AUDIT OF ACCOUNTS PAYABLE (1)

Wyeth Corporation uses a periodic system. On December 31, 2019, the company reported
inventory on hand costing P145,000. During the year-end December 31, 2020, the company
recorded purchases of P450,000. A physical count on December 31, 2020, revealed that goods
costing P210,000 were on hand. Accounts payable balance per books amounts to P100,000. The
following material events occurred between December 23 and January 7, 2021.

1. Goods costing P30,000 that Wyeth was holding as a consignee were included in the
physical count.

2. An invoice for goods costing P46,000 were received and entered as a credit purchase on
December 29. The goods arrived on January 2. The supplier shipped the goods FOB
destination on December 27.

3. An invoice costing P41,000 was received and entered as a credit purchase on January 3.
The goods arrived on that date and were in satisfactory condition. The invoice indicates
that the supplier shipped the goods FOB shipping point on December 29.

4. Goods that Wyeth specially purchased from an overseas supplier for ultimate sale to
Digital Enterprises, Inc. were included in the physical count. A contract between Wyeth
and Digital pertaining to the goods states that “title passes when the buyer approves the
goods.” A representative from Digital inspected and approved the goods in Wyeth’s
warehouse on December 28. Wyeth shipped the goods and recorded the a sale on
January 4. The goods cost P25,000 and were sold on credit for P36,000.

5. Goods costing P8,000 and housed in special storeroom were inadvertently overlooked
when the physical count was taken.

6. An invoice for goods costing P31,000 were received and entered as a credit purchase on
December 28. The supplier shipped the goods FOB shipping point on December 26. The
receiving report indicates that Wyeth received the goods on January 2.

Required:
a. Make all necessary adjusting entry in general journal form for the year ended December
31, 2020. Assume that the adjusting entry for cost of goods sold has not been mde and
that the books for the year have not been closed.
b. Compute the adjusted balance of accounts payable for Wyeth’s statement of financial
position as of December 31, 2020.
 AUDIT OF ACCOUNTS PAYABLE (2)

From the following, prepare the current liabilities section of the statement of financial position
for the Republic Glass Corporation as of December 31, 202:

1. Notes payable arising from the purchase of raw materials, P114,000.

2. Notes payable-bank, due in 90 days, P60,000 (collateral consists of P80,000 in trading
securities).
3. Notes payable to officers, due on demand, P40,000.
4. Accounts payable arising from the purchase of raw materials, P88,000.
5. Cash balance with First Asia Bank, P26,000; overdraft with Standard Chartered Bank,
P35,000.
6. Dividends in arrears on cumulative preference shares, P48,000.
7. Income tax withheld, P2,600.
8. Advance receipts on special jobs being manufactured to specification for customers,
P6,000.
9. Installment notes on equipment purchased, P40,000, of which P20,000 is due 2021 and
the balance in 2022.
10. Accounts receivable credit balance, P3,600.
11. Estimated cost of meeting service requirement guarantees on products produced and sold,
P14,000.
12. One of the company’s product exploded causing injury to a customer’s employee. The
estimated claim is P48,000. The company’ has no insurance to cover the loss of this
nature.
13. The company borrowed P20,000 on the cash surrender value of its officer’s life
insurance. Cash surrender value amounts to P80,000. Interest on this loan has been paid
to the financial statement date.