctuating Fund System 4.000 1. Petty cash fund Cash in bank 10.000 10.000 14. Postage 1. Supplies Accounts payable Petty cash fund 5. Petty cash fund Cash in bank 2.000 3. No entry 10.000 500 1.500 1. Petty cash fund Postage Supplies Transportation Miscellaneous expense Cash in bank 5. No entry Imprest Fund System 1.500 Supplies 3. Postage Supplies Petty cash fund 3. Postage Supplies Transportation Miscellaneous expense Petty cash fund 3.200 800 14.000 Problem 3-8 Fluctuating Fund System 1.000 1.500 2.000 100.000 Transportation 1.000 Miscellaneous expense 500 . Petty cash fund Cash in bank 2. Petty cash fund Cash in bank 2.000 10. Transportation Miscellaneous expense Cash in bank 10.500 5.500 1.000 100.500 3.000 Imprest Fund System 1.Philippine Bank current Accounts payable City Bank current Bank overdraft 70. No entry 1.500 5.000 3.000 4.000 1. No entry 10. Petty cash fund 1.000 14.000 3.500 4.000 9.200 800 9.

000 19.000 1.000 4.500 Postage 500 Transportation 500 Miscellaneous expense 500 Petty cash fund 3.000 Accounts payable Cash in bank 6. Petty cash fund Cash in bank 2.000 19.000 3. Petty cash fund Postage Supplies Transportation Cash in bank 10. Postage Supplies Transportation Petty cash fund 7.000 2.000 10.000 10.500 1.500 1.000 2.Cash in bank 6.000 4.500 500 12.000 1.000 7.000 8.000 3.500 8.000 10.000 1.000 4.500 1.000 19.000 12.000 1.000 June 30 Supplies Accounts payable Transportation Petty cash fund To reverse the adjustment made on June 30.000 4.000 July 15 Supplies 1.000 9.000 2.000 Imprest Fund System May 2 Petty cash fund Cash in bank 29 Postage Supplies Transportation Miscellaneous expense Petty cash fund Petty cash fund Cash in bank 10.000 . 15 Petty cash fund Supplies Postage Transportation Miscellaneous expense Cash in bank 5.000 9.000 Petty cash fund Cash in bank 12.000 1.000 2.000 2.000 1.000 8.000 9.000 31 Problem 3-11 2008 Nov.000 Problem 3-10 Fluctuating Fund System May 2 Petty cash fund Cash in bank 29 Postage Supplies Transportation Miscellaneous expense Petty cash fund 10.000 1.500 1. 2 Petty cash fund Cash in bank 10.500 8.000 June 30 Supplies Accounts payable Transportation Petty cash fund July 1 Petty cash fund Supplies Postage Transportation 2.000 3.000 3. No entry 3.000 4.000 3.000 1.

000 2.000 10.000 4.000 17. 1 Petty cash fund Receivable from employee Selling expenses Transportation 10.000 6. 15 No entry 31 Selling expenses Administrative expenses 2.30 Postage Supplies Petty cash fund Cash in bank Postage Supplies Special deposit Petty cash fund Petty cash fund Postage Supplies Special deposit No entry Postage Supplies Accounts payable Cash short or over Cash in bank 2.000 .000 Problem 3-12 Requirement 1 2008 Dec. 1 2 31 5.000 9.000 19.000 Dec.000 2.000 9.000 9.000 3.000 2.000 5.000 5.000 10.000 7.000 2.000 1.000 1.000 2. 31 2009 Jan.500 500 4.000 3.500 500 32 2009 Jan.000 4.000 2. 1 Petty cash fund Cash in bank 20 Selling expenses Miscellaneous expenses Equipment Cash in bank 31 Receivable from employee Selling expenses Transportation Petty cash fund 2009 Jan.000 2.000 4.000 1.

065.500.400.650.700 Requirement 2 Petty cash Less: Petty cash expenses from December 21.200 6.750.500 Purchases 1.000 Problem 3-18 Answer B Cash in First Bank Change fund Petty cash fund Total 5.600. 2008 to January 31. 2009: Selling expenses (1.000 Problem 3-19 Answer B Cash balance per book Credit adjustment Adjusted cash balance 6.000 500.000 4.000 2.000 15.000 1.000 3.000 50.000 2.000 6.000 5.000) 250.000 Problem 3-14 Answer C Problem 3-16 Answer A Payroll account Value added tax account Traveler’s check Money order Petty cash fund Total 2.200 Petty cash before replenishment 10.300 Problem 3-13 Answer B Problem 3-15 Answer A Petty cash fund Undeposited collections Cash in bank Total 50.000.700 3.000 1.000 ( 100.000) 4.500 + 500) 2.000.100.000 Transportation (500 + 1.000 1.000.000) Cash 1.600.000 Administrative expenses 2.000) 1.500.000 40.000 + 200.000 .000 33 Note receivable Accounts receivable (400.Transportation Purchases Cash in bank 1.000.400.000 600.540.000 700.000 300.000 Problem 3-17 Answer C Checking account #101 Checking account #201 Time deposit account 90-day Treasury bill Total cash and cash equivalent 1.000 (1.500 1.

000 40.000.000 3.000.000 12.000 6.000 7.000 6.000 Problem 3-28 Answer C Total petty cash Currency and coins Amount of replenishment 10.000 Problem 3-27 Answer C Coins and currency Replenishment check Total 2.000 4.000 ( 3.000) 1.940.000 Problem 3-26 Answer B Currencies Coins Accommodation check Total 4.000) 7.000.500.000.000 11.000) ( 500.000.000.Problem 3-20 Answer A Checkbook balance Postdated customer check NSF check Undelivered company check Adjusted balance 8.000 (2.000 2.000.000 7.000 34 CHAPTER 4 .000 1.000 Problem 3-21 Answer A Cash on hand Cash in bank Petty cash Saving deposit Total deposit 2.000.000 Problem 3-22 Answer B Problem 3-25 Answer A Cash on hand and in bank Time deposit Saving deposit Total Problem 3-23 Answer A Problem 3-24 Answer A 5.500.000 6.400.000 1.

000 2. D A B C C 6. C B A C C Problem 4-2 Balance per book Add: CM for note collected Total Less: DM for service charge Adjusted book balance Balance per bank Add: Deposit in transit Total Less: Outstanding checks: No.000 – 25.000 108.000 95. 8.000 5. Cash in bank Note receivable 2.000 93.000 42.000 188.000 155. C D C A B 11.000) Adjusted book balance 110.000 45. 9.000 35 Balance per bank Add: Deposit in transit 135.000 60. 13. 5.000 65. 102 105 107 Adjusted bank balance Adjusting entries: 1.000 .000 113.000 27.000 30.000 30. 4.000 80. 10.000 30. 15.000 15. 3. 12.000 10.000 2. 14. Bank service charge Cash in bank Problem 4-3 Balance per book Add: CM for note collected Total Less: DM for service charge NSF check Book error (52.000 2.Problem 4-1 1.000 93. 7.000 50.000 30. 2.000 95.

000 42.715. 770 775 777 Adjusted bank balance Adjusting entries: 1.000 270.000 45.000 50.000 3.840. Bank service charge Cash in bank 270. Bank service charge Accounts receivable Accounts payable Cash in bank 8.000 5.265.000 5.000 60.000 5.000 90.000 27.000 3.000 Problem 4-4 Balance per book Add: CM for note collected Total Less: DM for service charge Adjusted book balance Balance per bank Add: Deposit in transit Total Less: Outstanding checks: No.000 3.000 3. Cash in bank Bank service charge Note receivable 2.105.000 450.Erroneous bank debit Total Less: Outstanding checks: No.000 3. Cash in bank Bank service charge Note receivable Interest income 2.000 180.000 610.000 113.000 40.000 5.110.105.000 5.000 10.000 20.000 250.000 203.000 36 . 116 122 124 125 Adjusted bank balance Adjusting entries: 1.000 250.000 120.000 68.000 30.000 2.000 10.000 30.

Cash in bank Bank service charge Note receivable Interest income 2.100.650.000 220.000 5.000 150.000 5.450.630.000 200.100.380.000 2.Problem 4-5 Balance per book Add: Note collected by bank Total Less: Bank service charge NSF check Adjusted book balance Balance per bank Deposit in transit Total Less: Outstanding checks Adjusted bank balance Adjusting entries: 1.000 6.000 750.000 3.000 2.000 3.000 1.000 37 .000 500.000 2.000 2.000 1.000 6.000 2.000 2.405.000 470.000 7.000 850.630.000 500.000 50.000.000 50.000 550.000 6.695.000 4.000 50.000 45.450. Bank service charge Accounts receivable Cash in bank Problem 4-6 Book balance Add: Collection of note Interest on note Book error on check no.000.150.150.000.000 550. 175 Total Less: Bank service charge Payment for light and water NSF check Adjusted book balance Bank balance Add: Deposit in transit Total Less: Bank error Outstanding checks Adjusted bank balance 1.150.000 4.000 5.500.000 7.000 3.750.600.000 245.600.630.

000 40. Cash in bank Note receivable Interest income Accounts payable 2.000 5. Balance per book – April 30 Credit memo for note collected Outstanding checks: No.000) 1. Bank service charge Accounts receivable Cash in bank c. Adjusting entries: 1.000 2.000 1.300.000 30.100.000 60.000 60.000 2.Adjusting entries: 1.000 10.000 1.695.000 1.000 470.000 245. 1331 1332 1334 1335 Total Less: Bank service charge NSF check Undeposited collections Balance per bank – April 30 b.000 30.000 140.130.000 60.000 45.000 270.000 .000 60. Balance per book – April 30 CM for note collected Bank service charge NSF check Adjusted cash in bank 60.000 5.000 150.000 300.500.000) ( 25.000 25.000 220.000 1. Cash in bank Note receivable 2.000.100.000 ( 5.000 5.000 25. Bank service charge Light and water Accounts receivable Cash in bank Problem 4-7 a.

000 270.000 50.000 125.580.075.230.000 3.015.000 270.38 Problem 4-8 a.130.000 50.000 180.000 550.000 1.130.100.000 10.000 4.700. Accounts receivable Bank service charge Accounts payable Cash in bank c. Adjusting entries: 1.500.000 180.000 270.375.000 3.000 125.000 50.000 3.000 5.000 5.000 180.400.000 180.000 125.000 Problem 4-9 Balance per book Add: Proceeds of bank loan Note collected by bank Total Less: Service charge Customer’s check charged back Adjusted book balance 2. Balance per bank Add: Undeposited collections NSF check DM for safety deposit Unrecorded check Total Less: Checks outstanding Overstatement of creditor’s check Understatement of customer’s check Balance per book b.000 60.000 4.000 5. Balance per book Overstatement of creditor’s check Understatement of customer’s check Total Less: NSF check DM for safety box Unrecorded check Adjusted book balance 450.000 940.000 1.000 650.000 .000 50.000 435.000 3.000 730.000 4.000 3.000 180. Cash in bank Accounts payable Accounts receivable 2.

000 500.000) Total Less: Outstanding checks (750.000 630. Bank service charge Accounts receivable Cash in bank Problem 4-10 Balance per book (squeeze) Add: Proceeds of bank loan Proceeds of note collected Total Less: Bank service charge NSF check Adjusted book balance Balance per bank (squeeze) Add: Deposit in transit Bank error (200.000 55.000 4.000 1.000 200.000 + 15.070.000 .000.000 50.000 50.000 10.000 40.000 300.000.000 20.000 50.000 435.000 4.000 10.000 4.000 1.000 900.000 400.000 180.000 3.700.000.000 400.000 90.000) Accounts receivable Loan payable Notes receivable Interest income 880.000 x 1/6) Prepaid interest expense Loan payable (940.120.000 60.39 Balance per bank Add: Deposit in transit Incorrect deposit Erroneous bank charge Erroneous debit memo Total Less: Outstanding checks Erroneous bank credit Adjusted bank balance Adjusting entries: 1. Cash in bank Bank service charge Interest expense (60.000/94%) Note receivable Interest income 2.000 915.000 600.000 5.000 3.915.000 150.000 475.000 – 20.000 3.000) Adjusted bank balance Adjusting entries: Cash in bank Bank service charge (5.000 450.000 5.000 2.000.015.000 500.000 3.000 50.000 – 50.055.000 50.000 700.000 935.375.000 3.

000 190.000 1.200.000 544.000 5.000 516.000 275.000 5.000 500.000 674.000 300.000 1.000 – 20.40 Problem 4-11 Balance per book Add: Proceeds of bank loan Total Less: Understatement of check in payment of account (200.000 10.000 2.000 5.300.000 150.326.000 25.000 1.000 70.000.000 180.000 50.000 14.000 30.000 85.240.000 3.000 65.000 180.000 6.326.000/86%) Problem 4-12 Balance per book Add: Overstatement of check number 765 Check number 555 stopped for payment Total Less: Service charge NSF check Adjusted book balance Balance per bank Add: Undeposited collections Total Less: Outstanding checks: Number 761 762 763 764 1.475.000 10.000.000 40.000 1.000 5.000 55.330.516.000 1.000 130.000 4.000) Petty cash fund Adjusted book balance Balance per bank Add: Undeposited collections Erroneous bank charge Deposit omitted from bank statement Total Less: Erroneous bank credit Outstanding checks Adjusted bank balance Adjusting entries: Cash in bank Interest expense (84.000 600.000 x 2/12) Prepaid interest expense Accounts payable Petty cash fund Supplies Transportation Postage Loan payable (516.000 .500.000 20.000 90.000 5.000 326.000 5.

000 854. Cash in bank Accounts payable Miscellaneous income 2.050.000 41 Adjusting entries: 1.851.000 100.000 1.000 1.650.300.000 1.000 300.000 500.000 1.000 .000 400. Adjusting entries.000 20.000 104.100.000 2.000 10.750. Cash in bank 500.900.000 85.000 1.000 1.000 1.000 2.196. Bank reconciliation – June 30 Book balance Add: Credit memo for note collected Total Less: NSF check Service charge Adjusted book balance Bank balance Add: Deposit in transit Total Less: Outstanding checks Adjusted bank balance Bank reconciliation – July 31 Book balance Add: Credit memo for bank loan Total Less: Service charge Adjusted book balance Bank balance Add: Deposit in transit Total Less: Outstanding checks Adjusted bank balance b.650.899.000 1.000 1. July 31 1.000 10. Receivable from cashier Accounts receivable Sales discounts 30.000 90.000 235.000 4.000 3.000 1.899.000 40. Bank service charge Accounts receivable Cash in bank 3.000 1.000 1.765 Adjusted bank balance 50.400.000 30.240.000.196.000 5.000 Problem 4-13 a.000 1.

000 3.000 1.500.000 Problem 4-14 a.000.000 600.000 2.000 3.000 1.090.000 1.000 3.000 400.100.000 1. Bank service charge Cash in bank Computation of deposit in transit – July 31 Deposit in transit – June 30 Add: Deposits during July: Book debits Less: June credit memo for note collected Total Less: Deposits credited by bank during July: Bank credits Less: July credit memo for bank loan Deposit in transit – July 31 Computation of outstanding checks – July 31 Outstanding checks.000 300.000 42 2.496.000 4.000 700.000 1.000 104.000.499.700.000.600.350.000 4.000 2.000 100.100.000 .000 600.500.000 4. June 30 Add: Checks drawn by company during July: Book credits Less: June debit memos for NSF check Service charge Total Less: Checks paid by bank during July: Bank debits Less: July service charge Outstanding checks. July 31 854.000 4.Bank loan payable 500.000 500.000 90.000 300.000 400.000 100.851. Reconciliation – October 31 Adjusted book balance Bank balance Add: Deposit in transit Total Less: Outstanding checks Adjusted bank balance Reconciliation – November 30 Book balance Add: Understatement of collection from customer Total 1.000 3.000 3.000 1.

200.Less: Understatement of check disbursement Adjusted book balance 270.770.000 930.000 2.000 100.000 2.000 190.000) 1.000 390.000 Understatement of collection from customer 90.000 270.000 500. Accounts payable Cash in bank Computation of outstanding checks – October 31 Outstanding checks – October 31 (squeeze) Add: Checks issued by depositor: Book disbursements Understatement of check paid Total Less: Checks paid by bank: Bank disbursements Check of Susan Company charged in error Outstanding checks – November 30 Computation of deposit in transit – November 30 Deposit in transit – October 31 Add: Cash receipts deposited during November: Book receipts 2.000 400.000 820.000 Problem 4-15 a.000 1.000 ( 200.290.000 90.000 100. Adjusting entries – November 30 1.070.800.970.000 Total Less: Deposits credited by bank during November: Bank receipts 2.000 2.000 400.000 270.000 2.000 90.000 1.590.000 43 Bank balance Add: Deposit in transit Check of Susan Company charged in error Total Less: Outstanding checks Deposit of Susan Company erroneously credited Adjusted bank balance b.000) Deposit in transit – November 30 300.000 1.320.000 2.000 200. Reconciliation on July 1 .000 Deposit of Susan Company erroneously credited ( 100.000 820.400.170.000 190.500.000 270. Cash in bank Accounts receivable 2.

150.500.000 1.000 2.000 400.000 1.000 3.000 5.100.000 1. Bank service charge Cash in bank Computation of deposit in transit – July 1 Deposit in transit – July 1 (squeeze) Cash receipts per book Total Less: Deposits credited by bank Deposit in transit – July 31 Computation of outstanding checks – July 1 Outstanding checks – July 1 (squeeze) Checks drawn by depositor Total 950.000 500.000 500.000 44 Bank balance Add: Deposit in transit Total Less: Outstanding checks Adjusted bank balance Reconciliation on July 31 Book balance Add: Note collected by bank Total Less: Bank service charge Adjusted book balance Bank balance Add: Deposit in transit Total Less: Outstanding checks: Check # 107 108 Adjusted bank balance b.220.000 3.000 1.500.200.000 650.720.270.000 .950.270.000 1.950.970.000 4. Cash in bank Note receivable 2.700.000 1.000 1.400.000 470.000 3.000 500.500.500. Adjusting entries on July 31 1.000 20.000 950.Adjusted book balance 1.000 1.000 2.150.000 3.000 400.000 20.000 1.000 20.900.

000 600.000 380.000) (100.195.000 610.000 120.000 490.000 720.000 10.200.000) 1.000 ( 5.000 1.000 340.000 45.000 500.000) 500.000 45 Problem 4-16 Balance per book – November 30 Less: Service charge NSF check Customer’s note erroneously recorded as cash receipt Adjusted book balance Balance per bank – November 30 Add: Deposit in transit Total Less: Outstanding checks Adjusted bank balance Deposit in transit – October 31 Cash receipts deposited: Book debits October collections recorded in November Customer’s note recorded as cash receipt Total Less: Deposits credited by bank: Bank credits Correction of bank error Deposit in transit – November 30 Outstanding checks – October 31 Checks issued by depositor: Book credits October bank service charge Total Checks paid by bank: Bank debits November bank service charge November NSF check Outstanding checks – November 30 Adjusting entry: Bank service charge Accounts receivable Note receivable 10.000 710.000 ( ( 940.000 160.000.000 .150.000 ( 10.000 1.000 1.000 100.000 10.Less: Checks paid by bank Outstanding checks – July 31 4.000 ( 45.000.000 100.000 120.000) 565.000 50.000 50.000) 1.000 340.320.000) 50.000 380.000 125.

000 Problem 4-18 July 31 Receipts Disbursements Bank balance 800.000 700.000) .000 (372.000) 100.000) 200.000) 178.000) Note collected by bank: July ( 200.000 ( 650.000) Book error on payment ( 540.000 August ( 300.000 ( 200.000) Bank error on payment ( 400.000) ( 20.000) August 480.000 April 30 280.000 (220.000 3.000.000 372.000) Bank error on deposit ( 200.000 330.000 ( 8.000) 540.000) 2.000) Deposit in transit: July 600.860.000) August 650.000 August 31 1.000 100.000) Receipts 800.000 Book error on collection ( 180.000 500.000 ( 180.000) 178.000) ( 20.000) 30.000 ( 600.000) NSF check: July 100.000 August ( 50.000) (220.000) ( 100.000 Outstanding checks: July ( 100.000) ( 80.000 5.940.000) 530.000 100.000 ( 8.000 80.000) 400.000 50.000 ( 300.000 ( 2.000 46 Problem 4-17 Book balance Note collected by bank March April Service charge March April NSF check March April Deposit in transit March 31 April 30 Outstanding checks March 31 April 30 Bank balance March 31 200.000 Disbursements 720.000 ( 30.000 60.000) 480.000 ( 60.Cash in bank 160.

000) Bank balance 1. 31 3.000 December 31 Adjusted bank balance 1.000 Adjusting entry: Bank service charge Note receivable Cash in bank 4.000) December 31 Deposit in transit November 30 80.000) 1.000 40.000 300.000) 592.000) 200.442.000 1.000 . 30 Book balance Bank service charge November 30 December 31 Collection of note November 30 December 31 Adjusted book balance 2.000) 2.856.080.000 2.000) 498.440.000 ( 4.890.600.000 Disbursements 1.468.000 Outstanding checks November 30 ( 180.000 2.000 50.000 3.Book balance 1.200.000 304.442.090.000 ( 300.000.000 2.400.000) 1.830.000 4.000 December 31 498.000) ( 2.856.000) ( 200.000 47 Problem 4-19 Nov.000 Dec.000 ( ( 80.000 Receipts 2.000 2.000 1.900.000 ( 2.160.032.000 ( 2.000) 2.000) 4.568.468.000 ( 300.000 50.000 ( 180.000 Check erroneously charged by bank November 30 40.830.000 ( 592.

900.000 ( 90.400. Accounts receivable Cash in bank 2.48 Problem 4-20 Sept.000 NSF check: September 30 ( 60.000 50.000) October 31 ________ ( 120.260.500.000 170.000 900.000 1.100.000) October 31 40.000 ( 270.330.260.000 120.000 ( 30.330.030. 30 Receipts Disbursements Oct.000 1.000) Collection of accounts receivable September 30 30.000 1.000 800.000) 30.000) ( 60.000 Adjusted balance 1.000 270.000 1. Cash in bank Accounts receivable Salaries 40.030.000 50.000 2.000 Bank balance Deposit in transit September 30 October 31 Outstanding checks September 30 October 31 Adjusted balance 2.000 40.000 260. 31 Book balance 1.000 ( 130.000 Overstatement of check September 30 90.000 130.000) 1.000 2.960.000 Adjusting entries on October 31 1.200.000 2.000) 1.000 ( 40.400.960.000 .000 (30.000 1.000) 120.000) 260.000 ( 2.000) October 31 50.

000 75.000 5.600. Cash in bank Interest income Equipment 2.000 300. Bank service charge Accounts receivable Cash in bank 375.700.000 20.300.000 5.305.000 ( 625.000 5.000 ( 845.375.000 ( Disbursements 5.000 ( 20.375.000 .000 2.305.000 500.000) Receipts 5.000 2.600.000 June 30 2.400.000 625.000 200.000 550.400.000 75.000 5.500.000 300.000 Adjusting entries on June 30: 1.500.000 Problem 4-22 Answer A Balance per book Bank charges Customer note collected by bank ( 4.000) 500.000 ( 845.000) 5.000) 75.000) 550.49 Problem 4-21 May 31 Balance per book Bank service charge: May 31 June 30 NSF check: June 30 Interest collected: June 30 Book error: June 30 Adjusted balance Balance per bank Deposit in transit May 31 June 30 Outstanding checks May 31 June 30 Adjusted balance 2.480.000) ( 200.000 200.000) 25.000 2.000) 2.000 2.000 _________ 5.000) 2.550.000 225.480.000 ( 25.550.000 ( ( 300.000) 1.500.000 25.000.000 10.

Balance per book Add: Proceeds of note collected Total Less: NSF checks (150.000) 1.500.Interest on customer note NSF customer check Depositor’s note charged to account Adjusted book balance 60.000 The adjusted cash in bank can also be computed by starting with the balance per book.000) ( .000 50.000 300.500.000 – 20.000 1.000 700.000.000) ( 20.000 1.600.000.000 Problem 4-25 Answer A Problem 4-26 Answer B Problem 4-27 Answer B Problem 4-28 Answer D Balance per ledger Service charges Collection of note Book error Unrecorded check for traveling expenses 3.000 – 50.000 ( 250.000 ( 180.000) Adjusted book balance 850.000 750.000 ( 100.000) ( 500.000 400.000.000 1.000) 9.000) NSF check Bank service charge Adjusted book balance 8.500.750.000) ( 250.300.000 50 Problem 4-23 Answer B Balance per bank Add: Deposit in transit Total Less: Outstanding checks Erroneous bank credit Adjusted bank balance 2.500.000) (1.000 2.000 950.200.000 200.000) 4.000 100.000 Problem 4-24 Answer C Balance per book Note collected by bank Book error (200.

000) 2.000 2.000 7.200.000 2.000 6.Adjusted book balance Balance per bank Deposit in transit Total Outstanding checks (squeeze) Adjusted bank balance 4.000 2.600.400.600.000 500.000 2.000) (1.000.000 50.000 500.000 .000 6.000 4.200.000.500.000.100.500.000 11.000 400.950.000 3.400.000 300.000.000) 550.000 9.600.600.000 ( 100.000 4.000 ( 50.000) 8.000 1.500.000) 8.000) 2.000 51 Problem 4-29 Answer B Problem 4-30 Answer A Problem 4-31 Answer C Outstanding checks – May 31 Checks issued by depositor in June: Total credits to cash in June Service charge in May recorded in June Total Checks paid by bank in June: Checks and charges by bank in June Service charge in June NSF check in June Outstanding checks – June 30 Problem 4-32 Answer A Balance per book – June 30 Service charges Collection by bank NSF check Adjusted book balance Balance per bank – June 30 Deposits outstanding – June 30 Checks outstanding – June 30 Adjusted bank balance Outstanding checks – May 31 Checks recorded by book in June Total Less: Checks recorded by bank in June Outstanding checks – June 30 Deposits outstanding – May 31 Deposits recorded by book in June Total Less: Deposits recorded by bank in June Deposits outstanding – June 30 2.600.000 ( 100.900.000.000 1.000 ( 2.100.000 100.950.000 3.800.000 ( 400.900.000 1.

000 (1.930.000 ( 350.000 ( 500.000 9.000.700.390.000 8.000 4.000 – 1.Problem 4-33 Answer A Note collected Book error (1.936.900.100.000 9.000.000) 4.000 .000.000) ( 50.000 1.000) 509.400.400.000 (1.500.000 (4.000 6.000) 4.500.000.000) 1.600.300.000 52 Problem 4-34 Answer A Problem 4-35 Answer A Problem 4-36 Answer D Balance per bank – November 30 December deposits Total December disbursements Balance per bank – December 31 Deposit in transit – December Outstanding checks – December Adjusted bank balance – December 31 Balance per book – December 31 (squeeze) Note collected by bank NSF check Service charge Adjusted book balance Problem 4-37 Answer A Bank disbursements for July Outstanding checks – June 30 Outstanding checks – July 31 Book disbursements for July Problem 4-38 Answer B Bank receipts for April Deposits in transit – March 31 Deposits in transit – April 30 Book receipts for April 6.000 5.500.000) ( 47.000) NSF check Service charge Net debt to cash 1.000 3.000) ( 840.000) 1.000 ( 540.600.000) 4.000 700.900.000.

4. A B C A C Problem 5-2 1.000) 100. 3.000 15. 7.000 100. 7.000 c. 5. 9. Accounts receivable Allowance for doubtful accounts Notes receivable Installments receivable Advances to suppliers Claim receivable Subscription receivable Accrued interest receivable Total trade and other receivables 775. A D C C D Problem 5-3 1.000 300.000 30.000 150. D D D B A 6.000 300. 3.000. 9.000 2.000 10. 2.000 15.000 50. The customers’ credit balances and advances from customers should be classified as current liabilities and included as part of “trade and other payables”.000 ( 775. 10.53 CHAPTER 5 Problem 5-1 1. 4.000 1. 5.000 10. 2.000 300. 3.000 150.000 400. A C A A A 6. D B C D A Problem 5-4 a.600.000 20. The advances to subsidiary should be classified as noncurrent and presented as long-term investment. 5. Accounts receivable Notes receivable Installments receivable Advances to suppliers Advances to subsidiary Claim receivable Subscriptions receivable Accrued interest receivable Customer’s credit balances Advances from customers Receivables b. 2. 8. 10.000 300. . 8. 4.

Problem 5-6 Requirement 1 1. Notes receivable Accounts receivable 3.600.600.000 10.000.000 Advances to employees 10. Subscription receivable Deposit on contract Claim receivable Advances to employees Advances to affiliated Advances to supplier Accounts receivable 490.000 1.000 3. Accounts receivable – January 1 Charge sales Total Less: Collections from customers Writeoff Merchandise returns Allowances to customers Accounts receivable – December 31 600. The deposit on contract should be classified as noncurrent and presented as other noncurrent asset.Problem 5-5 a.200.320.000 c.000 5.000 400.000 Advances to supplier Total trade and other receivables 150. The advances to affiliates should be classified as noncurrent and presented as longterm investment.000 90.000 100.000 120.000 40.000 400.000 50.000 3. Doubtful accounts Allowance for doubtful accounts 90.000 6.300.000 5.400.000 1. Accounts receivable Claim receivable 60.000 6. The subscriptions receivable should be deducted from subscribed share capital.000 60.000 1.000 . Accounts receivable Sales 2.000 54 b.000 25.000 d.000 35.600.200.000 50.

Cash Sales discount Allowance for freight charge Accounts receivable FOB destination and freight prepaid 1.000 600. Allowance for doubtful accounts Accounts receivable 5.450.000 Problem 5-7 FOB destination and freight collect 1.000 20.000 485.000 500. Accounts receivable Freight out Sales Cash 2.000 10. Sales return Accounts receivable 6.000 2.000 150.000 15. Cash Accounts receivable 7.000 45.000 10.000 10. Accounts receivable Freight out Sales Allowance for freight charge 2.000 45.450.000 500.000 150.000 500.000 475.000 2.000 15.000 55 Requirement 2 Notes receivable Requirement 3 Accounts receivable Less: Allowance for doubtful accounts Net realizable value 670.000 10.000 . Sales discount Accounts receivable 8.000 70.000 250.000 15. Cash Notes receivable 20.000 10.4. Cash Sales discount 500.000 15.000 500.

470.000 30.000 485.000.000 200.000 2 Accounts receivable 50.000 15.000.000 500.000 50.000 56 2. Cash Sales discount Accounts receivable 495.000 Problem 5-8 1.000 100.500.Accounts receivable FOB shipping point and freight collect 1.000 1.000 15.000.000. Accounts receivable Sales 2.000 1. Accounts receivable Sales 2.000 1.000 500.000 100. Sales return Accounts receivable 5. Cash Accounts receivable 4.000 500. Accounts receivable Sales Cash 510.000 510.000 Net method July 1 Accounts receivable Sales 2 Accounts receivable 49.000 500.000 .000 10. Cash Sales discount Accounts receivable 3. Cash Sales discount Accounts receivable FOB shipping point and freight prepaid 1.000 196.000 1.000 Problem 5-9 Gross method July 1 Accounts receivable Sales 49.000 40.000 4. Sales return Allowance for sales return 4.000 500.000 40.

000 196.000. Required allowance (10% x 500.000 30.000 40.000 50.000) Doubtful accounts Allowance for doubtful accounts b.000 Accounts receivable 200.000 30.000 Accounts receivable 30 Cash 50.000 57 c.000 10.000 Accounts receivable 49.000 10. Required allowance (5% x 600.000 60.000 3.000 Sales discount 4.000 50.000 80.000) Less: Credit balance of allowance Doubtful accounts expense Doubtful accounts Allowance for doubtful accounts 30.000 12 Cash 196.000 60.000 20.000 20.750.000) Allowance for doubtful accounts 75.000 50. Required allowance Less: Credit balance of allowance Doubtful accounts expense Doubtful accounts Allowance for doubtful accounts d.000. Doubtful accounts (1% x 5.000 60.000 200.000 40.000 Sales 12 Cash 196.000 .000 Problem 5-11 a.000) Add: Debit balance in allowance account Doubtful accounts expense Doubtful accounts Allowance for doubtful accounts b. Credit sales (75% x 5.000 75.750.000 1.000 50. Required allowance Add: Debit balance in allowance account Doubtful accounts expense 40.000 60.000 75.000 Accounts receivable Sales discount forfeited Problem 5-10 a.Sales 196.000) Doubtful accounts (2% x 3.000 50.000 30.000 30 Cash 50.

000 Problem 5-13 Requirement a 1. Accounts receivable 7.000. Accounts receivable Sales 2.000 170. Cash Accounts receivable 4.000 290.000 170.000 200. Allowance for doubtful accounts Accounts receivable 5.000 50.000. Doubtful accounts Allowance for doubtful accounts 210.000 3.000 210.000 240.000 38.000 20. Cash Sales discount Accounts receivable(2.000 330.450.000 38.000 20.000) Allowance for doubtful accounts b.000.900.000.000 2.000 170.000 .000 3. Doubtful accounts (3% x 8.000 30.000) Allowance for doubtful accounts 60.000 210.450.900.000 30.000/98%) 3.000) c.900. Doubtful accounts Allowance for doubtful accounts Allowance – January 1 Doubtful accounts (squeeze) Recovery Total Accounts written off Allowance – December 31 (8% x 2.000 58 Allowance – January 1 Doubtful accounts (squeeze) Recovery Total Accounts written off Allowance – December 31 100.000 10.000 7.000 130.500.000 160. Doubtful accounts (2% x 1.000 2.Doubtful accounts Allowance for doubtful accounts c.000 240.000 60.000 Problem 5-12 a.000 130.000 100.

000.000 70. Cash Accounts receivable 4.000 20.000/10%) 2.000) 3. Cash Accounts receivable Sales (800.000 ( 60.000 10.000 40.000 8.000 10.200.000 5.000 60.000/1.000 10.000 .940.000 10.000 60.500.000) Accounts receivable(10% x 7.000 684.000 59 Problem 5-14 Requirement a 1.000) Less: Allowance before adjustment Doubtful accounts expense Requirement c Accounts receivable – December 31 Allowance for doubtful accounts Net realizable value 40. Cash Sales discount (5% x 720.000 = 4% Allowance for doubtful accounts – December 31 (4% x 1.000 5.000 80.200.000.000 720. Allowance for doubtful accounts Accounts receivable 800.000 80.000 36.500. Sales return Accounts receivable 6. Sales discount Allowance for sales discount 5. Sales return Accounts receivable Requirement b Doubtful accounts Allowance for doubtful accounts Rate = 40.000 40.000 10.000 70.000 60.000 1.Allowance for doubtful accounts Cash Accounts receivable 6.440.940.000) 1.000 7.

000 10.000 120.000) 2.000.600.000.000 120.000 1.000.000 10.000 1.000 10.000 130.000/2.000/97%) 4.000 1. Cash Sales discount Accounts receivable (1. Doubtful accounts Allowance for doubtful accounts Required allowance – December 31 (5% x 2.070.455.000 45.455.000) Less: Allowance before adjustment Doubtful accounts Rate = 100. Allowance for doubtful accounts Accounts receivable 5. Cash (2.000 10. Cash Sales 6.Accounts receivable Allowance for doubtful accounts Cash Accounts receivable 7.000 – 470.000 10.000 10.455.000 10. Accounts receivable Sales (3.500.600.000 55.000 2.000 55.000 – 1.000) Accounts receivable 3.000 20.000 470.000 70.400.000 1.000 20.000 .000 2.000 2.270.000 470.000 60 Problem 5-15 Requirement a 1.000 70.400. Sales return and allowances Cash 2.000 50.455.000 = 5% Requirement b Accounts receivable Less: Allowance for doubtful accounts Allowance for sales discount Net realizable value 70. Sales return and allowances Accounts receivable 7.

000 120.000 45.000 170.000 5.000 1% x 2. Not yet due 1 – 30 days past due 31 – 60 days past due 61 – 90 days past due Over 90 days past due Amount 1. 1 1.200.000 90.600.000 50.000 1. Allowance – January 1 Receivables Doubtful accounts expense (squeeze) .000 Sales 7.000 345.000 Percent of Uncollectible 5% 25% 50% 100% Required allowance 60.000) Writeoff ( 55.500.000 5.000 2.000) Sales return ( 30.410.000 280.270.8.000 100.000 25.935. Doubtful accounts Allowance for doubtful accounts Credit sales Less: Sales discount Sales return and allowances Net credit sales Doubtful accounts (2.500.000 625. Accounts receivable – Jan.200.475.500.000 61 Problem 5-16 1.000 Problem 5-17 1. Accounts receivable Allowance for doubtful accounts Cash Accounts receivable 7.000 115.500.000 2.000 Recovery 15.000/99% 4.500.000 2.500.000 2.000 50.000 5.000) Sales discount ( 115.000 1.000 100.000 5.000 55. 31 1.000.500.000 150.000 60.000 75.000 3.000 4.000) Accounts receivable – Dec.000 30.250.000 25.700.000 Collections (8.000 565.000/98% 2.000 Sales discount: 2% x 4.000 x 2%) Requirement b Accounts receivable Less: Allowance for doubtful accounts Net realizable value 50.

000) Understatement 4.000 170.000 2.270.000 76.655.000.000 x 25% 60. Accounts receivable Less: Allowance for doubtful accounts Net realizable value 545. Accounts receivable – December 31 Less: Allowance for doubtful accounts Net realizable value 62 Problem 5-19 1.000.000 3.000 50.000 200.000 x 1% 400.000.960.000 20.000 1.255.000 85. Writeoff Less: Recoveries Net writeoff 2005 2006 2007 Total 26. 2008 Add: Credit sales for 2008 Recoveries Total Less: Collections in 2008 Writeoff Accounts receivable – December 31.000 2.000 3.000 20.000 x 100% 1.000 170.000 2% 60.000 250.000 5.000) Required allowance – December 31 3.000 x 5% 300. Doubtful accounts Allowance for doubtful accounts Correct amount Recorded (2% x 9.000 29.000 280.000 x 10% 200.000 2.990.000 60.000 30.000 3.000 20.005. Accounts receivable – January 1.000 2.000 310.000 2.800.000 26.000 20.000 280.000) Allowance – December 31 20.000 + 30.790.000 140. 2008 4.000 + 40. 1.= 2% 3.000 Percentage to be used in computing the allowance = ------------------.000 4. Credit sales for 2008 Multiply by bad debt percentage Provision for doubtful accounts 3.000 30.000 3.615.000 180.000 26.000 Problem 5-18 1.000 24.000 265. Allowance – January 1 Recoveries Doubtful accounts (squeeze) Total Less: Writeoff (100.000 2.000 3.000 10.000.Total Less: Writeoff (235.000 9.000 1.000 3.000 3.000 20.000 90.000 40.000 200.960.000 76.000 170.000 600. Allowance for doubtful accounts – January 1 .

000 4.000 95. Retained earnings (.000.000 .000 50.000 30. 2008 600.000 10.000. Allowance for doubtful accounts – December 31. Required allowance – December 31.000 45.016 x 1.000 Problem 5-20 1.000 – 10.000) 2.= . 2007 Add: Recovery of accounts written off Total Less: Accounts written off Allowance before adjustment – December 31.= .010.000 5.016 10. Allowance – January 1 Recoveries – 2008 Doubtful accounts – 2008 (squeeze) 258.017 14.000 Problem 5-21 170.000 1.000 105. 2008 (debit balance) 63 3.000 4.000 40. Accounts receivable – December 31.000 95.000 50.000 10.000 40.000 60.000.000 105. Required allowance – December 31.000 5.000 200.000 Rate in 2007 = -----------------------.000.000 x 20%) Total 4.Add: Doubtful accounts for 2008 Recoveries Total Less: Writeoff Allowance for doubtful accounts – December 31 60.000 x 5%) On past due accounts (300.360.000 20. 2007 Add: Sales for 2008 Recovery of accounts written off Total Less: Collection from customers Accounts written off Accounts settled by issuance of note Accounts receivable – December 31.000 20. 2008 On current accounts (700.610. Doubtful accounts Allowance for doubtful accounts 105.000) Allowance for doubtful accounts 2.000 (10.000 – 20.000 5.000 35.000 92.000 10. 2008 Add: Debit balance before adjustment Increase in allowance 5.250.000 85.000 10.000 Rate in 2008 = -------------------------.000 20.000 65.000 5.000 1.610.

000) 500.000. 5.000) Recovery Total Writeoff Allowance before adjustment 3.000 1.000 28.000 7.000.000.000) 38.000 88.000 34.000 – 550.000 x 1% 80.000 400.000 x 75% Required allowance – December 31.Total Less: Writeoff – 2008 Allowance – December 31 (.000 39. 300.000.000 1.000.000 4.000 – 100.000 2.017 x 2.000 250.000 x 5% 60.000 950.000 – 38.000 65.000 3. Doubtful accounts 450.000 x 25% 500.000 Problem 5-22 1. 2008 3. Accounts receivable Less: Allowance for doubtful accounts Net realizable value 122.000 x 20% 25.000 30.000.000.000 12.000 450.000 Problem 5-24 2008 . 2008 Doubtful accounts recorded (2% x 20.966.000 x 10% 1.000 1.000 20.000 Allowance for doubtful accounts (1.000 64 Problem 5-23 1.000) 1.000 x 80% Required allowance – 12/31/2008 4. Allowance – January 1.000 250. Allowance – 1/1/2008 (1% x 2.000 34.000 200.000.800.000 300.000 50.000) 3.000 28.000 550.000) 2.000 (27.000 + 100.000) Recovery Total Less: Writeoff (300.000 400. Doubtful accounts Allowance for doubtful accounts (39.000.000) Allowance balance before adjustment 2.000 x 5% 2. Allowance – 1/1/2008 Doubtful accounts recorded in 2008 (1% x 3.

000 Dec.000 4.Jan.630 equals 471.948 63.000 400.370* Amortization 56.300 100.370 4.000 400.100 342.000. 31 Unearned interest income Interest income Cash Interest income Unearned interest income Interest income Cash Loan receivable 71. 31 Cash Interest income 400.370 71.948 (12%) Interest income 456.000 150.000 400.000 342.948 56.000 400. or a difference of P65 due to rounding.000. 1 Loan receivable Cash Cash Unearned interest income Unearned interest income Cash 4. 31 Cash Interest income Unearned interest income Interest income Date 01/01/2008 12/31/2008 12/31/2009 12/31/2010 (10%) Interest received 400.782 71.000 Problem 5-25 2008 Jan.435.000 4. 31 2010 Dec.300 260. 2009 Dec.000 260.000 .807.000.000 3.000 400.900 3. 1 Loan receivable Cash Direct origination cost Cash Cash 3.000 63.630 4.782 63.000.782 400.000 65 2009 Dec.000 *12% x 3.000.782 471.000.000.948 463.100 150.864.000 400.370 Carrying value 3.000 56.928.928.848 3.

000.056.918 3.000 Problem 5-26 Requirement 1 December 31.000 (6%) Interest income 189.000 240.160.000 3.000 2.Direct origination cost Dec.000.000 .382 53.000.370.720.000 50. 2011 (3.000 x .595 183.513 240.000 240. 2010 (2.513 56.020.405 53.109.000.000 240.405 Carrying value 3. 31 Cash Interest income 240.000.405 56.000 5.86) December 31. 31 (8%) Interest received 240.000 240.000 66 2010 Dec.382 50.000 6.000 x 8%) Total carrying value Present value of loan 6.000 5.382 Amortization 50.300 3.93) December 31.000.513 3.79) Total present value of loan Requirement 2 Loan receivable – 12/31/2008 Accrued interest (6.000 x . 2009 (1.000 53.487 100.020.000.000 x .000 1.480. 31 Interest income Direct origination cost Cash Loan receivable 56. 31 Cash Interest income Interest income Direct origination cost Date 01/01/2008 12/31/2008 12/31/2009 12/31/2010 2009 Dec.000.000 900.000 240.000 Cash Interest income Interest income Direct origination cost 2010 Dec.513 3.000 240.618 186.000 480.

672) Carrying value – 12/31/2010 Interest income for 2011 (8% x 2.000 x .775. 2012 (4.400 – 353.000.000 800.000.600) Carrying value – 12/31/2009 Interest income for 2010 (8% x 4. 2010 (1.64) 445.000 – 401.420.000.000 1. 2009 ( 500.000 1.000 480.000.000) 2010 Cash Loan receivable Allowance for loan impairment Interest income Loan receivable – 12/31/2009 Allowance for loan impairment (980.000 2.000 401.000.672 224.728 2009 67 2011 Cash Loan receivable Allowance for loan impairment Interest income Loan receivable – 12/31/2010 Allowance for loan impairment (578.728 353.000 1.000 .89) December 31.775.600 353.421.000 ( 224.328) Allowance per book Difference due to rounding 3.000 224.000 353. 2011 (2.000.000.000.Impairment loss Requirement 3 2008 Impairment loss Accrued interest receivable Allowance for loan impairment Cash Loan receivable Allowance for loan impairment Interest income (8% x 5.672) 2.026 224.646 Problem 5-27 Requirement 1 December 31.672 2.000.421.672 3.000.460.000 x .000 ( 578.000 1.000 x .000 2.600) 1.600 401.728 5.600 2.000.000 3.020.000 x .80) December 31.560.71) December 31.460.328 222.400) 4.000 980.

000 7.920 December 31. 2011 ( 360.000.000 2.000) 2010 Cash Loan receivable Allowance for loan impairment Interest income 3.000) Carrying value – 12/31/2009 Interest income for 2010 (12% x 5.000) 7.275.640 .352.175.000) Total carrying value Present value of loan Impairment loss Requirement 3 2008 Impairment loss Accrued interest receivable Allowance for loan impairment Cash Loan receivable Allowance for loan impairment Interest income (12& x 5.000 900. 2014 (4.000 500.000 642.000 x .000 627.000 – 627.500.000 December 31.000 500.000 3.000 5.225.365.Total present value of loan Requirement 2 Loan receivable Accrued interest receivable (12% x 7.000) 5. 2013 ( 360.640 360.365.000 642.000 1.708) 254.275.000.560 Total present value of loan 3.175.880 December 31.650) 234.000 (1.772) 277.000 627.225.000 3.360 634.648.000 1.500.596) 2.000 x .000. 2012 ( 360.598.000 5.240 2009 68 Loan receivable – 12/31/2009 Allowance for loan impairment (2.352.360.640 634.000.225.000 x .000 8.400.000 x .240 Problem 5-28 December 31.240 642.000 360.360 2008 Cash Interest income Impairment loss Allowance for loan impairment Face value of loan Present value of loan Impairment loss 4.000 900.000 634.

920 52.920 367.550.735) Present value of interest (80.500 338.000 4.360.000 360.500) 52.000 x 5 = 400.365.000 360.000.000) ( 150.360) Allowance for loan impairment Interest income (634. 69 Present value of principal (500.000 360.000) 1.758 360.000 5.640 – 302.000 4.000 360.500 294.000 661.882) Cash Interest income Cash Interest income Cash Interest income Cash Interest income Loan receivable 302.000 661.000 (5.000. Accordingly.500 1.000 2014 Problem 5-29 12/31/2008 Impairment loss Allowance for loan impairment 338.300.500 338.758 331.000 .500 Problem 5-30 Answer B Accounts receivable-January 1 Credit sales Collections from customers Sales return Accounts written off Accounts receivable-December 31 1.000 360.000 x .882 331.500 The remaining term of the loan is 4 years.882 302.000.000) ( 100.000 x .735) Total present value of loan Loan receivable Present value of loan Loan impairment loss 12/31/2009 Allowance for loan impairment Interest income (8% x 661. the present value factor for 4 periods is used.2009 2010 2011 2012 2013 Allowance for loan impairment Interest income (9% x 3.500.000 360.

000) 6.000) 280.000 1.000.000 650.000 Problem 5-36 Answer B .000 ( 700.000 30.200.000 (230.000 2.000 Problem 5-35 Answer A Allowance – December 2007 Doubtful accounts expense Total Accounts written off (squeeze) Allowance – December 2008 180.000 Problem 5-32 Answer C Accounts receivable (squeeze) Allowance for doubtful accounts (900.000 450.000 70 Problem 5-34 Answer D Allowance – January 1 Uncollectible accounts expense (squeeze) Recovery of accounts written off Total Accounts written off Allowance – December 31 (2.000 600.000 100.000 – 2.500.250.000 100.000) ( 50.000) 200.000.000 50.Allowance for doubtful accounts Allowance for sales return Net realizable value ( 250.000) Net realizable value 6.000 ( 100.000 50.000 430.000 200.000 Problem 5-31 Answer A Trade accounts receivable Allowance for doubtful accounts Claim receivable Total trade and other receivables 2.700.700.000) 300.000 230.000 – 200.050.000) 1.000 Problem 5-33 Answer B Allowance – January 1 Doubtful accounts expense Recovery of accounts written off Total Accounts written off Allowance – December 31 300.

000 71 Problem 5-41 Answer A Allowance – January 1 Doubtful accounts expense (4% x 5.000.000 Problem 5-37 Answer D Allowance for sales discount (5.0 –60 days (1.200.000.000 90.000 220.000 ( 70.000 250.000) 100.000 80.000 18.000 Problem 5-38 Answer A Problem 5-39 Answer B Doubtful accounts expense (3% x 3.000 60.000 10.000 x 2% x 50%) 50.000 x 6%) Allowance – December 31. 2008 12.000 160.000 30. 2007 Uncollectible accounts expense (squeeze) Recovery Total Accounts written off Allowance – December 31.000 205.000.000.000 Problem 5-42 Answer D Allowance – January 1 Doubtful accounts expense (squeeze) Total Accounts written off Allowance – December 31 250.000.000 Problem 5-40 Answer A Doubtful accounts expense (2% x 7.000 .000) Collection of accounts written off Total Accounts written off Allowance – December 31 40.000 220.000 200.000) 140.000 60.000) 90.000 20.000 x 1%) 61 – 120 days (900. 2008 Allowance – December 31.000 x 2%) Over 120 days (1.000 175.000 + 10.000 425.

Problem 5-43 Answer A Problem 5-44 Answer A .