Problem 1

ABC Company provided the following information on December 31, 2020: 1)

01/15/2021 P3,000,000 of accounts receivable was written off due to the

bankruptcy of a major customer.

02/14/2021 A shipping vessel of ABC with carrying amount of P5,000,000 was

completely lost at sea because of a hurricane.

11/3/2021 2)

A court case inolving ABC as the defendant was settled and the entity
was obligated to pay the plaintiff P1,500,000. ABC previously
recognized a P1,000,000 liability for the suit because management
deemed it probable that the entity would lose the case.
01/01/21

03/25/2021 One of ABC's factories with a carrying amount of P15,000,000 was

completely razed by forest fires that erupted in its vicinity.

The management of the entity completed the draft of the financial statements for
2020 on February 10, 2021.

On March 20, 2021, the board of directors authorized the financial statements for
issue. The entity announced the profit and other selected information on March 22,
2021.

The financial statements were made available to shareholders on April 2, 2021 at the
annual shareholders' meeting where the financial statements were approved.

The financial statements were filed with the regulatory agency the very next day.

Required:
1. Prepare adjusting entries on December 31, 2020 to reflect the adjusting events
after the reporting period.
2. Prepare the necessary disclosures to reflect the nonadjusting events after the
reporting period.

Problem 2

On December 12, 2020, an explosion in XYZ Company's plant caused extensive

damages to nearby properties. By March 1, 2021, claims have been asserted against
XYZ Company. XYZ Company’s management and their legal counsel concluded that it
is probable that XYZ would be liable for damages estimated at P4,000,000.
On December 12, 2020, an explosion in XYZ Company's plant caused extensive
damages to nearby properties. By March 1, 2021, claims have been asserted against
XYZ Company. XYZ Company’s management and their legal counsel concluded that it
is probable that XYZ would be liable for damages estimated at P4,000,000.

What should be reported in the December 31, 2020 financial statements that were
issued on March 25, 2021 in relation to the above-mentioned events?

Loss 4,000,000
Estimated Liability 4,000,000
Adjusting entries:

12/31/2020 Allowance for Doubtful Accounts 3,000,000

Accounts Receivable 3,000,000

Loss on Lawsuit 500,000

Estimated Liability on Lawsuit 500,000

A shipping vessel of ABC Company with a carrying amount of P5,000,000 was completely lost
at sea because of a hurricane.

03/20/21

Subsequent events
Computation of Sales:

Cash Sales
Add: Sales on Account
Trade accounts and notes receivable, end
Collection of trade accounts and notes receivable
Sales returns, discounts, and allowances
Accounts and notes receivable written off
Trade notes receivable discounted (NR directly credited)
Total
Less: Trade accounts and notes receivable, beginning
Total Sales - Accrual Basis

Computation of Purchases:

Cash purchases
Purchases on account:
Trade accounts and notes payable, end
Payment of trade accounts and notes payable
Purchases returns, discounts, and allowances
Total
Less: Trade accounts and notes payable, beginning
Total purchases- accrual basis

Income other than sales:

Income Received - Cash Basis xx 500,000.00

Add: Deferred Income - beginning xx 250,000.00
Accrued Income - ending xx 150,000.00
Total xx 900,000.00
Less: Deferred Income - ending xx (120,000.00)
Accrued Income - beginning xx (220,000.00)
Income for the current year - accrual basis xx 560,000.00

Deferred Income - Beginning Deferred Income - Ending

Previous Year Previous Year
Cash xx
Deferred Income xx
 Current Year Current Year
Deferred Income xx Cash xx
Income xx Deferred Income

Expenses other than purchases:

Expenses paid - Cash basis xx 1,000,000.00

Add: Prepaid expenses - beginning xx 120,000.00
Accrued expenses - ending xx 150,000.00
Total xx 1,270,000.00
Less: Prepaid expenses - ending xx (320,000.00)
Accrued expenses - beginning xx (100,000.00)
Expenses - accrual basis xx 850,000.00

Prepaid Expense - Beginning Prepaid Expense - Ending

Previous Year Previous Year
Prepaid Expense xx
Cash xx

Current Year Current Year

Expense xx Prepaid Expense xx
Prepaid Expense xx Cash

Problem 1

Zeta Company reported sales revenue of P4,600,000 in its income statement for the year ended
December 31, 2020.
The entity wrote off uncollectible accounts totaling P20,000 during 2020. Additional information is as
follows:
2019 2020
Accounts receivable 1,000,000 1,300,000
Allowance for doubtful accounts 60,000 110,000

Under cash basis, what amount should be reported as sales for 2020?

Problem 2

Elaine Company experienced the following changes in selected accounts for the current year:

Accrual sales 5,000,000

Accounts receivable
 Jan-01 800,000
Dec-31 500,000
Advances from customers
Jan-01 300,000
Dec-31 400,000

What amount was received from customers during the year?

Problem 3

Royal Company provided the following data for the current year:

Sales 10,000,000
Cost of goods sold 5,300,000
Operating expenses 3,800,000

Dec-31 Jan-01
Prepaid operating expenses 1,000,000 700,000
Accounts payable 1,350,000 1,200,000
Inventory 2,500,000 2,100,000
Accounts receivable 1,400,000 1,375,000

Under cash basis, what amout should be reported as purchases for the current year?

Problem 4

Selected accounts, cash receipts and disbursements of Emmyrelle Company for 2020 are as follows:

Dec-31 Jan-01
Accounts receivable 250,000 300,000
Notes receivable 150,000 100,000
Accounts payable 120,000 160,000
Notes payable 100,000 150,000
Prepaid insurance 30,000 10,000

Cash receipts for the current year

Cash sales 500,000
Collections of AR, net of discounts of P40,000 1,800,000
Collections of NR 80,000
Bank loan - one year, dated 12/31/13 100,000
Purchase returns 60,000
Cash disbursements for the current year
Cash purchases 130,000
Payment of AP, net of discounts of P20,000 1,500,000
Payment on NP 400,000
Insurance 220,000
Other expenses 650,000
Sales returns and allowances 50,000

1) Under accrual basis, what is the amount of gross sales for the current year?
2) Under accrual basis, what is the amount of gross purchases for the current year?
 xx AR/NR
Beginning
xx Credit Sales
xx Recoveries
xx
xx
xx
xx
xx xx
xx

xx AP/NP
Ending
xx Payments
xx PRA
xx PD
xx
xx xx
xx

Accrued Income (asset - receivable)

Beg. 70,000.00 End. Decrease of 70,000

Deferred Income (liability) Decrease of 130,000

End. Beg. 130,000.00

Income 560,000.00 Collection 500,000.00

Accrued Income - Beginning Accrued Income - Ending

Previous Year Previous Year
Receivable xx
Income xx
 Current Year Current Year
Cash xx Receivable
xx Receivable xx Income

Prepaid Expense (asset)

Beg. End. 200,000.00 Increase of 200,000

Accrued Expense (liability - payable)

End. 50,000.00 Beg. Increase of 50,000

Payment 1,000,000.00 Expense 850,000.00

Accrued Expense - Beginning Accrued Expense - Ending

Previous Year Previous Year
Expense xx
Payable xx

Current Year Current Year

Payable xx Expense
xx Cash xx Payable

AR
Beg. 1,000,000.00 1,300,000.00 End.
Cr. Sales 4,600,000.00 4,280,000.00 Collections
- SD
- SR
20,000.00 Write off

Accrued Income (asset - receivable)

Beg. 800,000.00 End. 500,000.00
 Deferred Income (liability)
End. 400,000.00 Beg. 300,000.00

Income 5,000,000.00 Collection 5,400,000.00

AP Inventory
End 1,350,000 1,200,000 Beg Beg 2,100,000
Payment 5,550,000 5,700,000 Purchases on account Purchases 5,700,000

AR/NR
Beg. 300,000 250,000 Ending
100,000 150,000
CS 1,920,000 1,840,000 Collections
80,000

Credit sales 1,920,000

Add: Cash sales 500,000
Accrual - Gross Sales 2,420,000

AP/NP
End 120,000 160,000 Beg.
100,000 150,000
Payments 1,520,000 1,830,000 Purchases on account
 400,000

Purchases on account 1,830,000

Add: Cash purchases 130,000
Accrual - Gross Purchases 1,960,000
 Ending
Collections
Sales Returns
Sales Discounts
Write off
Recoveries
NR - Discounted

Beginning
Purchases on Account

me - Ending
 xx
xx

nse - Ending

xx
xx
Inventory
2,500,000 End
5,300,000 COGS