Wesleyan University-Philippines (WU-P)

Maria, Aurora Aurora Campus

ACCO 17 – Final Examination

General Instruction:
1. Do not forget to put your name on your answer sheet.
2. Kindly submit your output via (1) email cuentoingrid2531@gmail.com or (2) direct
message. Do not forget to put your name on our submission list via our group chat.
3. Please show your solution in good accounting format. No solution, no points.
4. Duration: 6:00PM – 8:00PM. Strictly, no late submission.

Good luck and God bless!

Problem 1: CORRECTION OF ERROR (45points)

You discovered the following errors in connection with your examination of the financial
statements of the KAYAMOYAN Corporation:

1. Accounts payable of P88,300 2020 was erroneously credited to notes payable.

2. Rent income of P65,500 in 2020 was erroneously credited to miscellaneous income.

The following data were extracted from the financial statements of KAYAMOYAN Corporation:

Year ended 2020 Year ended 2021

Net Income 200,000 160,000
Working Capital 180,000 260,000
Retained Earnings, end of the year 200,000 360,000

Requirements:
Based on the above data, determine the following:
1. Net Income in 2020
2. Working capital, end of 2020
3. Retained earnings, end of 2020
4. Net Income in 2021
5. Working capital, end of 2021
6. Retained earnings, end of 2021
7. Prepared adjusting entries assuming errors were disclosed in
(a) 2020,
(b) 2021, and
(c) 2022

Answers/Solution:
1. 200,000
2. 180,000
3. 200,000
4. 160,000

ACCO 17 – Final Exam

TTH 18:00 – 19:30
 Wesleyan University-Philippines (WU-P)
Maria, Aurora Aurora Campus

5. 260,000
6. 360,000
7. 2020:
Miscellaneous Income 65,500
Rent Income 65,500

Notes Payable 88,300

Accounts Payable 88,300
2021 : None
2022 : None

Problem 2: AUDIT OF FS (15 points)

The following data are obtained from a set of books kept by the proprietor of LAVARN store
for 2021.
December 31 January 1
Cash 890,000 600,000
Notes receivable 600,000 200,000
Accounts receivable 1,000,000 800,000
Merchandise inventory 500,000 800,000
Equipment 550,000 600,000
Notes payable 250,000 350,000
Accounts payable 500,000 600,000
Accrued interest payable 20,000 40,000
Unearned rent income 20,000 60,000

The cashbook shows the following information:

Balance, January 1 600,000
Receipts
Accounts receivable 1,500,00
0
Notes receivable 500,000
Cash sales 400,000
Rent income 80,000
Sales of equipment costing
P100,000 and with book value of
P 50,000 60,000
Investment 300,000 2,840,000
Total 3,440,000
Payments:
Accounts payable 750,000
Notes payable 650,000
Cash purchase 300,000

ACCO 17 – Final Exam

TTH 18:00 – 19:30
 Wesleyan University-Philippines (WU-P)
Maria, Aurora Aurora Campus

Interest expenses 50,000

Expenses 400,000
Equipment 200,000
Withdrawals 200,000 2,550,000
Balance, December 31 890,000

Supplementary information:
a. Sales discounts granted to customers – P50,000
b. Sales returns made by customers – P150,000
c. Accounts receivable written off as uncollectible – P30,000
d. Purchase discounts on accounts payable paid – P40,000

Requirements:
Based on the above and the result of your audit, determine the following:
1. Compute for total gross sales in 2021.
Solution:
AR / NR /Advances From Customer
AR, beg. 800,000 1,000,000 AR, end
NR, beg. 200,000 600,000 NR, end
Recoveries 0 150,000 Sales Ret. & Allow
Sales on Account 2,830,000 50,000 Sales Discount
30,000 Write off
2,000,000 Collection w/recov.
Total 3,830,000 3,830,000 Total

Cash Sales 400,000

Sales on Account 2,830,000
Total Gross Sales 3,230,000

2. Compute for total gross purchases in 2021.

Solution:
AP / NP / Adv. To Sup.
AP, end 500,000 600,000 AP, beg.
NP, end 250,000 350,000 NP, beg.
Purch. Ret. & Allow 0
Purchase Discount 40,000
Payment 1,400,000 1,240,000 Purchase on
Account
Total 2,190,000 2,190,000 Total

Cash Purchase 300,000

ACCO 17 – Final Exam

TTH 18:00 – 19:30
 Wesleyan University-Philippines (WU-P)
Maria, Aurora Aurora Campus

Purchase on Account 1,240,000

Total Gross Purchase 1,540,000

3. Compute for the cost of sales in 2021.

Solution:
Merchandise Inventory
Merch. Invty., beg 800,000 500,000 Merch. Invty., end
Purchases 1,540,000 0 Purch. Ret. &
Allow.
Freight-in 0 40,000 Purchase Discount
1,800,000 Cost of Sales
Total 2,340,000 2,340,000 Total

Problem 3: COMPREHENSIVE (20points)

DONOTGIVEUP Company began operation on January 1, 2019. Financial statements for the
years 2017 and 2018 contained the following errors:
2019 2020
Ending Inventory 800,000 under 400,000 over
Depreciation 150,000 under
Insurance expense 50,000 over 50,000 under
Prepaid insurance 50,000 under

In addition, on December 31, 2020, a fully depreciated equipment was sold for P100,000 cash
but the sale was not recorded until 2020.
Requirements:
Ignoring income tax, what is the total effect of the errors on:
1. Net Income in 2019
2. Net Income in 2020
3. Working capital on December 31, 2020
4. Retained earnings on December 31, 2020

Net Income Net Income Working Retained

2019 2020 Capital 2020 Earnings
2020
Ending Inventory
2019 (800,000) 800,000 - -
2020 400,000 400,000 400,000
Depreciation 150,000 150,000
Insurance Exp.
2019 (50,000) 50,000 - -

ACCO 17 – Final Exam

TTH 18:00 – 19:30
 Wesleyan University-Philippines (WU-P)
Maria, Aurora Aurora Campus

Net Income Net Income Working Retained

2019 2020 Capital 2020 Earnings
2020
2020 50,000 50,000
Prepaid Insurance (50,000) 50,000 - -
Sale (100,000) (100,000) (100,000)
Total Effect to: (750,000) 1,250,000 300,000 500,000

-end-
“That's what is incredible about human beings, is the choice to keep going.”
-Jack Antonoff

ACCO 17 – Final Exam

TTH 18:00 – 19:30