Problem 14-1

D. Sales P 4,600,000
AR, beg. 1,000,000
AR, end. (1,300,000)
Writeoff (50,000)
Cash Basis – Sales P 4,250,000

Problem 14-2
C. Cash Sales P 200,000
Credit Sales 3,000,000
AR, beg. 400,000 AR, end.
(485,000)
Cash Basis – Sales P 3,115,000
Problem 14-3
A. Cash Sales P 1,900,000 [ 2,000,000 – 100,000 ]
Credit Sales 2,850,000 [ 3,000,000 – 150,000 ]
AR, beg. 1,000,000
AR, end. (750,000)
Cash Basis – Sales P 5,000,000

Problem 14-4
A. Cash Sales P 500,000
Credit Sales 3,000,000
AR, beg. 1,000,000
AR, end. (1,680,000)
Writeoff (120,000)
Cash Basis – Sales P 2,700,000

Problem 14-5
D. Charges to insurance expense P 625,000 Increase in Prepaid Insurance
25,000
Insurance paid P 650,000

Problem 14-6
B. Insurance P 700,000 ***Depreciation is not a cash expense
 Salaries 1,500,000
Increase in Prepaid insurance 50,000
Decrease is Accrued Payables 20,000
Total P 2,270,000

Problem 14-7
C. Initial Investment P 200,000
Services earned 500,000 Drawings
(100,000)
Cash Basis – Capital P 600,000

Problem 14-8
B. Sales P 1,750,000
AR, end. 300,000
AR, beg. (500,000)
Total P 1,550,000

Problem 14-9
D. Cash Basis, Income P 6,000,000
Add:
AR, end 4,000,000
AP, beg 3,000,000 7,000,000
Less:
AR, beg 2,000,000
AP, end 1,500,000 (3,500,000)
Accrual Basis, Income P 9,500,000

Problem 14-10
A. Payment to Suppliers P 4,900,000
Increase in AP 250,000
Purchases P 5,150,000
Inventory, beg. 2,900,000
Inventory, end. (2,600,000)
COGS P 5,450,000
Problem 14-11
1. B
2. B
3. A
4. A

Cash Receipts P 8,000,000

Discounts 500,000 Returns
250,000 Error (50,000)
amount not included in cash collections
Writeoff 100,000
AR, end 1,350,000
AR, beg (1,200,000)
Accrual – Gross Sales P 8,950,000
Less:
Discount (500,000) Sales Returns (250,000) Accrual – Net Sales P 8,200,000

Cash Payments P 5,000,000

Discounts 200,000 Returns 400,000
Error (100,000)
amount not included in cash payments
AR, end 1,850,000 Payments - AP 1,500,000
AR, beg (1,500,000) Accrual – Gross Discounts 20,000
Sales P 5,850,000 Payments - NP 400,000
Less: Payables, end. 220,000
Discount Payables, beg. (310,000
(200,000) Sales Returns )
(400,000) Accrual – Gross Sales P 1,960,000
Accrual – Net Sales P 5,250,000
***Bank loan not included in the
balance
Problem 14-12
1. A
2. A

Cash Sales P 500,000

Collection - AR 1,800,000
Discounts 40,000
Collection - NR 80,000
Receivables, end. 400,000
Receivables, beg. (400,000)
Accrual – Gross Sales P 2,420,000

Cash Purchases P 130,000

Problem 14-13
B. Prepaid Royalties, beg. P 650,000
Year-end credit adjustment (250,000)
Prepaid Royalties, end. P 400,000

Problem 14-14
D. Annual Insurance, Jul 1 P 32,000
Insurance expense (16,000)
Insurance, Dec. 31 P 16,000

Problem 14-15
1. A
2. A

Insurance, Mar. 1 P 72,000

Insurance expense (2,000)
Insurance, Mar. 31 P 70,000

Insurance, Mar. 31. 3,000

Insurance expense 72,000
Total Insurance 75,000
Insurance, Mar 31 70,000
Insurance expense P 5,000

Problem 14-16
B. Insurance, Jul. 1 P 72,000
Prepaid Tax 24,000
Less:
Expired Insurance (36,000)
Tax Covered (6,000)
Prepaid Expense P 54,000

Problem 14-17
D. Interest Expense, unadj. P 100,000
Decrease in Prepaid interest 5,500
Increase in Interest Payable 8,500
Interest Expense, Dec. 31 P 114,000

Problem 14-18
B. Advertising Expense, unadj P 990,000
December Bill 50,000
Future Advertising (60,000)
Advertising Expense, Dec. 31 P 980,000

Problem 14-19
A. Compensation Expense, unadj P 490,000
Accrued Salary 18,000
Bonus 175,000
Compensation Expense, Dec. 31 P 683,000
Problem 14-20
B. Professional fees, unadj P 820,000
December Bill 60,000
Future Advertising 70,000
Professional fees, Dec. 31 P 950,000

Problem 14-21
A. Rent Revenue, unadj P 8,000,000
Increase in Receivable 280,000
Decrease in Unearned Income 800,000
Rent Revenue, Dec. 31 P 9,080,000
Problem 14-22
C. Royalty Revenue, unadj P 2,500,000
Increase in Receivable 50,000 Increase in
Unearned (200,000)
Royalty Revenue, Dec. 31 P 2,350,000

Problem 14-23

2019
Dec. 31 Accounts Receivable 250,000
Retained Earnings 160,000
Sales 90,000

Retained Earnings 350,000

Advances to Supplier 100,000
Purchases 170,000
Accounts Payable 280,000

Expenses 30,000
Retained Earnings 70,000
Accrued Expenses 100,000

Inventory, beg. 150,000

Retained Earnings 150,000

Inventory, end 210,000

Income Summary 210,000

Retained Earnings 310,000

Depreciation 320,000
Acc. Dep – Equipment 30,000
Acc. Dep – Building 600,000

Doubtful Accounts 25,000

Allowance for DA 25,000

Interest Expense 36,000

Interest Payable 36,000 Computations:
Sales, Cash Basis P 4,000,000 Expenses P 1,500,000
AR, end 250,000 Accrued Exp, end 100,000
AR, beg. (200,000) Accrued Exp, beg (70,000)
Prior Period, adj 40,000 Expenses P 1,530,000
Sales P 4,090,000
Retained Earnings, unadj P 600,000
Purchases, Cash Basis P 2,000,000 Errors:
AP, end 280,000 Sales earned, 2018 200,000
AP, beg. (350,000) Prior Period Sales Adjustment (40,000)
Error 100,000 Unrecorded Purchases, 2018 (350,000)
Purchases P 1,830,000 Accrued Expenses (70,000)
Inventory, beg 150,000 Unrecorded Inventory 150,000
Inventory, end. (210,000) (310,000)
Unrecorded Depreciation
COGS P 1,770,000 P 180,000
Retained Earnings, adj

Zamboanga Company Income

Statement
Year Ended December 31, 2019

Sales P 4,090,000
Cost of Sales 1,770,000
Gross Profit 2,320,000

Expenses 1,530,000
Depreciation 320,000
Doubtful Accounts 25,000
Interest Expense 36,000 1,911,000
Net Income P 409,000

Zamboanga Company
Statement of Financial Position
December 31, 2019

ASSETS

Current Assets
Cash P 1,500,000
Account Receivable – net 225,000
Inventory 210,000
Advances to Supplier 100,000
Total Current Assets P 2,035,000

Noncurrent Assets
Equipment – net 170,000
Building – net 900,000
Land 800,000
Total Noncurrent Assets 1,870,000

Total assets P 3,905,000

 LIABILITIES AND SHARESHOLDER’S EQUITY

Current Liabilities
Accounts Payable 280,000
Accrued Expenses 136,000
Total Current Liabilities 416,000

Noncurrent Liabilities
Mortgage Payable 900,000

Equity
Share Capital 2,000,000
Retained Earnings (180,000 + 409,000) 589,000
Shareholder’s Equity 2,589,000
Total Liabilities and Shareholder’s Equity P 3,905,000

Problem 14-24

2019
Dec. 31 Accounts Receivable 40,000
Sales 40,000

Purchases 30,000
Accounts Payable 30,000

Inventory, end 230,000

Income Summary 230,000

Doubtful Accounts 15,000

Allowance for DA 15,000

Depreciation 90,000
Acc. Dep. – Equipment 40,000
Acc, Dep. – Building 50,000

Rent 5,000
Retained Earnings 5,000
Accrued Rent 10,000

Prepaid Insurance 12,000

Retained Earnings 5,000
Insurance 7,000

Computations:
 Purchases, Cash Basis P 1,200,000
Sales, Cash Basis P 2,000,000 AP, end 130,000
AR, end 290,000 AP, beg. (100,000) Purchases P
AR, beg. (250,000) 1,230,000
Sales P 2,040,000 Inventory, beg 150,000
Inventory, end. (230,000)
COGS P 1,150,000

Retained Earnings, unadj P 345,000

Errors:
Unrecorded Rent, 2018 (5,000)
Unrecorded Insurance 7,000
Retained Earnings, adj P 347,000

Evelyn Company
Income Statement
Year Ended December 31, 2019
Sales P 2,040,000
Cost of Sales 1,150,000
Gross Profit 890,000

Office Expenses 255,000

Depreciation 90,000
Doubtful Accounts 15,000
Rent 245,000
Insurance 45,000
Supplies Expense 140,000 790,000
Net Income P 100,000

Evelyn Company
Statement of Financial Position
December 31, 2019

ASSETS
Current Assets
Cash P 200,000
Account Receivable – net 275,000
Inventory 230,000
Prepaid Insurance 12,000
Total Current Assets P 717,000
 Noncurrent Assets
Equipment – net 320,000
Building – net 750,000
Land 300,000
Total Noncurrent Assets 1,370,000

Total assets P 2,087,000

LIABILITIES AND SHARESHOLDER’S EQUITY

Current Liabilities
Accounts Payable 130,000
Accrued Expenses 10,000
Total Current Liabilities 140,000
Equity
Share Capital 1,500,000
Retained Earnings (180,000 + 409,000) 447,000
Shareholder’s Equity 1,947,000
Total Liabilities and Shareholder’s Equity P 2,087,000

Problem 14-25

2019
Dec. 31 Inventory, end 500,000
Income Summary 500,000

Accounts Receivable 500,000

Sales 500,000

Purchases 80,000
Accounts Payable 80,000

Expenses 20,000
Accrued Expense 20,000

Receivable from President 10,000

Purchases 10,000

Sales 25,000
Deposit from customer 25,000

Doubtful Accounts 5,000

Allowance for DA 5,000
 Supplies 5,000
Expenses 5,000

Equipment 100,000
Depreciation 5,000
Acc. Dep. – Equipment 5,000
Expenses 100,000

Prepaid Insurance 15,000

Expenses 15,000

Interest Expense 4,000

Interest Payable 4,000

Computations:
Purchases, Cash Basis P 4,200,000
Sales, Cash Basis P 4,400,000 AP, end 80,000
AR, end 100,000 Error Error (10,000)
(25,000) Purchases P 4,270,000
Sales P 4,475,000 Inventory, end. (500,000)
COGS P 3,770,000

Expenses P 560,000
Accrued Exp, end 20,000
Errors:
Supplies (5,000)
Equipment (100,000)
Insurance (15,000)
Expenses P 460,000

Civic Company
Income Statement
Year Ended December 31, 2019

Sales P 4,475,000
Cost of Sales 3,370,000
Gross Profit 705,000

Expenses 460,000
Doubtful Accounts 5,000
Depreciation 5,000
Interest Expense 4,000 474,000
Net Income P 231,000
 Civic Company
Statement of Financial Position
December 31, 2019

ASSETS
Current Assets
Cash P 840,000
Account Receivable – net 95,000
Inventory 500,000
Prepaid Insurance 15,000
Supplies 5,000
Receivable from President 10,000
Total Current Assets P 1,465,000

Noncurrent Assets
Equipment – net 95,000

Total assets P 1,560,000

LIABILITIES AND SHARESHOLDER’S EQUITY

Current Liabilities
Accounts Payable 80,000
Accrued Expenses 20,000
Deposit from Customers 25,000
Interest Payable 4,000
Total Current Liabilities 129,000

Non Current Liabilities

Notes Payable 200,000

Equity
Share Capital 1,000,000
Retained Earnings 231,000
Shareholder’s Equity 1,231,000
Total Liabilities and Shareholder’s Equity P 1,560,000

Problem 14-26
1A 6 B
2B 7 A
3D 8 A
4D 9 C
5C 10 D