XFINACR3: TAKEHOME QUIZ ON ACCRUAL BASIS, CASH BASIS, SINGLE ENTRY &

ERROR CORRECTION
1ST SEMESTER, SY 2016-2017
PROBLEM-SOLVING. Write the final answer on a separate sheet of yellow paper. NO ERASURES.
1. The audited income statement of Uganda Company shows a net income of P175,000 for the
year ended December 31, 2015. Adjustment were made for the following errors:
December 31, 2014, inventory overstated by P22,500.
December 31, 2015, inventory understated by P37,500.
A P10,000 customers deposit received in December 2015, was credited to sales in 2015.
The goods were actually shipped in January 2016.
Based on the given information, what is the unadjusted net income of Uganda Co. for the year
ended December 31, 2015?
2. At September 1, 2014, the following existed in the records of Los Angeles Company: Plant &
equipment P8,600,000 and Accumulated depreciation P3,970,000. During the year ended
September 30, 2014, plant with a written down value of P370,000 was sold P490,000. The plant
had originally cost P800,000. Plant purchased during the year cost P1,800,000. It is the
companys policy to charge a full years depreciation in the year of acquisition of an asset and
none in the year of sale, using a rate of 10% on the straight-line basis. What net amount should
appear in Los Angeless balance sheet at September 30, 2014 for plant & equipment?
For questions 3 to 7, use the information below
Your audit of California Company disclosed that your client kept very limited records.
Purchases of merchandise were paid for by check, but most other items were out of cash receipts.
The companys collections were deposited weekly. No record was kept of cash in the bank, nor was
a record kept of sales. Accounts receivable were recorded only by keeping a copy of the ticket, and
this copy was given to the customer when he paid his account. On January 2, 2014 the company
started business and issued common stock, 108,000 shares with P100 par, for the following
considerations: Cash P900,000; Building (useful life, 15 years) P8,100,000; and Land
P2,700,000.
An analysis of the bank statements showed total deposits, including the original cash
investment, of P6,300,000. The balance in the bank statement on December 31, 2014 was
P450,000, but there were checks amounting to P90,000 dated in December but not paid by the
bank until January 2015. Cash on hand December 31, 2014 was P225,000 including customers
deposit of P135,000. During the year California Company borrowed P900,000 from the bank and
repaid P225,000 and P45,000 interest.
Disbursements totaling P900,000 paid in cash during the year were as follows: Utilities
P180,000; Salaries P180,000; Supplies P360,000 and Dividends P270,000. An inventory of
merchandise taken on December 31, 2014 showed P1,359,000 of merchandise. Tickets for
accounts receivable totaled P1,620,000 but P90,000 of that amount may prove uncollectible.
Unpaid suppliers invoices for merchandise amounted to P630,000. Equipment with a cash price of
P720,000 was purchased in early January on a one-year installment basis. During the year, checks
for the down payment and all maturing installments totaled P801,000. The equipment has a useful
life of 5 years.
3. Compute for the payments for merchandise purchases in 2014.
4. Compute for the collections from sales in 2014.
5. Compute for the net income for the year ended December 31, 2014.
6. Compute for the stockholders equity as of December 31, 2014.
7. Compute for the total assets as of December 31, 2014.
For question 8 & 9, use the information below
The condensed income statement of San Antonio, Inc. for the year ended December 31,
2015, is presented the following information:
Sales
P1,000,000
Cost of goods sold
600,000
Gross profit
P 400,000
Operating expenses
150,000
Net income
P 250,000
The December 31, 2015, audit of the companys financial statements disclosed the following errors:
December 31, 2015 inventory was understated P31,000.
Accrued expenses of P4,000 and prepaid expenses of P6,000 were not recognized in the
companys books.
Sales of P5,000 were not recorded until January 2016, although the goods were shipped in
December 2015, and were excluded from the December 31 physical inventory.
Purchases of P30,000 made in December 2015, were not recorded although the goods were
received and properly included in the December 31 physical inventory.
A machine was sold for P10,000 on July 1, 2015, and the proceeds were credited to the Sales
account. The machine was acquired on January 1, 2012 for P60,000. At that time, it had an
estimated life of 6 years with no residual value. No depreciation was recorded on this machine
in 2015.
8. What is the loss on sale of machine?
9. What is the corrected net income for the year ended December 31, 2015?

10. Connecticut Company reported an Accumulated Profits balance of P400,000 at December 31,
2013. In August 2014, Connecticut determined that insurance premiums of P75,000 for the
three-year period beginning January 1, 2013, had been paid and fully expensed in 2013.
Assume Connecticut has a 32% income tax rate, what amount should Connecticut report as
adjusted beginning Accumulated Profits in 2014?
11. The following information pertains to Sudan Companys sales for the current year:
Cash sales:
Gross
P 2,000,000
Returns and allowances
100,000
Credit sales
Gross
P 3,000,000
Discounts
150,000
On January 1, customers owed Sudan P1,000,000. On December 31, customers owed Sudan
P750,000. Sudan uses direct write-off method for bad debts. No bad debts were recorded in
the current year. Under the cash basis of accounting, what amount of revenue should Sudan
report for the current year?
12. Congo Company has apprehensions of possible pilferage in its stock of merchandise at
December 31, 2015. The following data were available:
12/31/201 12/31/201
4
5
Physical inventory, at
600,000 1,000,000
cost
Sales
4,000,000
Cost of sales
2,400,000
Accounts receivable- 1,200,000 1,350,000
trade
Accounts payable 1,500,000 1,850,000
trade
In 2015, accounts written off amounted to P100,000. Sales returns were P150,000 and
purchase returns, P50,000. Cash receipts from customers after P200,000 discounts totaled
P6,000,000 while cash payments to trade creditors amounted to P4,000,000 after discounts of
P300,000. Cash paid to customers for good returned was P50,000. On this transaction,
accounts receivable was debited. Under accrual basis, what should be the gross purchases for
the current year?
13. Tahiti Company owns an office building and leases the offices under a variety of rental
agreement involving rent paid in advance monthly or annually. Not all tenants make timely
payments of their rent. Tahitis balance sheet contained the following data:
2014
2015
Rentals receivable
960,000 1,240,00
0
Unearned rentals
3,200,0 2,400,00
00
0
During 2015, Tahiti received P8,000,000 cash from tenants. What amount of rental revenue
should Tahiti record for 2015?
For questions 14 & 15, use the information below:
Toronto Company is engaged in a small export business. The company maintains limited
records. Most of the companys transactions are summarized in a cash journal: non-cash
transactions are recorded by making memo entries. The following are abstracted from the
companys records: Accounts receivable 270,000 increase; Notes receivable 200,000
decrease; Accounts payable 150,000 decrease; Notes payable-trade 200,000 increase; Notes
payable bank 300,000 increase; Sales returns (P50,000 was refunded) 80,000; Sales
discounts 20,000; Purchase returns (P30,000 was refunded) 80,000; Purchase discounts
35,000; Accounts written off 60,000; Recovery of accounts written off 18,000; Cash sales
300,000; Cash purchases 250,000; Cash received from account customers 1,500,000; Cash
payment to trade creditors 1,200,000.
14. What is the amount of gross sales?
15. What is the amount of gross purchases?
On January 1, 2016 because of the evidence acquired during the examination of 2015 financial
statement of XXX Corporation, the company decided to change the method of deprecating its
equipment from straight-line to SYD method with a decrease in salvage value of P50,000, and a
change in remaining useful life to 5 years.
The equipment was acquired on April 1, 2014 at P2,500,000 and was estimated to have an useful
life of 10 year with a salvage value of P250,000. At the date of acquisition the company also
incurred P15,000 for installation and P20,000 for freight and insurance.
16. Compute for the book value of the assets as of December 31, 2015.
17. Compute for the depreciation expense for the year 2016.
Following were the information on 2015 inventory of YYY Corporation
Purchases
Qty
Unit Cost

1st Quarter
10,000
P 150.00
2nd Quarter
15,000
153.50
3rd Quarter
32,000
152.75
4th Quarter
8,000
154.00
In 2015, the company reported 43,000 units sold and which were accounted under FIFO.
18. If in 2016 the company changes its inventory method to weighted average, how much would be
the adjustment to retained earnings assuming ending inventory for 2016 were valued at
P150,000 and P152,500 under FIFO and weighted average respectively?
The December 31, 2016 and 2015 comparative financial statements of World Gallery Company
showed equipment with an original cost P379,000 and P344,000 with accumulated depreciation of
P153,000 and P128,000, respective. During 2016, the company purchased equipment costing
P50,000, and sold equipment with a carrying value of P9,000.
19. What amount should the company report as depreciation expense for 2016?
The balance sheet of Davenport Sales, Inc. as of December 31, 2015 showed increases in the
following account balances: Assets P267,000 increase; Liabilities P81,000 increase; Capital
stock P180,000 increase and Additional-paid-in capital P18,000 increase. There were no
changes in the retained earnings account except for a dividend payment of P39,000.
20. What is the net income for the year 2015?