Financial Accounting Valix and Peralta Volume One - 2008 Edition

CHAPTER 1
Problem 1-1 Problem 1-4
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. D C D D C C B C D A 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. A A D B D B D C C D

SOLUTION MANUAL

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Problem 1-3

Problem 1-2
1. 2. 3. 4. 5. C D D A D

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

A C A A D A D B D D

Problem 1-5
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. A A A D D D B D C D 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. A A C A A A B C A B

Problem 1-6
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. D D C A A C D D B D

Problem 1-7
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. B B C C A B D D A B

Problem 1-8

Problem 1-9 Problem 1-12
1. 2. 3. 4. 5. D D C B C 1. 2. 3. 4. 5. 6. 7. 8. 9. A B D B A D C A D

Problem 1-10
1. 2. 3. 4. 5. 6. 7. 8. 9. C B D A F E J G H

Problem 1-11
1. 2. 3. 4. 5. 6. 7. 8. 9. E D B C G H I F J

10. A

10. I

10. A

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Problem 1-13
1. Systematic and rational allocation as a matching process 2. Comparability or consistency 3. Monetary unit 4. Income recognition principle 5. Time period 6. Going concern and cost principle 7. Accounting entity 8. Materiality 9. Completeness or standard of adequate disclosure 10. Conservatism or prudence 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Problem 1-14
Materiality Going concern Income recognition principle Accounting entity Standard of adequate disclosure Comparability Matching principle Cost principle Reliability Time period

Problem 1-15
1. The cost of leasehold improvement should not be recorded as outright expense, but should be amortized as expense over the life of the improvement or life of the lease, whichever is shorter. This is in conformity with the systematic and rational allocation principle of expense recognition. 2. The fact that the customer has not been seen for a year is not a controlling factor to write off the account. If the account is doubtful of collection, an allowance should be set up. It is only when there is proof of uncollectibility that the account should be written off. 3. Advertising cost should be treated as outright expense, by reason of the uncertainty of the benefit that may be derived therefrom in the future, in conformity with “immediate recognition principle”. 4. The balance of the cash surrender value should not be charged to loss. In reality, this is conceived as a prospective receivable if and when the policy is canceled because of excessive premium in the early stage of policy. The CSV should be classified as noncurrent investment. 5. The cost of obsolete merchandise should not be included as part of inventory but charged to expense, as a conservative approach. 6. The excess payment represents goodwill which should not be amortized but subject to impairment. Conservatism dictates that goodwill should be recognized when paid for. 7. The depreciation is not dependent on the amount of profit generated during the year. Depreciation is an allocation of cost and therefore should be provided regardless of the level of earnings.

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8. An entry should be made to recognize the inventory fire loss, and such loss should be treated as component of income. 9. Revenues and expenses of the canteen should be separated from the revenues and cost of regular business operations in order to present fairly the financial position and performance of the regular operations. 10. The increase in value of land and building should not be taken up in the accounts. The use of revalued amount is permitted only when the revaluation is made by independent and expert appraiser. The expected sales price of P5,000,000 is not necessarily the revalued amount of the land and building. Moreover, increase in value is not an income until the asset is sold.

Problem 1-16
1. Accrual assumption 2. Going concern assumption 3. Asset recognition principle 4. Cost principle 5. Liability recognition principle 6. Income recognition principle 7. Expense recognition principle 8. Cause and effect association principle 9. Systematic and rational allocation principle 10. Immediate recognition principle

Problem 1-17
1. Monetary unit assumption 2. Cost principle 3. Materiality 4. Time period 5. Matching principle 6. Substance over form 7. Income recognition principle 8. Comparability or consistency 9. Conservatism or prudence 10. Adequate disclosure or completeness

Problem 1-18
1. The cost of the asset should be the amount of cash paid. No income should be recognized when an asset is purchased at an amount less than its market value. Revenue arises from the act of selling and not from the act of buying. 2. The entry should be reversed because the pending lawsuit is a mere contingency. The contingent loss is simply disclosed. To be recognized in accordance with conservatism, the contingent loss must be both probable and measurable. 3. The new car should be charged against the president and debited to receivable from officer, because the car is for personal use.

3.4 4. Purchased goodwill should be recorded as an asset. Under the new standard. 2. goodwill is not amortized anymore but on each balance sheet date it should be assessed for impairment. 5. 4. Problem 1-19 1. The entry is incorrect because no revenue shall be recognized until a sale has taken place. Accrual Going concern Accounting entity Monetary unit Time period . 6.

000.000 6.000 (1) LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Trade and other payables Note payable. plant and equipment Long-term investments Intangible asset Total noncurrent assets Total assets Note 800.000 150.000 8.000 950.000 4.000 500.350.000 800.500. 2008 ASSETS Current assets: Cash and cash equivalents Accounts receivable Inventories Prepaid expenses Total current assets Noncurrent assets: Property.000 5.000 1.000 Note 1 .500.000 8. P100 par Share premium Retained earnings Total shareholders’ equity Total liabilities and stockholders’ equity (4) 450.Prepaid expenses Office supplies Prepaid rent Total prepaid expenses 50.500.400.150.000 200.000 (2) (3) 4.850.350.000 200.000 450.000 900.000 2.000 500.5 CHAPTER 2 Problem 2-1 Easy Company Statement of Financial Position December 31.000 1. short-term debt Total current liabilities Noncurrent liabilities: Mortgage payable. long-term debt Total noncurrent liabilities Shareholders’ equity: Share capital.000 200. due in 5 years Note payable.000 650.000 6 .000 2.000.

plant and equipment Long-term investments Intangible assets Total noncurrent assets Total assets Note (1) (2) 420.000 300.000 5.000 620.000.000 250.640.000 2.000 (3) 20.Intangible asset Patent Note 4 .400.000 2.500. 2008 ASSETS Current assets: Cash Trading securities Trade and other receivables Inventories Prepaid expenses Total current assets Noncurrent assets: Property.Property.000) 4.000 (1.Trade and other payables Accounts payable Accrued expenses Total 350.940.000 Problem 2-2 Simple Company Statement of Financial Position December 31.Note 2 .200.000 6.000 800.560.000 9.600.000 1.250.000 450. plant and equipment Property.000 4.000 (4) (5) (6) 7 .000 100. plant and equipment Accumulated depreciation Net book value Note 3 .

120.000 600.500.000 1.000 Accum. 1.000.LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Trade and other payables Serial bonds payable .640. depr.000 Note (7) 620.000.000 ( 50.600.000 .000) 150.000 7.380.000 1.current portion Total current liabilities Noncurrent liabilities: Serial bonds payable .000 Land 1.000 500. plant and equipment Cost 1.Prepaid expenses Prepaid insurance Note 4 .250.000 2.000 40.000 880.540.000 Machinery 700.Inventories Finished goods Goods in process Raw materials 200.000 400.000 20.000.000 Tools 40.000 1.000.000 9.Property.000 5.000 Total 4.300.900.000 500.500.000 Factory supplies Total Note 3 .000 Book value 20.000 6.Trade and other receivables Accounts receivable Allowance for doubtful accounts Notes receivable Claim receivable Total Note 2 .400.000 620.000 500.500.000 50.remaining portion 2.000 2.000 Shareholders’ equity: Share capital Share premium Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity Note 1 .000 Building 2.000 4.

plant and equipment Long-term investments Intangible assets Other noncurrent assets Total noncurrent assets Total assets Note (1) 500.900.000 280.000 500.000 300.350.000 150.000 1. 2008 ASSETS Current assets: Cash and cash equivalents Trading securities Trade and other receivables Inventories Prepaid expenses Total current assets Noncurrent assets: Property.300.790.000 620.000 70.000 2.310.Trade and other payables Accounts payable Notes payable Income tax payable Advances from customers Accrued expenses Accrued interest on note payable Employees income tax payable Total 300.000 10.000 100.000 10.110.500.000 60.000 30.300.000 (2) (3) (4) (5) 5.Long-term investments Investment in bonds Plant expansion fund Total Note 6 .000 .000 1.8 Note 5 .000 100.000 2.000 Total Note 7 .000 20.000 640.000 Problem 2-3 Exemplar Company Statement of Financial Position December 31.000 1.Intangible assets Franchise Goodwill 100.000 12.000 200.000.000 3.

000 640.000.000. plant and equipment Cost value Land 1.000 Total 5.000 2.000 Book 400.300.000 (1.000 1.800.000 200.000 700.Trade and other receivables Accounts receivable Allowance for doubtful accounts Notes receivable Accrued interest on notes receivable Total Note 2 .000 1.000 Building 3.500.000) 250.500. 2.000 10.000 7.000.000) 5.Long-term investments Land held for speculation Sinking fund Preference share redemption fund 500.000 Note 3 .000 1.000 ( 20.200.900.000.000 Equipment 800.000 5.500.000.000 Accum.000.000.9 LIABILITIES AND SHAREHOLDERS’ EQUITY Note Current liabilities: Trade and other payables 1.000.000 Noncurrent liabilities: Bonds payable Premium on bonds payable Total noncurrent liabilities Shareholders’ equity: Share capital Reserves Retained earnings (deficit) Total shareholders’ equity Total liabilities and shareholders’ equity (6) 5.900.000 400.000 350.Property. depr.000.000 6.000 (7) (8) 7.000 12.000 Note 1 .000 .

310.000 Problem 2-4 Relax Company Statement of Financial Position December 31.Cash surrender value 60.000.000 50.000 30.000 300.000.000 100.000 150.000 10 Note 5 .000 5.000 7.000 2.000 120.Reserves Share premium – preference Share premium – ordinary Total 500.000 10.Intangible assets Computer software Lease rights Total 1. 2008 ASSETS Current assets: Cash Trade accounts receivable Inventories Note (1) 400.000 .Trade and other payables Accounts payable Notes payable Unearned rent income SSS payable Accrued salaries Dividends payable Withholding tax payable Total Note 7 – Share capital Preference share capital Ordinary share capital Total Note 8 .000 750.000 700.Other noncurrent assets Advances to officers.350.000 1.250.000 100.000.000 1.000 40.000 100.000 200.000 3.000 Total Note 4 . not collectible currently Long-term refundable deposit Total Note 6 .000 400.000.000.000 3.

000 1.000 3. value 500.000 800.000.000 100.000.000 2.000 400.Property.600.000 2. 2010 Total noncurrent liabilities Shareholders’ equity: Share capital Reserves Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity Note 1 .000. remaining position Bank loan payable.000 Equipment Total 5.000 3.000 2.300.000 Machinery 1. plant and equipment Investment in associate Intangible assets Total noncurrent assets Total assets 100.350.650.000.500.000 (5) Land Building 3.000 5.000 (2) (3) 5.100.900.000 1.250.000 500.000 8.000 1.000 400.600.750.000 7. Book depr.600.Trade accounts receivable Accounts receivable Allowance for doubtful accounts Net realizable value Note 2 .000 9.250.300.000 1.000 Accum.000 9. due June 30.500.000 11 LIABILITIES AND SHAREHOLDERS’ EQUITY Note Current liabilities: Trade and other payables Mortgage note payable-current portion Total current liabilities 1.000 ( 50.000) 750.000 (4) 1.000 1.000 Noncurrent liabilities: Mortgage note payable.000 300.800.000 3.Prepaid expenses Total current assets Noncurrent assets: Property.000. plant and equipment Cost 500.000 350.Intangible assets .400.200.250.000 Note 3 .000 5.

000 2.200.050.000 700.000 1.000 (3) (4) 5. plant and equipment Investment property Intangible asset Total noncurrent assets Total assets Note (1) (2) 700.400.570.000 12 300.000 2.000 750.Trademark Secret processes and formulas Total Note 4 .000 LIABILITIES AND EQUITY Note Current liabilities: Trade and other payables Bonds payable due June 30.000 200.000 (5) 2.500.Reserves Additional paid in capital Retained earnings appropriated for plant expansion Retained earnings appropriated for contingencies 100.000 6.000 Total 150.000 1.000 100.830.000 4.000.Trade and other payables Notes payable Accounts payable Income tax payable Accrued expenses Estimated liability for damages Total Note 5 .000.000 1.000.000 Problem 2-5 Summa Company Statement of Financial Position December 31.000 370.000 11.000 350. 2008 ASSETS Current assets: Cash Bond sinking fund Trade and other receivables Inventory Prepaid expenses Total current assets Noncurrent assets: Property.000 60.350.000 350.000 .000 830. 2009 Total current liabilities 4.000 1.000 140.000 50.400.050.

400.Property.000 3.Cash Cash on hand Cash in bank Note 2 .000 2.000 650.Noncurrent liability: Deferred tax liability Equity: Share capital Reserves Retained earnings Total equity Total liabilities and equity (6) (7) 3.000 Book value 1.000 6.000. 2.000 650.000.400.000 .Intangible asset Patent Note 5 .000 ( 50.000 830.700.000.000 30.000 Accum.500.000 850.000 900.000 50.000 5.000 650. plant and equipment Cost Land Building Furniture and equipment 1.000 8.000 3.500.000 Note 4 .900.000.400.050.500. depr.000 11.000 13 Note 1 .000 370.Trade and other receivables Accounts receivable Allowance for doubtful accounts Notes receivable Accrued interest receivable Total Note 3 .000 Total 5.000 2.500.000 150.000) 200.000 1.000 700.500.000 500.Trade and other payables Accounts payable Notes payable Accrued taxes Other accrued liabilities Total Note 6 – Share capital 1.000 2.000 50.700.

000) 7.000 ( 150.000 shares.000 500.000.000 (5.000.000 300.Authorized share capital.000 1. 10.700.000 ( 500.000) 2.000 7.000.Reserves Share premium Retained earnings appropriated for contingencies 200.000) 3.000 100.000 shares Subscription receivable Paid in capital Note 7 .250. P100 par 5.000 5.000) .000 ( 250.000.000 3.500.000 500.000 400.000 ( 140. 50.000 800.850.000.100.250.000 Unissued share capital Issued share capital Subscribed share capital.700.000 Total (2.000 Note 2 – Cost of sales Inventory.000.000) 1. 2008 Note Net sales revenue Cost of sales Gross income Other income Total income Expenses: Selling expenses Administrative expenses Other expenses Income before tax Income tax Net income (1) (2) (3) (4) (5) (6) 950.000 Note 1 – Net sales revenue Gross sales Sales returns and allowances Sales discounts Net sales revenue 7.000 1.000 3.000) ( 10.700.000 14 Problem 2-6 (Functional method) Karla Company Income Statement Year ended December 31.000 1.000) 500.850. January 1 Purchases Freight in Purchase returns and allowances 1.000.

December 31 Cost of sales ( 100.000 Note 3 – Other income Rental income Dividend revenue Total other income 250.000) 5.000 (1.000 125.000 100.700.000 650.500.000 Note 6 – Other expenses Loss on sale of equipment Loss on sale of investment Total other expenses 50.000) 7.Purchase discounts Net purchases Goods available for sale Inventory.000 175.000 .000 Note 5 – Administrative expenses Officers’ salaries Depreciation – office equipment Total administrative expenses 500.000 800.000 15 Note 4 – Selling expenses Freight out Salesmen’s commission Depreciation – store equipment Total selling expenses 950.000 50.000 6.000 150.000) 5.000 8.100.000 400. 2008 Net sales revenue Other income Total Expenses: Increase in inventory Note (1) (2) (3) ( 500.000 400.500.000 Natural method Karla Company Income Statement Year ended December 31.000.000 300.500.

Net purchases Freight out Salesmen’s commission Depreciation Officers’ salaries Other expenses 6.000 100.850.250.000 175.000) 1.000 150.000 1.000 425.000 Note 5 – Depreciation Depreciation – store equipment Depreciation – office equipment 125.000.000.000 650.000 Note 2 – Other income Rental income Dividend revenue Total other income 250.000) 5.000 Income before tax Income tax Net income (4) (5) (6) 5.000 ( 140.000 Note 3 – Increase in inventory Inventory.000 500.000 ( 150.500.000) ( 10.500.000 16 Note 1 – Net sales revenue Gross sales Sales returns and allowances Sales discounts Net sales revenue 7.000 1.000 300.000 ( 250.000 . December 31 Inventory.000 500.250.000) ( 100.000 400.000 500.500. January 1 Increase in inventory 1.000) 7.000 Note 4 – Net purchases Purchases Freight in Purchase returns and allowances Purchase discounts Net purchases 5.850.700.

2008 Note Net sales revenue (1) 7. 2008 Raw materials – January 1 Purchases Raw materials available for use Less: Raw materials – December 31 280.000 250.000 3.000 Cost of sales method Masay Company Income Statement Year ended December 31.000 240.000 2.200.000 4.450.000 Raw materials used Direct labor Factory overhead: Indirect labor Superintendence Light.000 50.990.000 100.000 .000 950.000 50.000 120.920.000 320.000 3.000 5.000 Note 6 – Other expenses Loss on sale of equipment Loss on sale of investment Total 50.000 110.000 210.000 Total manufacturing cost Goods in process – January 1 Total Cost of goods in process Less: Goods in process – December 31 Cost of goods manufactured 200.000 5.060. heat and power Rent – factory building Repair and maintenance – machinery Factory supplies used Depreciation – machinery 1.000 60.000 170.Total 425.000 17 Problem 2-7 Masay Company Statement of Cost of Goods Manufactured Year Ended December 31.230.000.120.

000 820.540.000 300.000 5.Cost of goods sold (5.000 10.000 200.000) 5.500.000 830.000 70.000) 500.000 210.000 160.000 ( 320.000 2.000 2.120.000 ( 50.000 Income before tax Income tax expense Net income (2) (3) (4) (5) (6) 830.000 .000 5.000 100.120.000) 7.000 Note 2 – Cost of goods sold Finished goods – January 1 Cost of goods manufactured Goods available for sale Finished goods – December 31 Cost of goods sold 360.000 Note 4 – Selling expenses Sales salaries Advertising Depreciation – store equipment Delivery expenses Total 400.000 210.330.060.000 590.450.000 ( 300.420.000 Note 3 – Other income Gain from expropriation Interest income Gain on sale of equipment 100.000) Gross income Other income Total income Expenses: Selling expenses Administrative expenses Other expense 1.000 18 Note 1 – Net sales revenue Sales Sales returns and allowances Net sales revenue 7.720.

000 ( _320.000 (3) (4) 130.000 950.Note 5 – Administrative expenses Office salaries 150.000 50.000 (5) 1.000 19 Nature of expense method Masay Company Income Statement Year Ended December 31.000 160. 2008 Net sales revenue Other income Total income Expenses: Decrease in finished goods and goods in process Raw materials used Direct labor Factory overhead Salaries Advertising Depreciation Delivery expenses Accounting and legal fees Office expenses Other expense Income before tax Income tax expense Net income Note (1) (2) 7.000 210.000) 500.450.000 6.000 150.000 200.000 150.000 Note 1 – Net sales revenue Sales Sales returns and allowances ( 7.000 (7) 110.000 590.000 Note 6 – Other expense Earthquake loss 300.120.000 2.840.000 (8) 300.000 (6) 550.500.920.000 Depreciation – office equipment Accounting and legal fees Office expenses Total 40.000) .000 7.000 820.000 250.000 250.660.

000 2.450.000 600.Net sales revenue 7.000 Note 6 – Salaries Sales salaries Office salaries 150.000 280.000 40. heat and power Rent – factory building Repair and maintenance – machinery Factory supplies used 110.000 1.000 3.000 210.000 100.000 Decrease 60.000 December 31 300.120.000 Note 2 – Other income Gain from expropriation Interest income Gain on sale of equipment 100.000 550.000 120.920.000 110.000 3.000 January 1 360.000 70.000 Note 7 – Depreciation Depreciation – store equipment Depreciation – office equipment Total 70.000 210.000 60.000 170.000 Note 3 – Decrease in finished goods and goods in process Finished goods Goods in process Total 20 Note 4 – Raw materials used Raw materials Purchases Raw materials Raw materials Raw materials – January 1 available for use – December 31 used 200.000.000 470.000 10.000 240.000 Depreciation – machinery Total 250.000 Total 400.000 50.000 .000 320.000 130.200.000 Note 5 – Factory overhead Indirect labor Superintendence Light.

000 (1.000 500.000 Note 4 – Administrative expenses Officers’ salaries Depreciation – building Office supplies 400.000 340.000) 5.000 .000 80.000 ( 100.750.000 Note 3 – Selling expenses Depreciation – store equipment Store supplies Sales salaries Total 110.000 1.000 Note 2 – Cost of goods sold Beginning inventory Purchases Transportation in Purchase discounts Goods available for sale Ending inventory Cost of goods sold 1.000 21 Note 1 – Net sales revenue Sales Sales returns and allowances Net sales revenue 9.300.000 580.870.000 (5.000) 8.870.000) 5.800.000 5.500.000 120.000 8.000 60.000 ( 200. 2008 Net sales revenue Cost of goods sold Gross income Expenses: Selling expenses Administrative expenses Other expense Income before tax Income tax expense Net income Note (1) (2) (3) (4) (5) 690.900.070.610.970.000 1.900.000 Problem 2-8 Youth Company Income Statement Year ended December 31.000 150.400.000 690.000 ( 360.000.000) 1.000) 2.Note 8 – Other expense Earthquake loss 300.360.000 7.

000 50.000 4.000 220.000 4.100.000) 1.680.600.580. light and power Total manufacturing cost Decrease in goods in process Cost of goods manufactured Christian Company Income Statement Year Ended December 31.750.000.000 .000 1.480.000 130.000 (5. 2008 Purchases Freight in Total Increase in raw materials Raw materials used Direct labor Factory overhead: Indirect labor Depreciation – machinery Factory taxes Factory supplies expense Factory superintendence Factory maintenance Factory heat.Total 580.000) 1.000 ( 100.000 150.810.000 90.000 480.000 80.000 600.900.000 1.000 Note 5 – Other expense Uninsured flood loss 340.000 120.000 1.000 22 Problem 2-9 Christian Company Statement of Cost of Goods Manufactured Year Ended December 31. 2008 Note Sales revenue Cost of goods sold (1) 8.

Gross income Expenses: Selling expenses Administrative expenses Income before tax Income tax expense Net income

2,900,000 (2) (3) 800,000 930,000 1,730,000 1,170,000 ( 170,000) 1,000,000

Note 1 – Cost of goods sold
Cost of goods manufactured Decrease in finished goods Cost of goods sold 4,900,000 200,000 5,100,000

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Note 2 – Selling expenses
Sales salaries Advertising Delivery expense Total 520,000 120,000 160,000 800,000

Note 3 – Administrative expenses
Office supplies expense Office salaries 800,000 Doubtful accounts Total 30,000 100,000 930,000

Problem 2-10
Ronald Company Statement of Cost of Goods Manufactured Year Ended December 31, 2008 Materials – January 1 Purchases Freight on purchases Purchase discounts Materials available for use Less: Materials – December 31 Materials used Direct labor Factory overhead: 1,120,000 1,600,000 220,000 ( 20,000) 1,800,000 2,920,000 1,560,000 1,360,000 2,000,000

Heat, light and power Repairs and maintenance Indirect labor Other factory overhead Factory supplies used (300,000 + 660,000 – 540,000) Depreciation – factory building Total manufacturing cost Goods in process – January 1 Total cost of goods in process Less: Goods in process – December 31 Cost of goods manufactured

600,000 100,000 360,000 340,000 420,000 280,000

2,100,000 5,460,000 360,000 5,820,000 320,000 5,500,000

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Ronald Company Income Statement Year Ended December 31, 2008 Note Net sales revenue Cost of goods sold Gross income Other income Total income Expenses: Selling expenses Administrative expenses Income before tax Income tax expense Net income (1) (2) (3) 6,980,000 (5,400,000) 1,580,000 160,000 1,740,000 200,000 340,000 540,000 1,200,000 ( 200,000) 1,000,000

Note 1 – Net sales revenue
Sales Sales returns and allowances Net sales revenue 7,120,000 ( 140,000) 6,980,000

Note 2 – Cost of goods sold
Finished goods – January 1 420,000

Cost of goods manufactured Goods available for sale Finished goods – December 31 Cost of goods sold

5,500,000 5,920,000 ( 520,000) 5,400,000

Note 3 – Other income
Interest revenue 160,000

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Problem 2-11
Reliable Company Statement of Retained Earnings Year Ended December 31, 2008 Retained earnings – January 1 Prior period error – overdepreciation in 2007 Change in accounting policy from FIFO to weighted average method – credit adjustment Corrected beginning balance Net income Decrease in appropriation for treasury share Total Cash dividends paid to shareholders Current appropriation for contingencies Retained earnings – December 31 200,000 100,000 150,000 450,000 1,300,000 200,000 1,950,000 ( 500,000) ( 100,000) 1,350,000

Problem 2-12
Net income Loss from fire Goodwill impairment Loss on sale of equipment Gain on retirement of bonds payable Gain on life insurance settlement Adjusted net income 3,000,000 ( 50,000) ( 250,000) ( 200,000) 100,000 450,000 3,050,000

Gondola Company Statement of Retained Earnings Year ended December 31, 2008

Undeposited collections Cash in bank – PCIB Cash in bank – PCIB (for payroll) 150. 8. 2. 10. Accounts receivable (15.600.000 ( 700. 7.000 450.000 Cash in bank .000 30. 2.000) (1.000 b.000 100.810.000 100. 4. D D B D B Problem 3-3 a. 9.000 2. 9.000 60. 3.000 + 25.500.000 2. 3. 7.000 690.PCIB (savings deposit) Money market instrument – 90 days Total cash and cash equivalents 2.000 CHAPTER 3 Problem 3-1 1.050.000) 400. 8.000 500. 4.000 .000 3.000.000) Cash in foreign bank Advances to officers Sinking fund cash Trading securities Bank overdraft Cash 40. 5.000 50.000) ( 350. D B C C A 1.000 120.000 ( 500. 5. 10. D A A C B 6.000. D D C A C 26 Problem 3-2 6.Balance – January 1 Compensation of prior period not accrued Correction of prior period error – credit Adjusted beginning balance Net income – adjusted Stock dividend Loss on retirement of preference share Appropriated for treasury share Balance – December 31 2.000) 3.500.

000 50.000) Money market placement Cash in closed bank Advances to employee Pension fund Cash 100. Accounts receivable (20.000 20.000 1. Cash Accounts payable c.000 50. Cash Accounts payable b. Cash on hand Petty cash fund 500.000 .000 1.000 110.000 100.000) 1.960.000 500.000 400.000 1.590.Problem 3-4 Adjusting entries on December 31.500.000 200.000 15.000.000 1.000 ( 200.000 ( 2. 2008 a.000 + 30. Accounts receivable Cash d.000) 400.000 (100.000 1. Petty cash fund Unreplenished petty cash expenses Postdated employee check Adjusted petty cash 3.000 50.000 1.000 + 60. Security Bank current account Postdated company check delivered Adjusted balance 4.000 30.000 Problem 3-5 1.000 10.450.000 50.000 27 Cash and cash equivalents: Demand deposit (see below) Time deposit – 30 days Petty cash fund Total Demand deposit per book Undelivered check Postdated check delivered Window dressing of collection Adjusted balance 1.000 200.000) 15.450.200.000. Cash on hand Postdated check Adjusted cash on hand 2.000 400.000 100.000) ( 3.000 200.

000 Problem 3-7 1.000 250.000 100.000) Accounts payable 100.000. 2 BSP Treasury bill – 60 days 3. Accounts receivable (40.000 3.000 (40.000 15.000 1. Currency and coins Check drawn payable to petty cashier Adjusted petty cash 3.000) 400.000 200.000 *The BPI Time deposit of P2. 1 PNB current account No.000 100. Accounts receivable Cash on hand Expenses Receivable from employee Petty cash fund Security Bank current account Accounts payable 100.000 2. Cash in bank Undelivered company check Postdated company check delivered Adjusted cash in bank 4.000 5.000. Cash on hand NSF customer check 200.000) 4.000 28 Problem 3-6 1.000) Cash on hand Advances to employees Caush short or over Petty cash fund Cash in bank (100.000 200.000) .000 2.000 is shown as noncurrent investment because it 100.000 ( 50. 5.000 2.965. Cash on hand NSF customer check Postdated customer check Adjusted on hand 2.250.000 150.000 1.000 400.000 14.000 500.000.000 3.Security Bank current account PNB current account No.000 + 150.000 Total cash and cash equivalents is restricted for land acquisition.000 250.000 5.000 ( 35.000 + 60.000 2.000) (60.200.

Petty cash fund Cash in bank 10.000 14.000 5. No entry 10.000 2.000 . Petty cash fund Postage Supplies 5.Postdated customer check Adjusted cash on hand 2.000.000 11.000 14.000 5.225.000 5.500 1.000 1. Accounts receivable Cash on hand Receivable from officer Expenses Cash short or over Petty cash Philippine Bank current Accounts payable City Bank current Bank overdraft 50.000 5.000 70.000 15.500 Imprest Fund System 1.000 150.000 50. Cash on hand Petty cash fund Philippine Bank current Manila Bank current Asia Bank time deposit Total cash and cash equivalent ( 15.000.000 29 5.000 1.000 5.000 70.000.000 4.000 10. Philippine Bank current account Undelivered company check Postdated company check delivered Adjusted balance 4.000 12.500 5.000 10.000 3.000 1.000 25.000 100.500 5.000 Problem 3-8 Fluctuating Fund System 1.000 100. Petty cash fund Cash in bank 2. Postage Supplies Transportation Miscellaneous expense Petty cash fund 3.070.200 800 9. Petty cash fund Cash in bank 2.070.000 45.000 2. Petty cash fund: Currency and coins 3.000) 150.

000 4.500 1.000 500 1.000 9.000 Imprest Fund System 5.000 Imprest Fund System May 2 Petty cash fund Cash in bank 10. Transportation Miscellaneous expense Cash in bank 10.Transportation 1.500 8.000 3.500 8. Petty cash fund Cash in bank 6. No entry Imprest Fund System 1.000 4.500 Supplies 3.000 Problem 3-10 Fluctuating Fund System May 2 Petty cash fund Cash in bank 29 Postage Supplies Transportation Miscellaneous expense Petty cash fund 10. Petty cash fund Cash in bank 2.000 1.500 Miscellaneous expense Petty cash fund Petty cash fund Cash in bank 8.000 1.000 19. Postage Supplies Petty cash fund 3.000 10.000 2.500 2. No entry 10.000 3.000 10.000 19.000 1. No entry 1.000 4.000 30 Fluctuating Fund System 4.200 Miscellaneous expense 800 Cash in bank 14.000 8.500 4.000 .000 10. Petty cash fund Postage Supplies Transportation Cash in bank 10.000 10. Petty cash fund Cash in bank 1.000 9.000 2.000 3.000 9.000 2. Supplies Accounts payable Petty cash fund 5.000 3.000 Cash in bank 6. Postage Supplies Transportation Petty cash fund 7.000 1. Postage 1.000 Transportation 1. No entry 7.000 3.000 19.000 Problem 3-9 Fluctuating Fund System 1.500 3.000 Miscellaneous expense 500 Accounts payable 3.000 9.000 3.000 29 Postage Supplies Transportation 2. Petty cash fund Cash in bank 2.

000 Cash in bank 12.000 1.000 June 30 Supplies Accounts payable Transportation 4.June 30 Supplies Accounts payable Transportation Petty cash fund July 1 Petty cash fund Supplies Postage Transportation 2.500 Supplies 3.000 10.000 Dec.000 July 15 Supplies 1.500 Miscellaneous expense 500 Miscellaneous expense 500 Petty cash fund 3.000 17.000 2.500 Postage 500 Postage 1.000 To reverse the adjustment made on June 30.000 1.000 10.000 4. 2 30 Petty cash fund Cash in bank Postage Supplies Petty cash fund Cash in bank Postage Supplies Special deposit Petty cash fund Petty cash fund Postage Supplies Special deposit No entry Postage Supplies Accounts payable Cash short or over Cash in bank 5.000 9.000 9.000 2.000 Cash in bank 12.000 3.000 31 Problem 3-11 2008 Nov.000 1. 31 2009 Jan.000 1.000 2.000 3.000 4.000 6.000 4.000 2.000 1.000 10.000 7. 15 Petty cash fund 5.000 Petty cash fund 12.000 5.500 Transportation 500 Transportation 1.000 1. 1 2 31 Problem 3-12 Requirement 1 2008 .000 Petty cash fund 4.000 1.000 2.000 19.

000 1.500.200 6.700 Requirement 2 Petty cash 10. 1 Petty cash fund Receivable from employee Selling expenses Transportation 10.300 Problem 3-13 Answer B Problem 3-15 Answer A Petty cash fund Undeposited collections Cash in bank Total 50.000 Administrative expenses 2.500 + 500) 2.000.000 700.000 1.000 40.000 10.000 4.000 Problem 3-14 Answer C Problem 3-16 Answer A Payroll account Value added tax account Traveler’s check Money order Petty cash fund Total 2.000 3.650.000 Less: Petty cash expenses from December 21.000 2.500.000 2.000 4.500 500 32 2009 Jan. 1 Petty cash fund Cash in bank 20 Selling expenses Miscellaneous expenses Equipment Cash in bank 31 Receivable from employee Selling expenses Transportation Petty cash fund 2009 Jan. 15 No entry 31 Selling expenses Administrative expenses Transportation Purchases Cash in bank 2.000 Problem 3-17 Answer C Checking account #101 1.000 2.000 2.200 6.500 500 4.000 1. 2008 to January 31.000 1.540.500 1.000 .000) 1.000 2.Dec.750.000 Transportation (500 + 1.500 Purchases 1.000 1. 2009: Selling expenses (1.700 Petty cash before replenishment 3.100.000 5.000 2.000 300.000 9.

000.Checking account #201 Time deposit account 90-day Treasury bill Total cash and cash equivalent ( 100.000) 1.000 600.000 + 200.000) 250.000 12.000.000 1.000.940.000 1.000.000 7.500.000 2.000 Problem 3-21 Answer A Cash on hand Cash in bank Petty cash Saving deposit Total deposit 2.000 2.000 Problem 3-19 Answer B Cash balance per book Credit adjustment Adjusted cash balance 6.000 50.000 6.000.000) 4.000.000 500.000 Problem 3-18 Cash in First Bank Change fund Petty cash fund Total Answer B 5.400.000.000 Problem 3-20 Answer A Checkbook balance Postdated customer check NSF check Undelivered company check Adjusted balance 8.400.500.000 7.000 33 Note receivable Accounts receivable (400.000.000 (1.000) Cash 1.000 Problem 3-26 Answer B Currencies Coins 4.000 5.400.000.600.000 3.000 .000 40.065.000 1.600.000.000) ( 500.000 (2.000.000 15.000 Problem 3-22 Answer B Answer A Problem 3-25 Answer A Cash on hand and in bank Time deposit Saving deposit Total Problem 3-23 Answer A Problem 3-24 5.

7. 2. 15. 102 105 107 Adjusted bank balance Adjusting entries: 1.000 188.000 11.000 Total 2.000 30.000 93.000 95. C D C A B 11. 10.000 65. 8.000 Problem 3-28 Answer C Total petty cash Currency and coins Amount of replenishment 10.000 50.000 ( 3. 12. 3. Cash in bank 30. 13.Accommodation check Total 6.000 . D A B C C 6.000 108.000 15.000 Total Less: Outstanding checks: No.000 30.000) 7.000 93. 4. C B A C C Problem 4-2 Balance per book Add: CM for note collected Total Less: DM for service charge Adjusted book balance Balance per bank Add: Deposit in transit 80. 9.000 2.000 34 CHAPTER 4 Problem 4-1 1. 5.000 95.000 6. 14.000 Problem 3-27 Answer C Coins and currency Replenishment check 4.

000 Total Less: Outstanding checks: No.000 2.840. Bank service charge Accounts receivable Accounts payable Cash in bank 45.000 8.000 30.000 50.000 3.000 10.000 203. 770 775 777 90. Cash in bank Bank service charge Note receivable 2.000 113.000 40.000 42.000 2. Bank service charge Cash in bank Problem 4-3 Balance per book Add: CM for note collected Total Less: DM for service charge NSF check Book error (52.000 20.Note receivable 30.000 .000 Adjusted bank balance Adjusting entries: 1.000 Problem 4-4 Balance per book Add: CM for note collected Total Less: DM for service charge 2.000 110.000 5.000 60.000 2.000 Adjusted book balance 5.000 270.000 135.000) 42.000 45.000 5.000 27.000 10.000 113.000 35 Balance per bank Add: Deposit in transit Erroneous bank debit 68.000 5.000 27.110.000 – 25.000 155.

000 120. Cash in bank Bank service charge Note receivable Interest income 2. 116 122 124 125 Adjusted bank balance Adjusting entries: 1.105.000 3.000 6.000 200.715.000 3.000 7.000 50.600.000 50.000 610.000 5.000 6.Adjusted book balance Balance per bank Add: Deposit in transit Total Less: Outstanding checks: No.450.150.450.000 30.600.000 500.000 Adjusted book balance Balance per bank Deposit in transit Total Less: Outstanding checks Adjusted bank balance Adjusting entries: 1.000 2.000 7.000.000 .000 4.150.000 10.000 36 Problem 4-5 Balance per book Add: Note collected by bank Total Less: Bank service charge NSF check 550.000 850.150.000 2.000 3.000 180. Bank service charge Cash in bank 270.000 5.000 250.000 450.000 60.000 3.000 5. Cash in bank Bank service charge Note receivable Interest income 2.265.000.000 3.000.000 250.105.

Bank service charge Accounts receivable Cash in bank Problem 4-6 Book balance Add: Collection of note Interest on note Book error on check no.000 245.000 220.000 2.000 37 Adjusting entries: 1.000 45.000 220.000 3.650. Bank service charge Light and water Accounts receivable Cash in bank Problem 4-7 a.000 1. Cash in bank Note receivable Interest income Accounts payable 2.000 1.000 245.000 .500.100.000 60.100. Balance per book – April 30 Credit memo for note collected Outstanding checks: No.750.000 150.000 6.630.405.000 5. 1331 1.630.000 150.100.000 40.630.380.000 5.000 1.000 470.000 4.695.000 2.000 45.000 Total Less: Bank service charge Payment for light and water NSF check 470.500.000 750.000 Adjusted book balance Bank balance Add: Deposit in transit Total Less: Bank error Outstanding checks 2.000 Adjusted bank balance 50.000 3.000 5.000 550.2.695.000 2. 175 2.000 500.

000 Balance per book b.1332 1334 1335 140.500.000 Total Less: Checks outstanding Overstatement of creditor’s check Understatement of customer’s check 1.130. Accounts receivable Bank service charge Accounts payable 450.230.000 180.000 Balance per bank – April 30 b. Cash in bank Note receivable 2.000 5.000 25.300.000) 1.000 3.000 50.000 4.000 1.000 ( 5.000 60.000 38 Problem 4-8 a.000 60. Adjusting entries: 1.000 60.000 270.000 Total Less: Bank service charge NSF check Undeposited collections 300.000.000 50. Cash in bank Accounts payable Accounts receivable 2.000 1.000 .100.000 180. Adjusting entries: 1.000 5.000 5.000 3.000 270. Balance per book – April 30 CM for note collected Bank service charge NSF check Adjusted cash in bank 30.000 10.000 5.000 550.000 25.000 650.000 125.100.000 60. Bank service charge Accounts receivable Cash in bank c.000) ( 25. Balance per bank Add: Undeposited collections NSF check DM for safety deposit Unrecorded check 730.000 270.000 30.130.000 1.000 125.

000 435.000/94%) 1.000 4.000 5.000 940.000 x 1/6) Prepaid interest expense Loan payable (940.000 50.015.700.000 3.000 Problem 4-9 Balance per book Add: Proceeds of bank loan Note collected by bank Total Less: Service charge Customer’s check charged back 60.000 400.000 10.000 5.000 3.000 300.075.000 4.000 475.000 270.000 4.000 40. Cash in bank Bank service charge Interest expense (60.375.000 Note receivable Interest income 1.000 50.015.000 Adjusted book balance 2.000 180.130.000 39 Balance per bank Add: Deposit in transit Incorrect deposit Erroneous bank charge Erroneous debit memo 915.915.000 3.000 Total Less: Outstanding checks Erroneous bank credit Adjusted bank balance Adjusting entries: 1.400.Cash in bank c.000 150. Balance per book Overstatement of creditor’s check Understatement of customer’s check Total Less: NSF check DM for safety box Unrecorded check Adjusted book balance 180.580.000 900.000 .375.000 180.000 90.000 50.000 4.000 200.000 125.000 1.000 10.000 600.000.000.000 4.

000 500.000.000 50.000 60.000) Accounts receivable Loan payable Notes receivable Interest income 10.000 5.000 6.000 Total Less: Outstanding checks (750.000 300.000 50.000 500.000 880.000 5.000 55.120.000 – 20.000) 700.000 .000 20.000 5.000 544.000 50.055.000 190.2.000 674.000 500.516.000 5.000 40 Problem 4-11 Balance per book Add: Proceeds of bank loan Total Less: Understatement of check in payment of account (200.000 3.000 50.000 400.000 3.700.000 3.000 2.000 5.000.000 + 15.000 3.000 – 50.000 180.500.000 435. Bank service charge Accounts receivable Cash in bank Problem 4-10 Balance per book (squeeze) Add: Proceeds of bank loan Proceeds of note collected Total Less: Bank service charge NSF check Adjusted book balance Balance per bank (squeeze) Add: Deposit in transit Bank error (200.000.000) 630.000.070.326.000 130.000 150.000 Adjusted bank balance Adjusting entries: Cash in bank Bank service charge (5.000 935.000 180.000 450.000 516.000 10.326.000 – 20.000 50.000 3.000) Petty cash fund Adjusted book balance Balance per bank Add: Undeposited collections Erroneous bank charge Deposit omitted from bank statement Total Less: Erroneous bank credit Outstanding checks Adjusted bank balance Adjusting entries: 5.

475.000 1. Bank service charge Accounts receivable Cash in bank 3.000 3.000/86%) Problem 4-12 Balance per book Add: Overstatement of check number 765 Check number 555 stopped for payment 30.000 10.Cash in bank Interest expense (84.000 10.000 41 Adjusting entries: 1.000 55. Receivable from cashier Accounts receivable Sales discounts 30.000 25.240.200.000 180.000 70.000 2.330.000 275.000 1.000 10.000 Adjusted bank balance 326.000 1.000 40.300. Bank reconciliation – June 30 .000 90.000 20.000 14.000 1.000 65.000 Problem 4-13 a.000 600.000 50.000 85.000 1.000 5.000 Adjusted book balance Balance per bank Add: Undeposited collections Total Less: Outstanding checks: Number 761 762 763 764 765 235.000 30.000 40.240.000 5.000 85.000 1.000 1.000 20.000 x 2/12) Prepaid interest expense Accounts payable Petty cash fund Supplies Transportation Postage Loan payable (516.000 Total Less: Service charge NSF check 90. Cash in bank Accounts payable Miscellaneous income 2.000 4.

650.000 4.000 1.000 1.000 1.000 854.000 1.196.000 1.000 500.000 1.000 2.000 1.000 100.000.899.000.000 1.000 104.000 1.700. Adjusting entries.000 1.000 .000 1.900.000.000 4. Cash in bank Bank loan payable 500.000 500.000 500.000 Deposit in transit – July 31 Computation of outstanding checks – July 31 400.000 1.000 400.000 3.Book balance Add: Credit memo for note collected Total Less: NSF check Service charge Adjusted book balance Bank balance Add: Deposit in transit Total Less: Outstanding checks Adjusted bank balance Bank reconciliation – July 31 Book balance Add: Credit memo for bank loan Total Less: Service charge Adjusted book balance Bank balance Add: Deposit in transit Total Less: Outstanding checks Adjusted bank balance b.100.000 1.899.500.000 300.000 300.100. Bank service charge Cash in bank Computation of deposit in transit – July 31 Deposit in transit – June 30 Add: Deposits during July: Book debits Less: June credit memo for note collected Total Less: Deposits credited by bank during July: Bank credits Less: July credit memo for bank loan 3.000 3. July 31 1.000 1.000 42 2.100.000 1.000 4.750.851.650.300.000 2.400.000 3.050.196.

000 100.Outstanding checks.000 Total Less: Checks paid by bank during July: Bank debits Less: July service charge Outstanding checks.000 190. Adjusting entries – November 30 1. Reconciliation – October 31 Adjusted book balance Bank balance Add: Deposit in transit Total Less: Outstanding checks Adjusted bank balance Reconciliation – November 30 Book balance Add: Understatement of collection from customer Total Less: Understatement of check disbursement Adjusted book balance 1.000 820.000 Problem 4-14 a.000 4.500.000 390.000 600.000 90.000 500.000 930. Accounts payable Cash in bank 90.499.000 600.000 400.000 1.000 100.000 300.000 400.090. July 31 854.000 820. June 30 Add: Checks drawn by company during July: Book credits Less: June debit memos for NSF check Service charge 3.000 270. Cash in bank Accounts receivable 2.000 1.000 .000 43 Bank balance Add: Deposit in transit Check of Susan Company charged in error Total Less: Outstanding checks Deposit of Susan Company erroneously credited Adjusted bank balance b.000 1.000 700.851.000 270.600.000.000 3.000 2.350.000 200.000 4.000 100.320.000 104.000 1.000 2.000 270.000 90.496.

290.000 2.000 Deposit in transit – November 30 300.950.770.000 ( 200.Computation of outstanding checks – October 31 Outstanding checks – October 31 (squeeze) Add: Checks issued by depositor: Book disbursements Understatement of check paid Total Less: Checks paid by bank: Bank disbursements Check of Susan Company charged in error 1.970.590.200.000 2.170.000 1.000 270.000 950.970.000 1.000 Less: Outstanding checks Adjusted bank balance Reconciliation on July 31 Book balance Add: Note collected by bank Total 1.000 2.220.000) 400.000 1.500.000 1.000) 190.700.000 90.720.000 1.800.000 .000 Total Less: Deposits credited by bank during November: Bank receipts Deposit of Susan Company erroneously credited 2.070.000 Problem 4-15 a.270.400.000 2.000 1. Reconciliation on July 1 Adjusted book balance Bank balance Add: Deposit in transit Total 2.270.000 2.500.000 1.000 ( 100.000 100.000 Outstanding checks – November 30 Computation of deposit in transit – November 30 Deposit in transit – October 31 Add: Cash receipts deposited during November: Book receipts Understatement of collection from customer 2.000 500.000 2.000 Adjusted book balance Bank balance 470.000 Less: Bank service charge 20.

000 50.500.000 500.150.000 10.000 Less: Outstanding checks: Check # 107 108 Adjusted bank balance b.000 340.000 5. Cash in bank Note receivable 2.000 1.000 Balance per bank – November 30 600.000 1.100.000 Adjusted book balance 500.000 4.000 Total Less: Outstanding checks Adjusted bank balance 720.000 20.000 Problem 4-16 Balance per book – November 30 Less: Service charge NSF check Customer’s note erroneously recorded as cash receipt 160.000 650.950.000 1.000 100.000 400.000 400.Add: Deposit in transit Total 3.500.000 340.150.150.000 Add: Deposit in transit 120.000 380.000 .000 3.900.000 3.200.000 20.000 950.400.000 4.000 500.000. Bank service charge Cash in bank Computation of deposit in transit – July 1 Deposit in transit – July 1 (squeeze) Cash receipts per book Total Less: Deposits credited by bank Deposit in transit – July 31 Computation of outstanding checks – July 1 Outstanding checks – July 1 (squeeze) Checks drawn by depositor Total Less: Checks paid by bank Outstanding checks – July 31 1.500.000 1. Adjusting entries on July 31 1.000 3.

000) 50.000 April 100.000) (100.000 ( ( 940.000 ( 8.000 160.000 Disbursements 720.000 330.000) 565.000 500.000) ( 20.000 Cash receipts deposited: Book debits October collections recorded in November Customer’s note recorded as cash receipt Total Less: Deposits credited by bank: Bank credits Correction of bank error Deposit in transit – November 30 Outstanding checks – October 31 125.000) (220.000) 530.000 ( 60.000 372.000 ( 2.000) 1.000 ( 8.320.000 (372.195.000 Checks issued by depositor: Book credits October bank service charge Total Checks paid by bank: Bank debits November bank service charge November NSF check Outstanding checks – November 30 Adjusting entry: Bank service charge Accounts receivable Note receivable Cash in bank 710.000 Note collected by bank March April Service charge March April NSF check March April Deposit in transit March 31 April 30 Outstanding checks March 31 April 30 Bank balance 200.000) 100.Deposit in transit – October 31 45.000 80.000) ( 20.000 ( 10.000.000 (45.000) 178.000 500.000 100.000 10.000 Problem 4-17 March 31 30 Book balance 280.000 700.000 120.000 ( 5.000) 30.000 (220.000) 178.000 .000) 2.000 50.000) (80.000 1.200.000) 490.000 380.000 10.000 1.000 60.000 (30.000 610.000) Receipts 800.000) 1.

900.000) ( 400.000 ( 180.000) 100.860. 30 Dec.400.000) Disbursements 3.000 ( 600.000) 2.000 (300.000) Bank error on payment 400.000 100.440.032.468.000 NSF check: July August Note collected by bank: July August Deposit in transit: July August Outstanding checks: July August Book balance 800. 31 Book balance 3.856.000) 4.000) 1.000 592.000 ( 650.090.000) 200.600.000 ( 540.000.000 Problem 4-19 Nov.000) 540.000 ( 2.000 200.000 Outstanding checks November 30 December 31 ( 592.000 (100.000) 1.000) ( 200.000) 50.000 ( (200.000 Bank balance 2.568.000) 2.000 Bank service charge November 30 December 31 ( 4.000 ( 180.000 1.000) Adjusted book balance 2.000 300.000) Deposit in transit 2.000 ( 100.000) 1.000 ( 2.000 ( 180.000) 480.000) 1.000 ( 180.940.Problem 4-18 July 31 August 31 Bank balance Book error on collection Book error on payment Bank error on deposit (200.000) 480.000 2.000 Receipts 5.000 ( 2.000) 600.000 (300.000) 3.442.000 .000 1.830.000 4.000) 650.000 Receipts Disbursements ( 200.000) Collection of note November 30 December 31 ( 300.200.080.160.000 1.890.000 50.000.

000) ( 498.000 Adjusting entry: Bank service charge Note receivable Cash in bank 4.000 2.260.000 ( ( 80.000 1.000 ( 30.260.000 900.000 1.000 2.000) 120.000 40.030.000 Receipts Disbursements ( 270.000 304.000 2.000 50.100.000 ( 270.830.000 1.000 ( 130.000 NSF check: September 30 ( 60.000) ( 60.000 2.000) October 31 40.000) October 31 ________ ( 120.400.900.000 80.442.000 300.960.000 Overstatement of check September 30 90.000 1.000 50.468.000) 498.000) 30.000 2.000) 1.000 Outstanding checks September 30 October 31 ( 30.000) 260.000 ( 40.000 Adjusted bank balance 2.000 Problem 4-20 Sept.000 130.000 2.000 1.000) .960.000 1.000 ( 90.500.200.000 1.330.030.000) October 31 50. 31 Book balance 1.000) Collection of accounts receivable September 30 30.330.000 40.000 Deposit in transit September 30 October 31 260.856. 30 Oct.000 Adjusted balance 1.000 Bank balance 800.November 30 December 31 Check erroneously charged by bank November 30 December 31 50.000) Adjusted balance 1.400.

480.000 50.000 5.000 550.000) 25.305.600.000 5.000) 2.000 ( ( 300.000 5.400.000 200.000 Receipts Disbursements ( 25.000) 5.000) 550.000 .000 ( 845.000 _________ 5.000 20.000 300.000 2.500.375.000 2.300.000 Bank service charge: May 31 June 30 NSF check: June 30 Interest collected: June 30 Book error: June 30 Adjusted balance Balance per bank Deposit in transit May 31 June 30 Outstanding checks May 31 June 30 Adjusted balance 2.000 Problem 4-21 May 31 June 30 Balance per book 2.000 75.000 200.305.000 25.000 170.000 300.550.000 ( 625.400.000 625.000 40.000) 5.000 500.000 5.600.000) 2. Cash in bank Interest income Equipment 2.375.500.000 40.000 2.000 ( 845.480.700.Adjusting entries on October 31 1.000 ( 5.000 Adjusting entries on June 30: 1.000) ( 200.000 75.000) 75.000 ( 20. Cash in bank Accounts receivable Salaries 120.000 225.000) 500.000 2. Accounts receivable Cash in bank 2. Bank service charge Accounts receivable Cash in bank 375.550.

000.500.200.000) ( 180.000.000 1.750.000 Adjusted book balance 850.000 300.000 Adjusted bank balance 2.600.000 950.000 750.000 – 50.000) 4.300. Balance per book Add: Proceeds of note collected Total Less: NSF checks (150.000 ( 250.000.000) NSF check Bank service charge Adjusted book balance 8.000 ( 250.500.500.000 Problem 4-25 Answer A Problem 4-26 Answer B Problem 4-27 Answer B Problem 4-28 Answer D Balance per ledger 3.000 – 20.000 1.000 .000 1.000 Problem 4-23 Answer B Balance per bank Add: Deposit in transit Total Less: Outstanding checks Erroneous bank credit 700.000) 9.500.Problem 4-22 Answer A Balance per book Bank charges Customer note collected by bank Interest on customer note NSF customer check Depositor’s note charged to account Adjusted book balance ( 4.000 Problem 4-24 Answer C Balance per book Note collected by bank Book error (200.000) 1.000) ( 20.000 400.000 2.000 200.000 60.000) 100.000.000 10.000 The adjusted cash in bank can also be computed by starting with the balance per book.000) (1.

000) 2.000 2.000 2.000 ( 8.600.000.000) 11.500.000 .200.000.000.000 400.000 9.950.000 100.000) 4.000 Total Checks paid by bank in June: Checks and charges by bank in June Service charge in June NSF check in June 6.000) 4.000 ( 100.400.000 4.500.500.000.000 500.000) 3.000 ( 51 Problem 4-29 Answer B Problem 4-30 Answer A Problem 4-31 Answer C Outstanding checks – May 31 Checks issued by depositor in June: Total credits to cash in June Service charge in May recorded in June 8.000) 550.000 2.000 50.400.000 50.000) (1.600.000 7.Service charges Collection of note Book error Unrecorded check for traveling expenses Adjusted book balance Balance per bank Deposit in transit Total Outstanding checks (squeeze) Adjusted bank balance 50.000.100.000 6.000 ( 100.500.950.900.000 1.600.000 3.000 100.000) ( 500.000) 1.900.000 Outstanding checks – June 30 Problem 4-32 Answer A Balance per book – June 30 Service charges Collection by bank NSF check Adjusted book balance Balance per bank – June 30 Deposits outstanding – June 30 Checks outstanding – June 30 Adjusted bank balance Outstanding checks – May 31 Checks recorded by book in June ( ( ( 2.

000 1.000 2.700.800.000) 4.390.400.000 Balance per bank – November 30 December deposits Total December disbursements (4.900.000 5.000 8.600.000 2.100.000 4.600.200.000) Balance per bank – December 31 Deposit in transit – December Outstanding checks – December Adjusted bank balance – December 31 Balance per book – December 31 (squeeze) Note collected by bank NSF check Service charge Adjusted book balance Problem 4-37 Answer A Bank disbursements for July Outstanding checks – June 30 (1.000 9.000) 4.000 ( 540.000) NSF check Service charge Net debt to cash 2.000 700.000 Book disbursements for July 9.936.900.000.000 400.600.600.000 ( 350.000) ( 840.400.000) ( 50.000 500.000 – 1.000 52 Problem 4-34 Answer A Problem 4-35 Answer A Problem 4-36 Answer D 3.500.000.100.930.300.000 4.000.Total Less: Checks recorded by bank in June Outstanding checks – June 30 Deposits outstanding – May 31 Deposits recorded by book in June Total Less: Deposits recorded by bank in June Deposits outstanding – June 30 Problem 4-33 Answer A Note collected Book error (1.000 1.000 300.000) ( 47.000 ( 500.000) 509.000 .000 1.000 1.000) Outstanding checks – July 31 1.

000.000 300. 2.500.000 15. 10. 8. 3. D D D B A 6. A B C A C 1.000) 1.000 775. 4. 2. 7.000 20. 2.000 2. 4. D B C D A Problem 5-4 a. 3. 9.000 300.000. 5. 10.000 100.Problem 4-38 Answer B 6. 4.000 30. 5.000 .000 Bank receipts for April Deposits in transit – March 31 Deposits in transit – April 30 Book receipts for April CHAPTER 5 Problem 5-1 Problem 5-3 1.000 400. Accounts receivable Notes receivable Installments receivable Advances to suppliers Advances to subsidiary Claim receivable Subscriptions receivable Accrued interest receivable Customer’s credit balances Advances from customers Receivables b. A C A A A 53 Problem 5-2 6.500. 7. 3. 9. 8. A D C C D 1.000) Notes receivable Installments receivable 775.000 6.000 (1.000 10.000 300. 5. Accounts receivable Allowance for doubtful accounts ( 50.000.000 100.000 150.

000 54 b.000 50.000 10.000 1.000 10.000 d.200.300. Problem 5-5 a. The deposit on contract should be classified as noncurrent and presented as other noncurrent asset.000 100. Subscription receivable Deposit on contract Claim receivable Advances to employees Advances to affiliated Advances to supplier Accounts receivable c. The subscriptions receivable should be deducted from subscribed share capital.400.000 120.000 10. Accounts receivable Claim receivable Advances to employees Advances to supplier Total trade and other receivables 150.Advances to suppliers Claim receivable Subscription receivable Accrued interest receivable Total trade and other receivables 1.000 25.600.000 50. .000 60.000.000 5.000 15.000 6.320. The advances to subsidiary should be classified as noncurrent and presented as long-term investment.000 6.000 60.000 1. The customers’ credit balances and advances from customers should be classified as current liabilities and included as part of “trade and other payables”.000 150.000 40.200.000 35.000 5.000 c.000 490.600.000 1.000 300. Accounts receivable – January 1 Charge sales Total Less: Collections from customers Writeoff Merchandise returns Allowances to customers Accounts receivable – December 31 600.

000 400.000 150.000 90.000 400.600. Notes receivable Accounts receivable 3.000 45. Allowance for doubtful accounts Accounts receivable 5.000 .000 15. Cash Notes receivable Requirement 2 Notes receivable Requirement 3 Accounts receivable Less: Allowance for doubtful accounts Net realizable value 670.000 90.600.000 2.The advances to affiliates should be classified as noncurrent and presented as long-term investment.000 250. Problem 5-6 Requirement 1 1. Sales return Accounts receivable 6.450.000 20.000 3.000 70.000 15.000 20.450. Doubtful accounts Allowance for doubtful accounts 4.000 150.000 2.000 3. Sales discount Accounts receivable 8.000 45. Accounts receivable Sales 2.000 600. Cash Accounts receivable 7.

000 15.000 10.Problem 5-7 FOB destination and freight collect 1. Accounts receivable Freight out Sales Cash 2.000. Accounts receivable Sales 2.000 500.000 510.000 500.000 500.000 475.000 10.000 495.000 500.000 500.000 15.000 10.000 15. Accounts receivable 4.000 500. Cash Sales discount Accounts receivable FOB shipping point and freight prepaid 1.000 500.000 500.000 10.000 Problem 5-8 1.000 . Cash Sales discount Allowance for freight charge Accounts receivable FOB destination and freight prepaid 1. Cash Sales discount Accounts receivable 510. Accounts receivable Sales Cash 2.000 10. Accounts receivable Freight out Sales Allowance for freight charge 2.000 485.000 10. Cash Sales discount Accounts receivable FOB shipping point and freight collect 1.000 500.000 15.000 500.000 485.

000 30 Cash 50.000 200.Sales 2.000.470.000. Required allowance (10% x 500. Sales return Allowance for sales return 1.000 60.000 60.000 1.000 2 Accounts receivable Sales 196.000 50.000 1.000 40.000 75.000 12 Cash 196. Doubtful accounts (1% x 5.000 Accounts receivable Sales discount forfeited 1.000 100.000 200. Cash Accounts receivable 4.000 12 Cash 196.000) Doubtful accounts Allowance for doubtful accounts b.000) 60.000 50.000) Doubtful accounts (2% x 3.750.000 50.000 Problem 5-9 Gross method July 1 Accounts receivable Sales 49. Credit sales (75% x 5.000 Accounts receivable 196.000 50.000 75. Required allowance Less: Credit balance of allowance Doubtful accounts expense Doubtful accounts Allowance for doubtful accounts d.000 Sales discount 4.000 50. Sales return Accounts receivable 5.000 80.500.000 50. Cash Sales discount Accounts receivable 3.000) Allowance for doubtful accounts c.000.000 100.000 40.000 Problem 5-10 a.000.000 Net method July 1 Accounts receivable Sales 2 Accounts receivable Sales 49.000 .000 3.000 75.000 1.000 4.000 200.000 Accounts receivable 30 Cash Accounts receivable 49.000 20.000 50.000.750.000 196.000 30.

000 240.000 290.000 200.000 Problem 5-12 a.000) Allowance for doubtful accounts b.900.000 38.000 40.000 30.000 240. Required allowance Add: Debit balance in allowance account Doubtful accounts expense Doubtful accounts Allowance for doubtful accounts c.000 170.000 60.000 160.000 100.000) c. Doubtful accounts Allowance for doubtful accounts Allowance – January 1 Doubtful accounts (squeeze) Recovery Total Accounts written off Allowance – December 31 (8% x 2.000 20.000 210.000 20.000 Problem 5-11 a.000 130.000 10.000. Doubtful accounts Allowance for doubtful accounts Allowance – January 1 Doubtful accounts (squeeze) Recovery Total Accounts written off Allowance – December 31 210.000 Problem 5-13 Requirement a .000 40. Doubtful accounts (3% x 8.000 100.000 170.000 10.Less: Credit balance of allowance Doubtful accounts expense Doubtful accounts Allowance for doubtful accounts 30.000 170.000 38.000) Allowance for doubtful accounts 60.000 210.000 130.000 20.000 60.000 30.000. Doubtful accounts (2% x 1.000) Add: Debit balance in allowance account Doubtful accounts expense Doubtful accounts Allowance for doubtful accounts b.000 330.000 30. Required allowance (5% x 600.000 50.000 40.

000) 1.900.000 Allowance for doubtful accounts – December 31 (4% x 1. Allowance for doubtful accounts Accounts receivable 5.000 ( 60.000 Problem 5-14 Requirement a 1.000 70. Cash Accounts receivable 4.000) 60.000 Less: Allowance before adjustment Doubtful accounts expense Requirement c Accounts receivable – December 31 1.000/10%) 2.000) 800.000 70.000 8.000 7.000 2.000 7.000 3.000.000 3.000 40. Cash Sales discount Accounts receivable(2.900.000 10.500.1.500.000 10.000 Allowance for doubtful accounts Net realizable value 20.000 10. Cash Accounts receivable Sales (800.000/1.500.000 36.450. Accounts receivable Sales 2.000 10.000 = 4% 7.440.000.000 40.000.000 684.000 .450. Accounts receivable Allowance for doubtful accounts Cash Accounts receivable 6.000.000 40. Sales return Accounts receivable Requirement b Doubtful accounts Allowance for doubtful accounts Rate = 40.200.000/98%) 2.000 30.000 3.000 30.000 50. Cash Sales discount (5% x 720.

000 80.400.940.600.000 120.000 10.400.455.000 80. Cash (2.000 2.000 120.000 1.000 5.000 1.000 = 5% Requirement b Accounts receivable Less: Allowance for doubtful accounts Allowance for sales discount 130.000.000 – 1.500.000 10.000 2.000 720.000 70. Cash Sales discount Accounts receivable (1. Accounts receivable Sales (3. Sales return Accounts receivable 6.000 .270.455.000.600.000) Less: Allowance before adjustment Doubtful accounts Rate = 100.000 Problem 5-15 Requirement a 1.000 10.000 1.000 10.200.000.000 10.000/97%) 1.070.000 10.000 2.000 70.000 60. Allowance for doubtful accounts Accounts receivable Accounts receivable Allowance for doubtful accounts Cash Accounts receivable 7.000 45.000 – 470.000 Net realizable value 60.000 2.Accounts receivable(10% x 7.000 10.000 70.940. Sales discount Allowance for sales discount 5.000) Accounts receivable 3.455. Doubtful accounts Allowance for doubtful accounts Required allowance – December 31 (5% x 2.000/2.000 50.000 5.455.000) 3.000) 2. Cash Accounts receivable 4.

000 Problem 5-16 1.000) ( 55.000 565. Doubtful accounts Allowance for doubtful accounts Credit sales 2.000/98% 2. Accounts receivable – Jan.000/99% Sales discount: 2% x 4.000) ( 4.935.600.000 50.000 50.000 15.000 55.000 Net credit sales Doubtful accounts (2.000 10. Sales return and allowance Accounts receivable 7.000 25.000 5.500.000.000 1% x 30.500.475. Sales return and allowance Cash 8.000 55.4. Allowance for doubtful accounts Accounts receivable 5.000 55.000 Less: Sales discount Sales return and allowances 100.000 50.000 45. 1 4.500.000 470.000 5.500.000 1.000 10.000) ( 115.410.000 5.000 5.000 20.000 470.000 Sales return 2.000 7.000 Sales Recovery 2.000 60.000 625.500.000) . Cash Sales 6.500.000 2.000 Collections Sales discount Writeoff 90.000 (8. Accounts receivable Allowance for doubtful accounts Cash Accounts receivable 9.000 x 2%) Requirement b Accounts receivable Less: Allowance for doubtful accounts Net realizable value 20.500.

000 10.000 3.000 25% 50% 100% 5% 25.000.990.000 120.000 30.000 345.000 545.270.000 + 30.000 x 10% 200.000 150.000.000 50.000 3.000 x 25% 60.000 3.000 20.000 Less: Writeoff (100.Accounts receivable – Dec.000 170.000 170.000 x 1% 400.000 x 5% 300.000 + 40. Allowance – January 1 Receivables Doubtful accounts expense (squeeze) Total Less: Writeoff (235.000) 265. 31 1.000 30.000 120.000 31 – 60 days past due 61 – 90 days past due Over 90 days past due 2.000) Understatement 4.000 x 100% (140.000 Doubtful accounts (squeeze) 200.000 170.000 Recoveries 20.250.000 2.960.000 170.000 Problem 5-17 Percent of Amount Uncollectible allowance 1.000 280.000 1.790.270.000 20.000 Total 310.000 100. 1.960.000 1.000 2. Accounts receivable Less: Allowance for doubtful accounts Net realizable value 1. Accounts receivable – December 31 (look at the above transaction) Less: Allowance for doubtful accounts Net realizable value .000 75.000 280.000 200.000) (180.000 115.700.000) Allowance – December 31 20.000 Required Problem 5-18 1.000 60.000) 1.000 Required allowance – December 31 3.200. Doubtful accounts Allowance for doubtful accounts Correct amount Recorded (2% x 9.000 20. Allowance – January 1 90.000 280. Not yet due 1 – 30 days past due 60.000 1.

000 40.000 5.000 3.000.Problem 5-19 2005 Total 1.000 5.000 40.000 2.000 4. Allowance for doubtful accounts – December 31.005.000 3.000 (10. 2007 30.000 26. 2008 Add: Credit sales for 2008 Recoveries Total Less: Collections in 2008 Writeoff Accounts receivable – December 31.255.000 26.000 50.000 Percentage to be used in computing the allowance = ------------------.000 5.000 Problem 5-20 1.000 2006 2007 76.000 24.000 65.000 85. 2007 Add: Sales for 2008 Recovery of accounts written off Total Less: Collection from customers Accounts written off Accounts settled by issuance of note Accounts receivable – December 31.000 40.000 250.000 76.000 3. 2008 (debit balance) 10. Allowance for doubtful accounts – January 1 Add: Doubtful accounts for 2008 Recoveries Total Less: Writeoff Allowance for doubtful accounts – December 31 45.000 2.360.000 Allowance before adjustment – December 31.000 Net writeoff 26.000.000 60.010.000 2.000 10. 2008 600.000 5.000 30. Credit sales for 2008 Multiply by bad debt percentage 2% Provision for doubtful accounts 3.= 2% 3.000 4.000 3.000 Less: Recoveries 9.000 29.000 2.000 5.000 Add: Recovery of accounts written off Total Less: Accounts written off 50.800.655.000 20. Writeoff 85.000.000 4.615.000 600.610. Accounts receivable – December 31.000) .000 1.000 200.000 60. 2008 4.610.000 3.000. Accounts receivable – January 1.000 2.

000.000 95.000 .000.966.000 250.000) 400.000 x 5% 2.000 2.000 20.000) 3.000.000 550. Allowance – January 1 Recoveries – 2008 Doubtful accounts – 2008 (squeeze) Total Less: Writeoff – 2008 Allowance – December 31 (.000 92.000.250.000 450.000.000.000 60.3.000 x 5%) 35.000 x 20%) Total 4. Doubtful accounts 450.000 – 10. Required allowance – December 31.000 Recovery Total Less: Writeoff (300.000 1. Accounts receivable Less: Allowance for doubtful accounts Net realizable value 258.000 105.000 – 20.000 Problem 5-22 1. Allowance – January 1.000) Allowance for doubtful accounts 2.000 + 100.017 14. Retained earnings (.000 10. Required allowance – December 31.000.000 – 550.000 x 10% 1.000 x 25% 500.017 x 2. Doubtful accounts Allowance for doubtful accounts 105.016 x 1.000.000 – 100.000 34.000 1. 2008 Add: Debit balance before adjustment Increase in allowance 5. 2008 3.000 122.000 20.000 On past due accounts (300.000.000 34.000 950. 2008 On current accounts (700.000) 500.= .000 50.000.000 1.000 200. 2008 Doubtful accounts recorded (2% x 20.000 250.000 Allowance balance before adjustment 2.000 88.000 95.000 20.000 Problem 5-21 170.000 105.016 10.000) 400.000 x 75% 300.000 Required allowance – December 31.000 Rate in 2007 = -----------------------.000 Allowance for doubtful accounts (1. 5.000 10.= .000 Rate in 2008 = -------------------------.

630 4.000 Problem 5-24 2008 Jan.900 3. Allowance – 1/1/2008 Doubtful accounts recorded in 2008 (1% x 3.Problem 5-23 1. or a difference of P65 due to rounding.948 Amortization 56.000 4.100 342.807.000 (27. 300. Doubtful accounts Allowance for doubtful accounts (39.000 7.000 3.370* 4.000 4.000) 1.000.782 71.000 150.000 Recovery Total Writeoff Allowance before adjustment 28.000 463. .000 *12% x 3.000 471.928.948 12/31/2009 400.435.000) 38. 31 Cash Interest income Unearned interest income Interest income (10%) (12%) Date Interest received Interest income Carrying value 01/01/2008 12/31/2008 400.000 56.000 x 80% Required allowance – 12/31/2008 39.948 56.000.000 400.000 20.630 equals 471.928.000.000 – 38.000 456.948 63.000 x 5% 60.000) 2.000 342.000 28.000 x 20% 25.782 12/31/2010 400.000.000) 30.864.000 400.100 150.370 3. Allowance – 1/1/2008 (1% x 2.848 3.000 65.000 1.000 4.000 12.800.000 3. 1 Loan receivable Cash Cash Unearned interest income Unearned interest income Cash Dec.000 x 1% 80.

382 53.000.160.000 4.2009 Dec.000 71.300 100.000 50. 31 Cash Interest income Interest income Direct origination cost (8%) (6%) Date Interest received Interest income Carrying value 01/01/2008 12/31/2008 240.782 63.000 189.000 .000 Problem 5-25 2008 Jan.000 Cash Interest income 240.000 100.595 12/31/2010 240.000.000 186.370 4.000 240.000 53.000 240.000 400.782 400.000.000 3.000 260. 31 Cash Interest income Unearned interest income Interest income Cash Interest income Unearned interest income Interest income Cash Loan receivable 400.056. 1 Loan receivable Cash Direct origination cost Cash Cash Direct origination cost Dec.405 3.405 53.000 63.300 260.513 240.405 56.382 50.000 240.300 3.000. 31 Cash Interest income Interest income Direct origination cost 2010 Dec.487 2009 Dec.000.000 400.382 Amortization 50.000 183. 31 3. 31 2010 Dec.370 71.109.000 240.618 12/31/2009 240. 31 2009 Dec.918 3.513 3.

728 .86) 1.000.513 3.000.000.000 2.000 401.421.000 980.370.000 x .000.000 Total present value of loan Requirement 2 Loan receivable – 12/31/2008 6.728 353.000 December 31.000.000.2010 Dec.000 Accrued interest (6.000.79) 2.000 5.000 1.000 6.000 480.000.000 353.600 1.93) 900.000. 2009 (1.480.000.460.000 x . 2010 (2.000 1.000.000 3.400) Carrying value – 12/31/2009 4.000 x .020.000 Allowance for loan impairment (980.000 480.460.600 5.000 – 401.020.513 56.000 December 31.020.000 2. 31 Interest income Direct origination cost Cash Loan receivable 56.600) ( 578.000 1.000 Problem 5-26 Requirement 1 December 31.000) 401.600 2010 Cash Loan receivable Allowance for loan impairment Interest income Loan receivable – 12/31/2009 5.000.000 x 8%) Total carrying value Present value of loan Impairment loss Requirement 3 2008 Impairment loss Accrued interest receivable Allowance for loan impairment 2009 Cash Loan receivable Allowance for loan impairment Interest income (8% x 5.720. 2011 (3.

000.672 2.Interest income for 2010 (8% x 4.225.500.328) Allowance per book Difference due to rounding 3.646 Problem 5-27 Requirement 1 December 31.175.000 2.775.000 3.000 900.000) Total carrying value Present value of loan Impairment loss Requirement 3 2008 Impairment loss Accrued interest receivable Allowance for loan impairment 2009 Cash 3.64) 2.000 900.000.000 December 31.000 x .672 224.000 5.420.560.672) ( 224.000 x .000 December 31.026 224.000.421.000 3.500.000 7.000 Allowance for loan impairment (578.71) 1. 2009 ( 500.225.672 222.328 Interest income for 2011 (8% x 2.000 x .000.000 .000.000 Total present value of loan Requirement 2 Loan receivable Accrued interest receivable (12% x 7.672) Carrying value – 12/31/2010 2.728 2011 Cash Loan receivable Allowance for loan impairment Interest income Loan receivable – 12/31/2010 3.000 8. 2012 (4.000 224.775. 2011 (2.000.400.80) 800.000 x .89) 445.000 December 31.400 – 353.000 500.000 5.600) 353. 2010 (1.175.275.

360 December 31.Loan receivable Allowance for loan impairment Interest income (12& x 5.000 500.598.000.882 2010 Allowance for loan impairment Interest income (634.650) 234.000 1.758 360.352.275.920 4.360 Face value of loan Present value of loan Impairment loss 2008 Cash Interest income Impairment loss Allowance for loan impairment 2009 Allowance for loan impairment Interest income (9% x 3.000 x .640 302.560 Total present value of loan 3. 2014 (4.360.758 331.240 627.000 – 627.640 – 302.000 x .640 634.772) 277.365.000) 2010 Cash Loan receivable Allowance for loan impairment Interest income Loan receivable – 12/31/2009 7.000 627.000 x .000.648. 2011 ( 360.000) 642.596) 2.000 634.365.000.000 360.000 .708) 254.000 1.240 Problem 5-28 December 31.000 360.240 642.880 3.882 331.000 360.000 Allowance for loan impairment (2. 2012 ( 360.360) 302.000.000 634.000) (1. 2013 ( 360.640 December 31.000 x .352.882) 2011 Cash Interest income 2012 Cash Interest income 360.000 360.365.000) Carrying value – 12/31/2009 5.225.000 December 31.000 642.000 Interest income for 2010 (12% x 5.

000 661.000 x .000 ( 250.000 x .735) 367. the present Problem 5-30 Answer B Accounts receivable-January 1 Credit sales Collections from customers Sales return Accounts written off Accounts receivable-December 31 Allowance for doubtful accounts Allowance for sales return Net realizable value 1.500 12/31/2009 Allowance for loan impairment Interest income (8% x 661.360.920 52.550.500.000) ( 150.000) 1.300. Present value of principal (500.735) 294.000 Problem 5-29 12/31/2008 Impairment loss Allowance for loan impairment value factor for 4 periods is used.000 4.000. Accordingly.500 338.000 .2013 Cash Interest income 2014 Cash Interest income Loan receivable 360.500 1.000.000.000 x 5 = 400.000 Total present value of loan Loan receivable Present value of loan Loan impairment loss 338.000) ( 100.920 661.500 The remaining term of the loan is 4 years.000 Problem 5-31 Answer A Trade accounts receivable 2.000 5.250.000) 1.000 360.000.500) 52.000 4.500 Present value of interest (80.000 (5.000 360.500 338.000) ( 50.

500.000.000 61 – 120 days (900.000) 300.000 90.000) 200.000 600.000 .000 1.000 100.000 230.000 – 2.000 650.000 280.000 430.700.000 Problem 5-32 Answer C Accounts receivable (squeeze) Allowance for doubtful accounts (900.000 50.Allowance for doubtful accounts Claim receivable Total trade and other receivables ( 100.000) Net realizable value 6. 2008 Allowance – December 31.000 50.000 100.000 450.200.050.000 ( 700.000 Problem 5-36 Answer B 0 –60 days (1.000 70 Problem 5-34 Answer D Allowance – January 1 Uncollectible accounts expense (squeeze) Recovery of accounts written off Total Accounts written off Allowance – December 31 (2.000) Problem 5-35 Answer A Allowance – December 2007 Doubtful accounts expense Total Accounts written off (squeeze) Allowance – December 2008 180.000 60.000 – 200.700.000 Over 120 days (1.000 (230.200.000 30.000) 6.000.000 2.000 x 1%) 12.000 x 2%) 18.000 x 6%) Allowance – December 31.000 200.000 Problem 5-33 Answer B Allowance – January 1 Doubtful accounts expense Recovery of accounts written off Total Accounts written off Allowance – December 31 300.000 80. 2007 Uncollectible accounts expense (squeeze) 60.

000 Problem 5-38 Answer A Problem 5-39 Answer B Doubtful accounts expense (3% x 3.000 220.000.000 250.000 Problem 5-40 Answer A Doubtful accounts expense (2% x 7.000 + 10.000) 90.000) Collection of accounts written off Total Accounts written off Allowance – December 31 40.000) 140.000.000 30. 2008 20.000.000 Problem 5-43 Answer A Problem 5-44 Answer A .000 ( 70.000 71 Problem 5-41 Answer A Allowance – January 1 Doubtful accounts expense (4% x 5.000 200.000 220.000.000 Problem 5-42 Answer D Allowance – January 1 Doubtful accounts expense (squeeze) Total Accounts written off Allowance – December 31 250.000) 100.000 175.000 205.000 Problem 5-37 Answer D Allowance for sales discount (5.000 160.000 425.Recovery Total Accounts written off Allowance – December 31.000 10.000 x 2% x 50%) 50.

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