ACCOUNTANCY DEPARTMENT ACC 6 Financial Accounin! & R"#o$in! III %&P&S& Macuo'C&P&A& () S"*")"$' A&Y& +,(-.+,(/ P$"li* 0ui1 ( G"n"$al In)$ucion)2 1.) T3" ") i) !oo4 5o$ a *a6i*u* o5 7, *inu") onl8& No on" i) allo9"4 o !o ou o5 3" $oo* 93il" i i) !oin! on& 2.) Plac" 8ou$ an)9"$) in a cl"an )3"" o5 #a#"$& Do no 9$i" a 3" :ac; o5 8ou$ an)9"$ )3""& Uili1" ano3"$ )3"" o5 #a#"$ i5 on" <(= #a#"$ 9ill no )u55ic" 5o$ 8ou$ an)9"$& >&= ?$i" 8ou$ na*" in 3" u##"$ l"5 )i4" #o$ion an4 a))i!n a #a!" nu*:"$ on 3" u##"$ $i!3 )i4" o5 "ac3 )3""& A$$an!"*"n o5 3" an)9"$) )3oul4 5ollo9 3" a$$an!"*"n o5 3" @u")ionnai$"& ATENEO DE DAVAO UNIVERSITY SCHOOL OF BUSINESS & GOVERNANCE ACCOUNTANCY DEPARTMENT ACC 6 Financial Accounin! & R"#o$in! III %&P&S& Macuo'C&P&A& () S"*")"$' A&Y& +,(-.+,(/ P$"li* 0ui1 ( -&= No :o$$o9in! o5 an83in!& /&= M&Y&O&B& C3"ain! i) )$icl8 #$o3i:i"4 an4 9ill :" 4"al 9i3 acco$4in!l8& 6&= Failu$" o 5ollo9 3" a:oA" in)$ucion) 9ill $")ul o a (B 4"4ucion 5$o* 8ou$ $ain! on 3i) @ui1& 7.) Go4 :l"))C D&= Sa$EE& FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF PROBLEMS& Provide what is required. (&= The income statement of Augustus Waters Corporation for 2014 included the following items !nterest "evenue P#$%$00 &alaries '(pense )$%000 !nsurance '(pense 12%*00
The following +alances have +een e(cerpted from August Waters Corporation,s +alance sheets 12-.1-2014 12-.1-201. Accrued interest receiva+le P#%100 P)%$00 ATENEO DE DAVAO UNIVERSITY SCHOOL OF BUSINESS & GOVERNANCE ACCOUNTANCY DEPARTMENT ACC 6 Financial Accounin! & R"#o$in! III %&P&S& Macuo'C&P&A& () S"*")"$' A&Y& +,(-.+,(/ P$"li* 0ui1 ( Accrued salaries pa/a+le 0%#00 4%200 Prepaid insurance 1%100 1%$00 RE0UIRED <S3o9 co*#uaion) in !oo4 5o$* an4 "nci$cl" 3" 5inal an)9"$=2 a.1 Cash received for interest during 2014 +.1 Cash paid for salaries during 2014 c.1 Cash paid for insurance premiums during 2014 +&= 2nder the accrual +asis% rental income of 3a4el 5race Compan/ for the calendar /ear 2014 is Php*0%000. Additional information regarding rental income are 12-.1-2014 12-.1-201. 2nearned rental income P)%$00 P$%000 Accrued rental income 4%000 .%000 ATENEO DE DAVAO UNIVERSITY SCHOOL OF BUSINESS & GOVERNANCE ACCOUNTANCY DEPARTMENT ACC 6 Financial Accounin! & R"#o$in! III %&P&S& Macuo'C&P&A& () S"*")"$' A&Y& +,(-.+,(/ P$"li* 0ui1 ( RE0UIRED <S3o9 co*#uaion) in !oo4 5o$* an4 "nci$cl" 3" 5inal an)9"$=2 a.1 Actual cash rental received +/ 3a4el 5race Compan/ in 2014. >&= 6an 3alen Compan/% a sole proprietorship% recorded transactions on the cash +asis during 2014. The entit/ provided the following information Cash 2*0%000 Accounts receiva+le% 1-1-14 1*0%000 !nventor/% 1-1-14 *20%000 7urnitures and fi(tures 1%100%000 8easehold improvements *00%000 Accumulated 9epreciation% 1-1-14 ..0%000 Accounts pa/a+le% 1-1-14 1)0%000 6an 3alen% Capital% 1-1-14 1%400%000 &ales *%$20%000 Purchases .%0)0%000 ATENEO DE DAVAO UNIVERSITY SCHOOL OF BUSINESS & GOVERNANCE ACCOUNTANCY DEPARTMENT ACC 6 Financial Accounin! & R"#o$in! III %&P&S& Macuo'C&P&A& () S"*")"$' A&Y& +,(-.+,(/ P$"li* 0ui1 ( &alaries 1%)40%000 Pa/roll Ta(es 110%000 !nsurance #0%000 "ent .40%000 2tilities 120%000 8iving '(penses 1.0%000 0%420%000 0%420%000 The entit/ is in the process of negotiating a +an: loan. The +an: is requesting financial statements prepared on the accrual +asis of accounting. ATENEO DE DAVAO UNIVERSITY SCHOOL OF BUSINESS & GOVERNANCE ACCOUNTANCY DEPARTMENT ACC 6 Financial Accounin! & R"#o$in! III %&P&S& Macuo'C&P&A& () S"*")"$' A&Y& +,(-.+,(/ P$"li* 0ui1 ( 9uring the course of an audit% the CPA o+tained the following information 1.1 Amounts due from customers totaled P.*0%000 on 9ecem+er .1% 2014. 2.1 An anal/sis of the accounts receiva+le revealed that an allowance for dou+tful accounts of P40%000 should +e provided. ..1 2npaid invoices for purchases totaled P.0$%000 and P1)0%000 on 9ecem+er .1% 2014 and 9ecem+er .1% 201.% respectivel/. 4.1 The inventor/ totaled P)$0%000 +ased on a ph/sical count of the goods on 9ecem+er .1% 2014. The inventor/ was priced at cost which appro(imates mar:et value. $.1 ;n <a/ 1% 2014% the entit/ paid P#0%000 to renew the comprehensive insurance coverage for one /ear. The premium on the previous polic/ which e(pired on April .0% 2014% was P)$%000. ATENEO DE DAVAO UNIVERSITY SCHOOL OF BUSINESS & GOVERNANCE ACCOUNTANCY DEPARTMENT ACC 6 Financial Accounin! & R"#o$in! III %&P&S& Macuo'C&P&A& () S"*")"$' A&Y& +,(-.+,(/ P$"li* 0ui1 ( *.1 ;n =anuar/ 2% 2014% the entit/ entered into a 2$>/ear lease agreement% appropriatel/ classified as operating lease. This lease agreement covers the vacant lot ad?acent to the retail store for use as a par:ing lot. As part of the agreement% the entit/ paved and fenced the lot at a cost of P*00%000. The useful life of the improvement is 1$ /ears. @o provision for depreciation has +een recorded. 9epreciation on furniture and fi(tures was P120%000 for 2014. ).1 Accrued e(penses on 9ecem+er .1% 201. and 2014 were +,(> +,(- 2tilities 10%000 1$%000 Pa/roll Ta(es 11%000 1*%000 0.1 The entit/ is +eing sued for P4%000%000. The coverage under the comprehensive insurance polic/ is limited to P2%$00%000. The entit/,s attorne/ +elieved that an unfavora+le outcome is pro+a+le and that a reasona+le estimate of the settlement is P.%000%000. The lia+ilit/ is e(pected to +e settled in 201$. #.1 The salaries included P40%000 per month paid to the owner. The owner also received P2%$00 per wee: for living e(penses. ATENEO DE DAVAO UNIVERSITY SCHOOL OF BUSINESS & GOVERNANCE ACCOUNTANCY DEPARTMENT ACC 6 Financial Accounin! & R"#o$in! III %&P&S& Macuo'C&P&A& () S"*")"$' A&Y& +,(-.+,(/ P$"li* 0ui1 ( RE0UIRED2 1.1 Ad?usting 'ntries 2.1 Accrual Aasis !ncome &tatement ..1 Accrual Aasis &tatement of 7inancial Position -&= Poole Compan/ paid or collected during 2014 the following items !nsurance premiums paid P1$%400 !nterest collected .0%#00 &alaries paid 1.$%200
The following +alances have +een e(cerpted from Poole Compan/,s +alance sheets 12-.1-2014 12-.1-201. Prepaid insurance P1%200 P1%$00 !nterest receiva+le .%)00 2%#00 &alaries pa/a+le 12%.00 10%*00 ATENEO DE DAVAO UNIVERSITY SCHOOL OF BUSINESS & GOVERNANCE ACCOUNTANCY DEPARTMENT ACC 6 Financial Accounin! & R"#o$in! III %&P&S& Macuo'C&P&A& () S"*")"$' A&Y& +,(-.+,(/ P$"li* 0ui1 ( @o plant assets were sold during 2014 RE0UIRED <S3o9 co*#uaion) in !oo4 5o$* an4 "nci$cl" 3" 5inal an)9"$=2 a.1 !nsurance '(pense on the income statement for 2014. +.1 !nterest "evenue on the income statement for 2014. c.1 &alar/ '(pense on the income statement for 2014. FEND OF 0UIGF