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IA3 Chapter 14 Problem 31

The document shows adjusting entries made by Civic Company at the end of 2020 including increasing inventory by ₱500,000 and recording depreciation of equipment of ₱5,000. It then presents Civic Company's income statement for 2020, showing net income of ₱231,000. Finally, it presents Civic Company's balance sheet as of December 31, 2020, with total assets of ₱1,560,000 and retained earnings of ₱231,000.

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582 views3 pages

IA3 Chapter 14 Problem 31

The document shows adjusting entries made by Civic Company at the end of 2020 including increasing inventory by ₱500,000 and recording depreciation of equipment of ₱5,000. It then presents Civic Company's income statement for 2020, showing net income of ₱231,000. Finally, it presents Civic Company's balance sheet as of December 31, 2020, with total assets of ₱1,560,000 and retained earnings of ₱231,000.

Uploaded by

Bea Tumulak
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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PR 14-31

Adjusting entries:
1.) Merchandise inventory ₱500,000.00
Income summary ₱500,000.00

2.) Accounts receivable ₱100,000.00


Sales ₱100,000.00

Purchases ₱80,000.00
Accounts payable ₱80,000.00

3.) Expenses ₱20,000.00


Accrued expenses ₱20,000.00

4.) Receivable from president ₱10,000.00


Purchases ₱10,000.00

5.) Sales ₱25,000.00


Unearned revenue ₱25,000.00

6.) Bad debts expense (100k x 5%) ₱5,000.00


Allowance for doubtful accounts ₱5,000.00

7.)
a. Supplies ₱5,000.00
Expenses ₱5,000.00

b. Equipment ₱100,000.00
Depreciation expense (100k/10 x 6/12) ₱5,000.00
Accumulated depreciation - equipment ₱5,000.00
Expenses ₱100,000.00

c. Prepaid insurance ₱15,000.00


Expenses (20k x 9/12) ₱15,000.00

8.) Interest expense (100k x 12% x 4/12) ₱4,000.00


Interest payable ₱4,000.00

Civic Company
Income Statement
For the year ended December 31, 2020

Sales (Note 1) ₱4,475,000.00


Cost of goods sold (Note 2) ₱3,770,000.00
Gross profit ₱705,000.00
Expenses (Note 3) -₱460,000.00
Bad debt expense -₱5,000.00
Depreciation expense -₱5,000.00
Interest expense -₱4,000.00
Net income ₱231,000.00

Note 1
Sales, cash basis ₱4,400,000.00
AR, end ₱100,000.00
Error -₱25,000.00
Sales, accrual basis ₱4,475,000.00

Note 2
Purchases, cash basis ₱4,200,000.00
AP, end ₱80,000.00
Error -₱10,000.00
Purchases ₱4,270,000.00
Inventory, end ₱500,000.00
COGS ₱3,770,000.00

Note 3
Expenses, cash basis ₱560,000.00
Accrued exp, end ₱20,000.00
Errors:
Supplies -₱5,000.00
Equipment -₱100,000.00
Prepaid insurance -₱15,000.00
Expenses, accrual basis ₱460,000.00

Civic Company
Balance Sheet
December 31, 2020

Assets
Cash ₱840,000.00
Accounts receivable ₱100,000.00
Less: Allowance for doubtful accounts ₱5,000.00 ₱95,000.00
Receivable from president ₱10,000.00
Merchandise inventory ₱500,000.00
Prepaid insurance ₱15,000.00
Supplies ₱5,000.00
Equipment ₱100,000.00
Less: Accumulated depreciation ₱5,000.00 ₱95,000.00
Total assets ₱1,560,000.00

Liabilities and Stockholders' Equity


Accounts payable ₱80,000.00
Accrued expenses ₱20,000.00
Unearned revenue ₱25,000.00
Interest payable ₱4,000.00
Notes payable ₱200,000.00
Total liabilities ₱329,000.00

Share capital ₱1,000,000.00


Retained earnings (from net income) ₱231,000.00
Total shareholders' equity ₱1,231,000.00
Total liabilities and shareholders' equity ₱1,560,000.00

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