1. On January 1, 2018, Wackisan Co.

sells inventory with a list price of P100, 000 on

account under credit terms of 15%, 20% 3/10, n/30.
Under the gross method, how much should be debited to accounts receivable on
January 1, 2018?
a. PI00, 000 c. P68, 000
b. P85, 000 d. P65, 960

2. Under the net method, how much should be debited to Accounts receivable on January
1, 2016?
a. PI00, 000 c. P68, 000
b. P85, 000 d. P65, 960

Since it started its operations in 2013, Valdez Co. carried no allowance for doubtful accounts.
Uncollectible receivables were expensed as written off and recoveries were credited to income
as collected. On March 1, 2017 (after the financial statements were issued), management
recognized that Valdez's accounting policy with respect to doubtful accounts was not correct,
and determined that an allowance for doubtful accounts was necessary.
Data for five years as follow:
Credit Sales Accounts Written Off Recoveries
2013: P1, 500, 000 P20, 000 P15, 000
2014: 2, 000, 000 40, 000 20, 000
2015: 3, 500, 000 270, 000 15, 000
2016: 2, 000, 000 65, 000 30, 000
2017: 3, 000, 000 85, 000 40, 000

The year end balances of accounts receivables are as follows:

December 31, 2016: P3, 000, 000
December 31, 2017: P3, 400, 000

Based on the above data answer the following:

3. (Assumption 1): Bad debts are provided for as a percentage of credit sales. The
percentage to be used to compute for allowance for bad debts on December 31, 2017
is?
a. 1.50% c. 3.50%
b. 3.00% d. 4.00%

4. How much is doubtful accounts expense for 2017?

a. P45, 000 c. P105, 000
b. P90, 000 d. P120, 000

5. Assuming the allowance for doubtful accounts on January 1, 2017 is P400, 000, how
much is the allowance for doubtful accounts on December 31, 2017?
a. P400, 000 c. P460, 000
b. P445, 000 d. P475, 000

6. (Assumption 2): Bad debts are provided for as a percentage of credit sales. The
company’s contacts are generally for two years:
The percentage to be used to compute the allowance for bad debts on December 31,
2017 is?
a. 1.50% c. 3.50%
b. 3.00% d. 4.00%

7. How much is doubtful accounts expense for 2017?

c. P45, 000 c. P105, 000
 d. P90, 000 d. P120, 000

8. How much is the allowance for doubtful accounts for December 31, 2017?
a. P105, 000 c. P165, 000
b. P115, 000 d. P280, 000

9. (Assumption 3): Assume that a policy was established to maintain allowance for doubtful
accounts based on historical bad debts loss percentage applied to year end accounts
receivables. The historical bad debts loss percentage is to be recomputed each year
based on available years up to maximum of five years.
The percentage to be used to compute the allowance for bad debts on December 31,
2017 is?
a. 1.50% c. 3.50%
b. 3.00% d. 4.00%

10. How much is doubtful accounts expense for 2017?

a. P102, 000 c. P45, 000
b. P90, 000 d. P42, 000

11. How much is the allowance for doubtful accounts for December 31, 2017?
c. P45, 000 c. P102, 000
d. P105, 000 d. P120, 000

On January 2, 2018, Atlas Co. purchased inventory on account costing P100, 000. The term of
the purchase is 20%, 2/10, n/30.
Assume that Atlas uses the Gross Method determine the following:
12. The amount to be debited to purchases on January 2, 2018 is?
a. P100, 000 c. P78, 400
b. P80, 000 d. P98, 000

13. The total amount paid assuming the purchase was settled on January 12, 2018?
a. P100, 000 c. P78, 400
b. P80, 000 d. P98, 000

14. The amount to be credited to purchase discount assuming the purchase was settled on
January 12, 2018?
a. Zero c. P2, 000
b. P20, 000 d. P1,600

15. The amount to be debited to purchase discount lost assuming the purchase was settled
in January 14, 2018?
a. Zero c. P2, 000
b. P20, 000 d. P1,600

16. Assume that Atlas uses the Net Method, determine the following:
The amount to be debited to purchases on January 2, 2018 is?
c. P100, 000 c. P78, 400
d. P80, 000 d. P98, 000

17. The total amount paid assuming the purchase was settled on January 12, 2018?
c. P100, 000 c. P78, 400
d. P80, 000 d. P98, 000

18. The amount to be credited to purchase discount assuming the purchase was settled on
January 12, 2018?
c. Zero c. P2, 000
 d. P20, 000 d. P1,600

19. The amount to be debited to purchase discount lost assuming the purchase was settled
in January 14, 2018?
c. Zero c. P2, 000
d. P20, 000 d. P1,600

Records of the Gladys New Products Co. show the following data relative to product 143:

Units Unit Cost Total Cost

April 1 Balance 20, 000 P10 P200, 000
April 2 Purchase 30, 000 12 360, 000
April 4 Sale 25, 000
April 10 Purchase 15, 000 14 210, 000
April 15 Sale 21, 000
April 17 Sales Return 1, 000
April 28 Purchase 20, 000 16.75 335, 000

Based on the above data answer the following:

20. Using the weighted average method, how much is the cost of inventory at the end of
April?
a. P580, 000 c. P520, 000
b. P605, 000 d. P525, 000

21. Using the weighted average method, how much is the cost of goods sold in April?
a. P525, 000 c. P585, 000
b. P500, 000 d. P520, 000

22. Using the moving average method, how much is the cost of inventory at the end of April?
a. P580, 000 c. P520, 000
b. P605, 000 d. P525, 000

23. Using the moving average method, how much is the cost of goods sold in April?
a. P525, 000 c. P585, 000
b. P500, 000 d. P520, 000

24. Using the FIFO perpetual method, how much is the cost of inventory at the end of April?
a. P580, 000 c. P520, 000
b. P605, 000 d. P525, 000

25. Using the weighted average method, how much is the cost of goods sold in April?
c. P525, 000 c. P585, 000
d. P500, 000 d. P520, 000

The December 31 year-end financial statements of SAMOA COMPANY contained the following
errors:
Dec. 31, 2016 Dec. 31, 2017
Ending inventory P48, 000 understated P40, 500 overstated
Depreciation expense P11, 500 understated -----------------

An insurance premium of P330, 000 was prepaid in 2016 covering the years 2016, 2017, and
2018. The entire amount was charged to expense in 2016. In addition, on December 31, 2017,
a fully depreciated machinery was sold for P75, 000 cash, but the sale was not recorded until
2018. There were no other errors during 2016 and 2017, and no corrections have been made
for any of the errors. Ignore income tax effects.

1. What is the total effect of the errors on Samoa’s 2016 net income?
a. P123, 500 overstatement
b. B. P27, 500 overstatement
c. C. P192, 500 understatement
d. D. P177, 500 understatement

2. What is the total effect of the errors on the amount of Samoa’s working capital at
December 31, 2017?
a. P75, 500 overstatement
b. B. P40, 500 overstatement
c. C. P225, 500 understatement
d. D. P144, 500 understatement

3. What is the total effect of the errors on the balance of Samoa’s retained earnings at
December 31, 2017?
a. P156, 000 understatement
b. B. P87, 000 overstatement
c. C. P133, 000 understatement
d. D. P85, 000 understatement

Calcium prepares statements on the cash basis. The balance sheet on December 31, 2016 and
income statement for the year 2016 are as follows:

Statement of Financial Position:

Cash P1, 500, 000
Furniture and Equipment 2, 500, 000
Total 4, 000, 000

Note Payable 1, 000, 000

Capital:
Balance, January 1 P1, 600, 000
Add: Net Income 2, 250, 000
Total 3, 850, 000
Less: Withdrawals 850, 000 3, 000, 000
Total: P4, 000, 000

Income Statement:
Professional Fees P5, 000, 000
Expenses:
Rent P1, 200, 000
Supplies 800, 000
Other Operating Expenses 750, 000 2, 750, 000
Net Income 2, 250, 000
You decided that the statements should be prepared on the accrual basis and you assemble the
information below:

1. The furniture and equipment were acquired on July 1, 2015. The estimated life is 10
years.
2. The 12% promissory note is dated April 1, 2016 and matures in one year, interest is
payable on the date of maturity.
3. Accounts receivable:
December 31, 2016: P750, 000
December 31, 2015: P500, 000

4. Accrued rent on December 31, 2016, P100, 000.

5. Office Supplies Unused:
December 31, 2016: P250, 000
December 31, 2015: P300, 000

Questions:

Based on the above and the result of your audit, determine the accrual balance of the following
as of December 31, 2016:

4. The Professional Fees:

a. P5, 000, 000 c. P5, 500, 000
b. P5, 250, 000 d. P5, 600, 000

5. Net Income:
a. P2, 000, 000 c. P2, 400, 000
b. P2, 010, 000 d. P2, 210, 000

6. Current Asset:
a. P2, 500, 000 c. P2, 600, 000
b. P2, 300, 000 d. P2, 200, 000

7. Non-Current Asset:
a. P2, 125, 000 c. P2, 200, 000
b. P2, 225, 000 d. P2, 400, 000

8. Total Assets:
a. P4, 625, 000 c. P4, 800, 000
b. P4, 525, 000 d. P4, 600, 000

9. Current Liabilities:
a. P1, 000, 000 c. P1, 190, 000
b. P1, 090, 000 d. P1, 200, 000

10. Total Owner’s Equity:

a. P3, 625, 000 c. P3, 610, 000
b. P3, 435, 000 d. P3, 400, 000

The I WANT TO HOLD YOUR HAND Company was started by Paul McCartney early in 2014.
Initial capital was acquired by issuing shares of ordinary shares to various investors and by
obtaining a bank loan. The company operates a retail store that sells records, tapes, and
compact discs. Business was so good during the first year of operations that Paul is considering
opening a second store on the other side of town. The funds necessary for expansion will come
from a new bank loan. In order to approve the loan, the bank requires financial statements.

Paul asks for your help in preparing the balance sheet and presents you with the following
information for the year ending December 31, 2020:

a. Cash receipts consisted of the following:

From customers P360, 000
From issue of ordinary shares 100, 000
From bank loan 100, 000
b. Cash disbursement were as follows:
Purchase of inventory P300, 000
Rent 15, 000
Salaries 30, 000
Utilities 5, 000
Insurance 3, 000
Purchase of equipment and furniture 40, 000

c. The bank loan was made on March 31, 2020. A note was Signed requiring payment of
interest and principal on March 31, 2021, The interest rate is 12%

d. The equipment and furniture were purchased on January 3, 2020, and have an
estimated useful life of 10 years with no anticipated salvage value. Depreciation per year
is P4, 000.

e. Inventories on hand at the end of the year cost P 100, 000.

f. Amounts owed at December 31, 2020 were as follows:

To suppliers of inventory P20, 000
To the utility company 1, 000

g. Rent on the store building is P 1, 000 per month. On December 1, 2020 four months'
rent was paid in advance.

h. Net income for the year was P 76,000.

Questions:

Based on the above data, compute for the following:

11. Cash:
a. Zero c. P393, 000
b. P167, 000 d. P560, 000

12. Current Assets:

a. P103, 000 c. P496, 000
b. P270, 000 d. P663, 000

13. Total Assets:

a. P306, 000 c. P532, 000
b. P393, 000 d. P699, 000

14. Current Liabilities:

a. P70, 000 c. P121, 000
b. P100, 000 d. P130, 000

15. Shareholders’ Equity:

a. P176, 000 c. P411, 000
 b. P323, 000 d. P599, 000

The following balances have been excerpted from Potassium's Statement of Financial Position
for the year 2020:
January 1 December 31
Accounts receivables P200, 000 P300, 000
Allowance for bad debts 20, 000 30, 000
Merchandise inventory 380, 000 330, 000
Accounts payable 150, 000 100, 000
Accounts receivable written off 50, 000
Cash received from customers 1, 498, 000
Cash paid to trade creditors 1, 200, 000
Sales discounts 20, 000
Purchase returns 10, 000
Rental receivables 70, 000 80, 000
Rental payable 60, 000 35, 000
Cash received from tenants 120, 000

Additional information:
 Collections from customers included customer's deposit of P80, 000 of which P 20,000
selling price of goods were already shipped and received by the customer. The shipment
of goods was not recorded by the company although the cost of merchandise was
properly excluded in the count.
 Collections from customers also included P30, 000 payment from customer of accounts
receivable in which a check dated January 15, 2021 was received.
 Collections also included recovery of accounts previously written off amounting to P8,
000.
 Included in the payment to trade creditors was a check drawn and recorded by the
company to the supplier in December 2020 amounting to P20, 000 which was delivered
to the payee on January 10, 2021.
 Also the company did not record payment to supplier amounting to P30, 000.

Questions:
Determine the accrual balance of the following as of December 31, 2020:
16. Net Sales:
a. P1, 400, 000 c. P1, 470, 000
b. P1, 550, 000 d. P1, 570, 000

17. Net Purchases:

a. P1, 130, 000 c. P1, 140, 000
b. P1, 160, 000 d. P1, 170, 000

18. Cost of Sales:

a. P1, 180, 000 c. P1, 490, 000
b. 1, 210, 000 d. P1, 220, 000

19. Rent Income:

a. P130, 000 c. P145, 000
b. P155, 000 d. P135, 000

20. Bad Debts Expense

a. P52, 000 c. P22, 000
b. P60, 000 d. P12, 000
The property, plant and equipment section of Brenner Corporation's balance sheet at
December 31, 2015 included the following Items:

Land P700, 000

Land Improvements 10, 000
Building 900, 000
Machinery 980, 000

During 2016 the following data were available to you upon your analysis of the fixed assets
account:

Cash paid on the purchase of land P2, 500, 000

Mortgage assumed on the land bought, including interest at 16% 4, 000, 000
Realtors commission 300, 000
Legal fees, realty taxes and documentation expenses 50, 000
Amount paid to relocate persons squatting on the property 100, 000
Cost of tearing down an old building on land 120, 000
Amount recovered from the salvage of the building demolished 150, 000
Cost of fencing the property 110, 000
Amount paid to a contractor for the building erected 2, 000, 000
Building permit fees 20, 000
Excavation expenses 50, 000
Architect's fees 50, 000
Interest that would have been earned had the money used during -
the period of construction been invested in the money market 150, 000
Invoice cost of machinery acquired 2, 000, 000
Freight, unloading, and delivery charges 60, 000
Customs duties and other charges 140, 000
Allowances, and hotel accommodation, etc. paid to foreign –
technician during installation and test runs of machine. 400, 000
Royalty payments on machine purchased –
(based on units produced and sold) 120, 000

Question:
Based on the above and the result of your audit determine the following:

1. The total cost of the Land?

a. P7, 770, 000 c. P7, 620, 000
b. P7, 650, 000 d. P7, 880, 000

2. The total cost of Land improvements?

a. P120, 000 c. P110, 000
b. P10, 000 d. P170, 000

3. The total cost of the Building?

a. P2, 990, 000 c. P2, 920, 000
b. P3, 020, 000 d. P3, 080, 000

4. The total cost of the Machinery?

a. P3, 500, 000 c. P3, 620, 000
b. P3, 580, 000 d. P3, 220, 000

5. The cost of the depreciable Property, Plant and Equipment?

a. P6, 690, 000` c. P6, 720, 000
b. P6, 010, 000 d. P6, 470, 000

You are engaged in the audit of Eunise Co., a new client. The Eunise Company is a
calendar year basis. The following data were found during your audit:
  Goods in transit shipped FOB destination by a supplier in the amount of P20, 000 had
been excluded from the inventory, and further testing revealed that the purchase had
been recorded.

 Goods costing P10, 000 had been received, included in inventory, and recorded as a
purchase. However, your inspection revealed that the goods were found to be defective
and would be immediately returned.

 Materials costing P50, 000 and billed on December 30 at a selling price of P64, 000 had
been segregated in the warehouse for inventory as a signed purchase order had been
received from the customer. Terms, FOB destination.

 Goods costing P 14, 000 was out on consignment with Mariel, Inc. Since the monthly
statement from Mariel, Inc. listed those materials as on hand, the items had been
excluded from the final inventory and invoiced on December 31 at P16, 000.

 The sale of P30, 000 worth of materials and costing P24, 000 had been shipped FOB
point of shipment on December 31. However, this inventory was found to be included in
the final inventory.

Further inspection of the client's records revealed the following December 31, 2016 balances:
Inventory: P 220, 000; Accounts receivable: P 104, 000; Accounts payable: P138, 000; Sales:
P1, 010, 000; Purchases: P640, 000; Net income: P180, 400.

Questions:
Based on the above and the result of your audit, determine the balances of the following:

6. The adjusted balance of inventory, December 31, 2016

a. P250, 000 c. P260, 000
b. P274, 000 d. P300, 000

7. The adjusted balance of accounts receivable, December 31, 2016

a. P36, 000 c. P24, 000
b. P64, 000 d. P16, 000

8. The adjusted balance of accounts payable, December 31, 2016

a. P158, 000 c. P118, 000
b. P138, 000 d. P108, 000

9. The adjusted balance of sales, December 31, 2016

a. P946, 000 c. P1, 010, 000
b. P962, 000 d. P930, 000

10. The adjusted balance of net income, December 31, 2016

a. P160, 400 c. P166, 400
b. P150, 400 d. P164, 400

As a member of the audit team responsible for the audit of Faith Ann Guadilla Company's
financial statements for the year 2017, you were assigned to perform cut-off test for the
beginning and ending inventory balances of the company to be able to verify the Cost of
goods sold and inventory reported in the financial statements. Assume that all
purchases are FOB shipping point.

In the course of your examination, the following facts were discovered:

December 31, 2016:
 Invoices totaling P36, 000 were entered in the voucher register in January' but the goods
were received during December.

 December invoices totaling P32, 000 were entered in the voucher register in December,
but the goods were not received until January

December 31, 2017:

 Sales of P20, 000 were made on account on December 31 and the goods were
delivered at that time but the sale was recorded in January.

 Invoices totaling P24, 000 for goods received in December were entered in the voucher
register in January.

 December invoices totaling P8, 000 were entered in the voucher register in December,
but the goods were not received until January.

 Invoices totaling P4, 000 were entered in the voucher register in January, and the goods
were received in January. However, upon examination of these invoices, you determined
that these are all shipped December.

Required:
Compute the net effect of the above errors on the following 2017 accounts:

11. Retained earnings-prior period error

a. P4, 000 understated c. P4, 000 overstated
b. P68, 000 understated d. P68, 000 overstated

12. Sales
a. P20, 000 overstated c. P16, 000 understated
b. P20, 000 understated d. Zero

13. Ending inventory

a. P4, 000 understated c. P8, 000 understated
b. P12, 000 understated d. P8, 000 overstated

14. Accounts payable

a. P4, 000 understated c. P20, 000 understated
b. P24, 000 understated d. P28, 000 understated

15. Cost of goods sold

a. P12, 000 overstated c. P 12, 000 understated
b. P36, 000 overstated d. P36, 000 understated

On January 1, 2016, Walter Company sells inventory with a list price of P100, 000
On account under credit terms of 15%, 20%, 3/10, n/30.

Question:
Based on the above data answer the following:

16. Under the gross method, how much should be debited to Accounts receivable on
January 1, 2016?
a. P100, 000 c. P68, 000
b. P85, 000 d. P65, 960

17. Under the net method, how much should be debited to Accounts receivable on January
1, 2016?
 a. P100, 000 c. P68, 000
b. P85, 000 d. P65, 960

The following Information was obtained in connection with the audit of Kathereen
Hyacinth Co.’s cash account as of December 31, 2017:

 Cash balance per general ledger on December 31 was P37, 500. The company
recorded actual company collections amounting to P152, 500 from its customers during
December. Also in December, the company recorded bank service charges of P2, 500,
including November bank service charges of P1, 500. The December bank statement
showed total deposits credited by the bank of P 145, 000 and total checks paid
amounting to P133, 750 and bank service charges of P3, 250.

 The Outstanding checks on November 30 and December 31 were P16, 250 and P12,
500 respectively while deposit in transit on November 30 was P12, 500.

 The cash receipts book of December is under-footed by P2, 500

 The bank erroneously charged the company’s account for a P3, 750 check for another
company. This bank error was corrected on January 2018.

Questions:
Based on the above data and the result of your audit, compute for the following:

18. Deposit in transit, December 31, 2017

a. P19, 000 c. P22, 000
b. P12, 000 d. P20, 000

19. Adjusted cash in bank balance, December 31, 2017

a. P26, 500 c. P37, 750
b. P37, 500 d. P26, 750

20. How much is the unrecorded bank service charges as of December 31, 2017?
a. P1, 250 c. P2, 350
b. P3, 250 d. P2, 250
The following balances have been excerpted from Chlorine's Statement of Financial Position for
the year 2016:

Accounts receivable, decrease P100, 000

Merchandise inventory, decrease 25, 000
Accounts payable, decrease 200, 000
Notes receivable-trade, increase 100, 000
Rental receivables, increase 14, 000
Unearned rental income, decrease 40, 000
Prepaid interest, decrease 5, 500
Interest payable, increase 8, 500

Additional data:
Accounts receivable written off 10, 000
Cash received from customers 4, 200, 000
Cash paid to creditors 2, 800, 000
Sales discounts 30, 000
 Sales returns and allowances 20, 000
Purchase discounts 40, 000
Purchase returns 10, 000
Cash received from tenants 400, 000
Interest paid 100, 000

Based on the above data, answer the following questions:

1. What is the amount of gross sales?
a. P4, 110, 000 c. P4, 210, 000
b. P4, 160, 000 d. P4, 260, 000

2. What is the amount of gross purchases?

a. P3, 000, 000 c. P2, 600, 000
b. P3, 050, 000 d. P2, 650, 000

3. What is the amount of the cost of sales for the year?

a. P2, 625, 000 c. P2, 675, 000
b. P2, 575, 000 d. P2, 725, 000

4. What amount of rental revenue should the company report for the year?
a. P454, 000 c. P374, 000
b. P426, 000 d. P346, 000

5. How much interest expense should the company report for the year?
a. P86, 000 c. P103, 000
b. P97, 000 d. P114, 000

PROBLEM 3-10
The following balances have been excerpted from Argon's financial Statements for the year
2020:

January 1, December 31,

Accounts receivable 200, 000 250, 000
Notes receivable 300, 000 100, 000
Cash received from customers 1, 120, 000
Sales returns and allowances 20, 000
Sales discounts 10, 000
Merchandise inventory 200, 000 100, 000
Accounts payable 50, 000 25, 000
Notes payable 100, 000 75, 000
Purchase returns and allowances 40, 000
Purchase discounts 10, 000
Payments to suppliers 650, 000
Accrued rent receivable 70, 000 40, 000
Unearned rent income 80, 000 40, 000
 Collection of rent 480, 000
Prepaid salaries 100, 000 125, 000
Accrued salaries payable 75, 000 50, 000
Payment of salaries 350, 000

Questions: Determine the following:

1. The Gross Sales for the year 2020?

a. P1, 000, 000 c. P970, 000
b. P1, 030, 000 d. P1, 240, 000

2. The net purchases for the year 2020?

a. P650, 000 c. P550, 000
b. P600, 000 d. P500, 000

3. The Gross income for the year 2020?

a. P300, 000 c. P270, 000
b. P350, 000 d. P320, 000

4. The salaries expense for the year 2020?

a. P400, 000 c. P350, 000
b. P300, 000 d. P450,000

5. The rent income for the year 2020?

a. P470, 000 c. P460, 000
b. P490, 000 d. P500, 000

PROBLEM 3-1 Computation of Sales

The following data were reported by Franz Company during the current year:
Account receivable – January 1 P200, 000
Accounts receivable - December 31 180, 000
Notes receivable - January 1 240, 000
Notes receivable - December 31 170, 000
Advances from customers - January 1 55, 000
Advances from customers - December 31 40, 000
Sales returns and allowances 4, 000
Sales discounts 2, 000
Uncollectible accounts written off during the current year 3, 000
Recoveries of accounts previously written off -----------
Sales accrual basis 600, 000

Determine the gross sales under the cash basis of accounting

a. P666, 000 c. P696, 000
b. P668, 000 d. P699, 000

PROBLEM 3-2 Computation of Bad Debts

The following data were reported by Azul Company during the current year:

Allowance for doubtful accounts – January 1 P 25, 000

Allowance for doubtful accounts - December 31 40, 000
Uncollectible accounts written off during the current year 8, 000
Recoveries of accounts previously written off 2, 000
How much is the total bad debts expense during the current year?
a. P9, 000 c. P21, 000
b. P15, 000 d. P23, 000

PROBLEM 3-3 Computation of Purchases

The following data were reported by Sippar Company during the current year:

Accounts payable - January 1 P 200, 000

Accounts payable - December 31 250, 000
Notes payable - January 1 400, 000
Notes payable - December 31 210, 000
Advances to suppliers - January 1 50, 000
Advances to suppliers - December 31 68, 000
Purchase returns and allowances 6, 000
Purchase discounts 3, 000
Payment 800, 000

Determine the gross purchases under the accrual basis of accounting

a. P651, 000 c. P687, 000
b. P654, 000 d. P678, 000

PROBLEM 3-4 Computation of Cost of Machine Acquired and Sold:

Phosphorus Co. provided you the following information in relation to its property, plant, and
equipment account:
Beginning Ending
Equipment P100, 000 ` P120, 000
Accumulated Depreciation 15, 000 18, 000

Additional Information:
a) Depreciation is 15% per annum.
b) At the start of the year, Phosphorus Co. acquired an equipment and at the same time
disposed of an equipment with a carrying amount of P25, 000 accumulated depreciation of P15,
000 for P35, 000.

Questions:

1. How much is the cost of the machine disposed?

a. P60, 000 c. P120, 000
b. P160, 000 d. P40, 000

2. How much is the cost of the machine acquired?

a. P60, 000 c. P120, 000
b. P160, 000 d. P40, 000