PROBLEM NO.

4
A portion of the SPARK COMPANY’s statement of financial position appears as follows:
December 31, 2017 December 31, 2016
Assets:
P353,300 P100,000
Cash
Notes receivable 0 25,000
Inventory ? 199,875
Liabilities:
? 75,000
Accounts payable

Spark Company pays for all operating expenses with cash and purchases all inventory on credit.

During 2017, cash totaling P471,700 was paid on accounts payable. Operating expenses for
2017 totaled P220,000. All sales are cash sales. The inventory was restocked by purchasing
1,500 units per month and valued by using periodic FIFO. The unit cost of inventory was
P32.60 during January 2017 and increased P0.10 per month during the year. Spark sells only
one product. All sales are made for P50 per unit. The ending inventory for 2016 was valued at
P32.50 per unit.

31. Number of units sold during 2017

A. 7,066 B. 18,400 C. 4,268 D. 13,400

32. Accounts payable balance at December 31, 2017

A. P190,100 B. P50,000 C. P199,100 D. P200,000

33. Inventory quantity on December 31, 2017

A. 5,750 B. 2,750 C. 17,084 D. 10,750

34. Cost of inventory on December 31, 2017

A. P187,450 B. P186,875 C. P192,950 D. P189,660

35. Cost of goods sold for the year ended December 31, 2017

A. P609,125 B. P609,700 C. P606,915 D. P603,625

PROBLEM NO. 5
A depreciation schedule for semi-trucks of ISIDRO MANUFACTURING COMPANY was requested
by your auditor soon after December 31, 2017, showing the additions, retirements,
depreciation, and other data affecting the income of the company in the 4-year period 2014 to
2017, inclusive.
The following data were ascertained.
Balance of Trucks account, Jan. 1, 2014 P180,000
Truck No. 1 purchased Jan. 1, 2011, cost
Truck No. 2 purchased July 1, 2011, cost 220,000
Truck No. 3 purchased Jan. 1, 2013, cost 300,000
Truck No. 4 purchased July 1, 2013, cost 240,000
Balance, Jan. 1, 2014 P940,000

The Accumulated Depreciation—Trucks account previously adjusted to January 1, 2014, and

entered in the ledger, had a balance on that date of P302,000 (depreciation on the four trucks
from the respective dates of purchase, based on a 5-year life, no salvage value). No charges
had been made against the account before January 1, 2014.
Transactions between January 1, 2014, and December 31, 2017, which were recorded in the
ledger, are as follows.
July 1, 2014 Truck No. 3 was traded for a larger one (No. 5), the agreed purchase price of
which was P400,000. Isidro Mfg. Co. paid the automobile dealer P220,000 cash
on the transaction. The entry was a debit to Trucks and a credit to Cash,
P220,000. The transaction has commercial substance.
Jan. 1, 2015 Truck No. 1 was sold for P35,000 cash; entry debited Cash and credited Trucks,
P35,000.
July 1, 2016 A new truck (No. 6) was acquired for P420,000 cash and was charged at that
amount to the Trucks account. (Assume truck No. 2 was not retired.)
July 1, 2016 Truck No. 4 was damaged in a wreck to such an extent that it was sold as junk
for P7,000 cash. Isidro Mfg. Co. received P25,000 from the insurance company.
The entry made by the bookkeeper was a debit to Cash, P32,000, and credits to
Miscellaneous Income, P7,000, and Trucks, P25,000.

Entries for depreciation had been made at the close of each year as follows: 2014, P210,000;
2015, P225,000; 2016, P250,500; 2017, P304,000.

36. What is the total depreciation expense for the year ended December 31, 2014?
A. P180,000 B. P198,000 C. P172,000 D. P228,000

37. What is the gain (loss) on trade in of Truck #3 on July 1, 2014?

A. (P30,000) B. P10,000 C. (P60,000) D. P190,000

38. What is the net book value of the Trucks on December 31, 2017?
A. P414,000 B. P348,000 C. P228,500 D. P894,000

39. The total depreciation expense recorded for the 4-year period (2014-2017) is overstated
by
A. P185,500 B. P265,500 C. P287,500 D. P275,500
40. The books have not been closed for 2017. What is the compound journal entry on
December 31, 2017 to correct the company’s errors for the 4-year period (2014-2017)?
A. Accumulated depreciation 629,500
Trucks 480,000
Retained earnings 9,500
Depreciation expense 140,000
B. Accumulated depreciation 665,500
Trucks 480,000
Retained earnings 45,500

Depreciation expense 140,000

C. Accumulated depreciation 665,500
Trucks 480,000
Retained earnings 185,500
D. Accumulated depreciation 665,500
Trucks 665,500

PROBLEM NO. 1
The following are selected unadjusted account balances and adjusting information of
TANYING CORP. for the year ended December 31, 2017.
Retained earnings, January 1 P 1,322,010
Sales salaries and commissions 75,000
Advertising expense 48,270
Legal services 6,675
Insurance and licenses 23,040
Travel expense – sales representatives 13,680
Depreciation expense – sales/delivery equipment 18,300
Depreciation expense – office equipment 12,600
Interest revenue 1,650
Utilities 19,200
Telephone and postage 4,425
Office supplies inventory 6,540
Miscellaneous selling expenses 8,220
Dividends 99,000
Dividend revenue 15,450
Interest expense 13,560
Allowance for doubtful accounts (credit balance) 480
Officers’ salaries 109,800
Sales 1,353,000
Sales returns and allowances 11,700
Sales discounts 2,640
Gain on sale of assets 23,460
Inventory, January 1 269,100
Inventory, December 31 61,650
Purchases 424,800
Freight in 16,575
Accounts receivable, December 31 783,000
Income from discontinued operations (before income taxes) 120,000
Loss on sale of equipment 217,800
Ordinary shares outstanding 117,000

Adjusting information:
(a) Cost of inventory in the possession of consignees as of December 31, 2017,
was not included in the ending inventory balance.................................................P55,800
(b) After preparing an analysis of aged accounts receivable, a decision was made
to increase the allowance for doubtful accounts to a percentage of the ending
accounts receivable balance.......................................................................................2%
(c) Purchase returns and allowances were unrecorded. They are computed as a
percentage of purchases (not including freight in).......................................................6%
(d) Sales commissions for the last day of the year had not been accrued. Total
sales for the day...................................................................................................P9,180
Average sales commissions as a percent of sales.........................................................3%
(e) No accrual had been made for a freight bill received on January 2, 2018, for
goods received on December 29, 2017..................................................................P1,710
Page 2
(f) An advertising campaign was initiated November 2, 2017. This amount was
recorded as “Prepaid advertising” and should be amortized over a six-month
period. No amortization was recorded...................................................................P5,454
Freight charges paid on sold merchandise were netted against sales. Freight
charges on sales during 2017..............................................................................P10,500
(g) Interest earned but not accrued............................................................................P1,680
(h) Depreciation expense on a new forklift purchased March 1, 2017, had not
been recognized. (Assume all equipment will have no salvage value and the
straight-line method is used. Depreciation is calculated to the nearest month.)
Purchase price....................................................................................................P23,400
Estimated life in years.................................................................................................10
(i) A “real” account is debited upon the receipt of office supplies. Office supplies on hand at
year-end..............................................................................................................P3,675
(j) Income tax rate (on all items)..................................................................................30%
Compute the adjusted balances of the following:
1. Net sales
A. P1,363,500 B. P1,349,160 C. P1,353,000 D. P1,342,500
2. Cost of goods available for sale
A. P684,900 B. P824,697 C. P686,697 D. P779,913
3. Inventory, December 31, 2015
A. P61,500 B. P61,350 C. P56,250 D. P117,450
4. Distribution costs
A. P181,649 B. P167,513 C. P178,013 D. P176,453
5. Administrative expenses
A. P207,345 B. P193,785 C. P194,265 D. P194,595
6. Allowance for doubtful accounts
A. P15,660 B. P16,140 C. P15,180 D. P480
7. Total income
A. P817,143 B. P811,653 C. P779,913 D. P822,153
8. Income from continuing operations before taxes
A. P231,360 B. P436,795 C. P218,995 D. P239,695
9. Office supplies inventory
A. P6,540 B. P3,675 C. P2,865 D. P 0
10. Net income
A. P237,296 B. P210,299 C. P250,289 D. P216,296