University of San Jose – Recoletos

College of Commerce
Accountancy and Finance Department
Intermediate Accounting 4 (Accounting 105)
Error Correction, Changes in Accounting Policies and Changes in
Accounting Estimates
Ivan C. Ricaña,CPA,CrFA,LPT,CTT,MPA(COP)

Compute for and/or provide what is/are asked. Show your solutions.

You are given the ff. post-closing trial balance of UC COA Company for December 31,
2020:
Account Titles Debits Credits
Cash ₱714,000
Accounts Receivable 480,000
Allowance for Doubtful Accounts ₱16,000
Prepaid Expenses 32,400
Merchandise Inventory, End 360,000
Land 400,000
Building 1,000,000
Accumulated Depreciation – Building 300,000
Equipment 784,000
Accumulated Depreciation - Equipment 518,400
Accounts Payable 520,000
Advances from Customers 20,000
Interest Payable 36,000
Unearned Rent Revenue 60,000
Mortgage Payable 1,200,000
Share Capital 800,000
Retained Earnings 300,000
₱3,770,400 ₱3,770,400

Your examination of the company’s accounts disclosed the following information:

1. Advertising expense for December 2019, amounting to ₱50,000, was recorded when
payment was made by the firm in January 2020.
2. Advances from customers recorded as sales but the goods were delivered in the
following year:
2019 ₱160,000
2020 ₱100,000
3. Advances to suppliers were recorded as purchases but the merchandise was
received in the following year:
2019 ₱150,000
2020 ₱180,000
4. A fully depreciated equipment without scrap value was sole on October 1, 2020.
The cost of the machinery is ₱400,000. This equipment had been fully
depreciated since July 1, 2020. The proceeds from the sale amounting to
₱64,000 was credited to equipment when it was sold. Depreciation expense of
10% is provided on the equipment based on the year-end balance.
5. The company leased a portion of its building for ₱60,000. The term of the
lease is one year ending April 30, 2020. Collection of rent was credited to
Unearned Rent Revenue account. No adjusting entry has yet been made in 2019
and 2020.
6. An allowance for doubtful accounts equal to 5% of accounts receivable should
be established at the end of the year.
7. Merchandise inventories at the end of 2020 did not include merchandise that
was then in transit and to which the company had title. These shipments of
₱20,000 were recorded as purchases in January 2013.
8. Insurance premium cover the period from June 1, 2020 to June 1, 2021,
amounting to ₱36,000 was paid and recorded as expense on June 1, 2020. The
company did not make any adjustment at the end of the year.
9. The company recorded an unadjusted net income of ₱200,000 during the year
2020.

Compute for the following:

1. Net Income in 2020.
2. Total current assets as of December 31, 2020.
3. Total noncurrent assets as of December 31, 2020.
4. Total current liabilities as of December 31, 2020.
5. Retained Earnings as of December 31, 2020.

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