Problem 1 

Required: 
Amount to be reported on the December 31, 2020 statement of financial position
1. Current liabilities
2. Non-current liabilities 
Solution :
CURRENT NON-CURRENT
LIABILITIES  LIABILITIES 
1 ₱ 1,000,000.00
2 ₱ 1,350,000.00

3 ₱ 1,500,000.00
4 ₱ 1,000,000.00 ₱ 5,000,000.00
5 ₱ 500,000.00 ₱ 3,500,000.00
6 ₱ 600,000.00
₱ 2,000,000.00
7
₱ 50,000.00
₱ 3,000,000.00
8.A
₱ 100,000.00

₱ 5,000,000.00
8.B
9 ₱ 4,000,000.00
TOTAL 14, 250,000 ₱ 13,500,000.00
 Problem 2:
Required:
of financial position 
1. Accounts payable – Trade balance at December 31, 2020 
2. Adjusting journal entry
Solution:
1. Accounts payable – Trade balance at December 31, 2020 
Unadjusted accounts payable ₱ 1,500,000.00
add:
Trade creditors, debit
₱ 63,000.00
balances
Invoice date dec.21,2020 ₱ 45,000.00
Unissued checks ₱ 63,000.00
Goods in transit  ₱ 6,000.00 ₱ 177,000.00
Less: 
Estimated warranty on
₱ 100,000.00
products sold
Customers deposit  ₱ 9,000.00
Due to officers and
₱ 50,000.00
shareholders for advances
Goods received on
₱ 41,000.00 ₱ 200,000.00
consignment at selling price
Accounts payable- Trade
₱ 1,477,000.00
balance
2. ADJUSTING JOURNAL ENTRY

Accounts payable ₱ 200,000.00

Estimated Warranty Payable ₱ 100,000.00
Customers deposit ₱ 9,000.00
Due to officers and shareholders ₱ 50,000.00
Purchases
₱ 41,000.00
Miscellaneous expense ₱ 18,000.00
Advance to suppliers ₱ 45,000.00
Accounts payable ₱ 63,000.00
Purchases ₱ 45,000.00
Accounts payable ₱ 45,000.00
Cash in bank ₱ 63,000.00

Accounts payable ₱ 63,000.00

Purchases ₱ 6,000.00

Accounts payable ₱ 6,000.00

 FORMULA

3,000+8,000+7,000
5,000+12,000+24,000+4,000
 PROBLEM 3
Required:
Based on the above and the result of your audit,
compute for the following as of December 31, 2020
1. Adjusted balance of Vouchers Payable
2. Purchase discounts lost on unaid vouchers
3. Purchase discounts lost on paid vouchers

Solution:
1.Adjusted balance of Vouchers Payable 2. Purchased discount loss
formula Voucher No. Adjusted Balance FORMULA: (unpaid vouchers)
78,400/98% 797 ₱ 80,000.00 80,000-78400 ₱ 1,600.00
821 -
44,100/98% 829 ₱ 45,000.00 ₱ 900.00
836 -
22,050/98% 842 ₱ 22,500.00 ₱ 450.00
856 ₱ 80,850.00
865 ₱ 78,400.00
total ₱ 306,750.00 ₱ 2,950.00
ased discount loss
vouchers) 3. Purchase discounts lost on paid vouchers
Payments
Purchases ₱ 1,645,000.00
Cancelled -₱ 36,750.00
Adjutsted accounts payable ₱ 1,304,450.00
Purchase discounts lost on paid vouchers
 formula:

₱ 1,309,500.00

306,750-2,950
₱ 5,050.00
Prob 4
Req.
Based on the given information, determine the following:
1.Total estimated returns from sales made during the first 6 months of 2020
2. Total estimated returns subsequent to June 30, 2020
3.Estimated loss on component replacement (in percentage of sales price)
4. Required Estimated Liability for Product Warranty balance at June 30, 2020
5. Required adjustment to liability account.
SOLUTION:
1.Total estimated returns from sales made during the first 6 months of 2020
January ₱ 4,200,000.00 7% ₱ 294,000.00
February ₱ 4,700,000.00 7% ₱ 329,000.00
March ₱ 3,900,000.00 7% ₱ 273,000.00
April ₱ 3,250,000.00 7% ₱ 227,500.00
May ₱ 2,400,000.00 10% ₱ 240,000.00
June ₱ 1,900,000.00 10% ₱ 190,000.00
₱ 1,553,500.00

3.Estimated loss on component replacement (in percentage of sales price)

Freight cost 5%
Manufacturing cost 70%
Salvage value -10%
65%
2. Total estimated returns subsequent to June 30, 2020

30% 20% 20%

January ₱ 294,000.00 ₱ 88,200.00 ₱ 58,800.00 ₱ 58,800.00
February ₱ 329,000.00 ₱ 98,700.00 ₱ 65,800.00 ₱ 65,800.00
March ₱ 273,000.00 ₱ 81,900.00 ₱ 54,600.00 ₱ 54,600.00
April ₱ 227,500.00 ₱ 68,250.00 ₱ 45,500.00 ₱ 45,500.00
May ₱ 240,000.00 ₱ 72,000.00 ₱ 48,000.00 ₱ 48,000.00
June ₱ 190,000.00 ₱ 57,000.00 ₱ 38,000.00 ₱ 38,000.00

4. Required Estimated Liability for Product Warranty balance at June 30, 2020
formula
Total estimated warranty liability ₱ 1,009,775.00 (1,553,500*65%)
Warranty expense -₱ 588,022.50 (904,650*65%)
Requested estimated warranty liability ₱ 421,752.50

5. Required adjustment to liability account.

Required estimated warranty liability ₱ 421,752.50
Per books, June 30 -₱ 120,400.00
Required adjustment to liability account ₱ 301,352.50
 10% 10% 10%
₱ 29,400.00 ₱ 29,400.00 ₱ 29,400.00 ₱ 29,400.00
₱ 32,900.00 ₱ 32,900.00 ₱ 32,900.00 ₱ 65,800.00
₱ 27,300.00 ₱ 27,300.00 ₱ 27,300.00 ₱ 81,900.00
₱ 22,750.00 ₱ 22,750.00 ₱ 22,750.00 ₱ 113,750.00
₱ 24,000.00 ₱ 24,000.00 ₱ 24,000.00 ₱ 168,000.00
₱ 19,000.00 ₱ 19,000.00 ₱ 19,000.00 ₱ 190,000.00
₱ 648,850.00
 Prob 5:
Prepare the audit adjustments for the following situations you find in the records of Olaf, Inc.
which closes its accounts December 31, 2020:
Solution:

a. Prepaid advertising ₱ 12,000.00

Advertising expense ₱ 12,000.00
b. Office supplies on hand ₱ 250.00
Office supplies expense ₱ 250.00
c. Insurance expense ₱ 350.00
1,800/36*7
Prepaid Insurance ₱ 350.00
d. Factory supplies expense ₱ 2,200.00
3,300-1,100
Factory supplies ₱ 2,200.00
e. Prepaid subscription ₱ 1,400.00
1,800/36*8
subscription expense ₱ 1,400.00
f. Insurance expense ₱ 400.00
3,600/36*4
Prepaid Insurance ₱ 400.00
g. Prepaid rent ₱ 6,000.00
12,000/12*6
Rent expense ₱ 6,000.00
h. Prepaid dues and subscription ₱ 800.00
1,200/12*4
Dues and subscription expense ₱ 800.00
i. Dues and subscription expense ₱ 720.00
Prepaid dues and subscription ₱ 720.00
Prepaid dues and subscription ₱ 360.00
720/6*3
Dues and subscription expense ₱ 360.00
j. Prepaid vacation expense ₱ 3,000.00
Vacation expense ₱ 3,000.00