Name: Aireyca Glenn G.
Lanaban
You were engaged by HONESTY CORPORATION to examine their financial statements as of
December 31, 2020. The bookkeeper provided you the following:
Cash......................................................................................P 963,200
Accounts receivable.................................................................2,254,000
Inventory................................................................................6,050,000
Accounts payable....................................................................4,201,000
Accrued expenses......................................................................431,000
During your audit, you noted that HONESTY CORPORATION held its cash books open after
year-end. In addition, your audit revealed the following:
1. Receipts for January 2021 of P654,600 were recorded in the December 2020 cash receipts
book. The receipts of P360,100 represent cash sales and P294,500 represent collections
from customers, net of 5% cash discounts.
2. Accounts payable of P372,400 was paid in January 2021. The payments, on which
discounts of P12,400 were taken, were included in the December 2020 check register.
3. Merchandise inventory is valued at P6,050,000 prior to any adjustments. The following
information has been found relating to certain inventory transactions:
a. The invoice for goods costing P175,000 was received and recorded as a purchase on
December 31, 2020. The related goods, shipped FOB destination, were received on
January 4, 2021, and thus were not included in the physical inventory.
b. A P182,000 shipment of goods to a customer on December 30, 2020, terms FOB
destination, are not included in the year-end inventory. The goods cost P130,000 and
were delivered to the customer on January 3, 2021. The sale was properly recorded in
2021.
c. Goods costing P637,500 were shipped on December 31, 2020, and were delivered to the
customer on January 3, 2021. The terms of the invoice were FOB shipping point. The
goods were included in the 2020 ending inventory even though the sale was recorded in
2020.
d. Goods costing P217,500 were received from a vendor on January 4, 2021. The related
invoice was received and recorded on January 6, 2021. The goods were shipped on
December 31, 2020, terms FOB shipping point.
e. Goods valued at P275,000 are on consignment with a customer. These goods are not
included in the inventory figure.
f. Goods valued at P612,800 are on consignment from a vendor. These goods are not
included in the physical inventory.
Determine the adjusted balances of the following on December 31, 2020☹5 pts each) show
solutions.
11. Cash
12. Accounts receivable
13. Inventory
14. Accounts payable
SOLUTION
1. Accounts receivable(294,000/.95) 310,000
Cash 294,500
Sales discount 15,500
Sales 360,100
Cash 360,100
2. Cash 360,000
Purchase discount 12,400
Accounts payable 372,400
3.a Accounts payable 175,000
Purchases 175,000
b. Inventory 130,000
Cost of sales 130,000
c. Cost of sales 637,500
Inventory 637,500
d. Inventory 217,500
Cost of sales 217,500
Purchases 217,500
Accounts payable 217,500
e. Inventory 275,000
Cost of sales 275,000
f. No entry-not included in the inventory
1.CASH
Unadjusted Cash 963,200
Collections for 2021 (294,500)
Cash sales for 2021 (360,000)
Payment collection-2021 360,000
Cash 668,600
2. ACCOUNTS RECEIVABLE
Unadjusted accounts receivable 2,254,000
Collection-2021 310,000
Accounts receivable 2,564,000
3. INVENTORY
inventory
637,50
6,050,000
0
130,000
217,500
275,000
637,50
6,672,500 0
6,035,000
4. ACCOUNTS PAYABLE
Accounts payable
4,201,0
175,000
00
372,400
217,500
4,790,9
175,000 00
4,615,9
00
