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Charity Company

Proposed Audit Adjustments


12/31/2014

1.)Cash account included equipment acquisition fund of 60,000


2.) A Physical inventory on December 31, 2014 revealed goods costing 600,000
3.) Goods purchased under FOB shipping point on December 28, 2014 were received and recorded by Charity on January 4, 20
4.) AFDA should be adjusted to 5% of accounts receivable
5.) The company purchased 100 shares of its 100 peso par value ordinary share capital for 30,000, the amount having been cha
6.) Except for equipment purchased on June 30, 2014 for 20,000 cash, all equipment were acquired at the inception of the com
7.) Prepaid expenses include 4800 pesos insurance premium on a one year insurance policy, taken on october 1, 2014
8.) Unearned rent income on December 31, 2014 amounted to 10,000
9.) Accrued expenses on December 31, 2014 amounted to 54,000

Adjustments

1.)Equipment acquisition fund 60,000


Cash 60,000
To account for acquisition of equipment

2.)Merchandise inventory, End 600,000


Merchandise Inventory, Beg 600,000
To record inventory to its proper amount

3.)Purchases 50,000
Accounts Payable 50,000
To record purchases made on the cut off date

4.)Bad Debt Expense 9750*


Allowance for Doubtful Accounts 9,750
To establish an allowance for doubtful account

5.)Treasury shares 30,000


Investment 30,000
To set up treasury shares

6.)Depreciation Expense *39,200


Accumulated Depraciation 39,200
Torecord depreciation for the year

7.)Insurance Expense 1,200


Prepaid Expense 1,200
To record insurance expense consumed
8.)Unearned Rent Income 2,800
Rent Income 2,800
To adjust the unearned rent income to its correct balance

9.) Miscellaneous 3,000


Accrued Expenses 3,000
To adjust accrued expenses to its proper amount for december 31, 2014

Merchandise end 650,000


Purchases 66,000
Merch beg 584,000
ed by Charity on January 4, 2015, 50,000

0, the amount having been charged to the investment account


red at the inception of the company 3 years ago. Depreciation for 2014 has not been recorded.
en on october 1, 2014

Reclassifying entry

* Accounts Receivable 615,000


Multiply: 0.05
30750
Less: AFDA 21,000
9,750

*312,000+90,000 = 402,000 382,000/38,200 = 0.1


402,000 - 20,000 = 382,000 20,000 X 0.10 =2,000
76,400/2 = 38,200 (2,000/2 )+38,200 = 39,200

*Insurance Premium 4,800


Divide by 12
Total 400
Multiply : 3
Insurance Expense 1200
Working BS -VARIATION
Cash 191000 60,000 131,000
Accounts Receivable 615,000 615,000
Less: AFDA 21,000 9,750 30,750
Inventory 584,000 584,000 584,000 650,000
Prepaid Expenses 8,000 1,200 6,800
Investments 110,000 30,000 80,000
Furniture & Equipment 312,000 312,000
Miscellaneous Equipment 90,000 90,000
Accumulated Depreciation 76,400 39,200 115,600
Equipment Acquisition Fund 60,000 60,000

Accounts Payable 543,000 50,000 593,000


Accrued Expenses 51,000 3,000 54,000
Unearned Rent Income 12,800 2,800 10,000

Ordinary Share Capital 600,000 600,000


Retained Earnings 182,800 182,800
Net Income
Treasury shares 30,000 30,000
131,000
615,000
30,750
650,000
6,800
80,000
312,000
90,000
115,600
60,000

593,000
54,000
10,000

600,000
182,800
388,650
30,000
1,974,800 1,974,800
0
Charity Company
Working Trial Balance

Reference Per books Per audit Audited Balances


WORKING PL VARIATION
Sales 3,500,000
Rent Income 48,000 2,800
Purchases 2424000 50,000 2,474,000
Salaries Expense 400,000 400,000
Advertising Expense 124,000 124,000
Commission Expense 80,000 80,000
Utilities Expense 32,000 32,000
Supplies Expense 12,000 12,000
Transportation Expense 14,000 14,000
Repairs & Maintainance 16,000 16,000
Miscellaneous Expense 23,000 3,000 26,000
Bad debt expense 9,750 9,750
Depreciation Expense 39,200 39,200
Insurance Expense 1,200 1,200
Total 3125000 3548000 103150 2800 3,228,150
NET INCOME

Sales
Cos
MI,beg
Purchases
GAS
MI,end
CGS
GP
Selling
admin
Net income
Audited Balances Profit(Loss) Balance Sheet

3,500,000 3,500,000
50,800 50,800
2,474,000
400,000
124,000
80,000
32,000
12,000
14,000
16,000
26,000
9,750
39,200
1,200
3,550,800 3228150 3550800 0 0
322650
Charity Company
Working Trial Balance

Per books Per audit Audited Balances Profit(Loss)


Cash 191000 60,000 131,000
Accounts Receivable 615,000 615,000
Less: AFDA 21,000 9,750 30,750
Inventory 584,000 584,000 584,000
Prepaid Expenses 8,000 1,200 6,800
Investments 110,000 30,000 80,000
Furniture & Equipment 312,000 312,000
Miscellaneous Equipment 90,000 90,000
Accumulated Depreciation 76,400 39,200 115,600
Equipment Acquisition Fund 60,000 60,000

Accounts Payable 543,000 50,000 593,000


Accrued Expenses 51,000 3,000 54,000
Unearned Rent Income 12,800 2,800 10,000

Ordinary Share Capital 600,000 600,000


Retained Earnings 182,800 182,800
Treasury shares 30,000 30,000

Sales 3,500,000 3,500,000


Rent Income 48,000 2,800 50,800
Purchases 2424000 50,000 2,474,000 2,474,000
Salaries Expense 400,000 400,000 400,000
Advertising Expense 124,000 124,000 124,000
Commission Expense 80,000 80,000 80,000
Utilities Expense 32,000 32,000 32,000
Supplies Expense 12,000 12,000 12,000
Transportation Expense 14,000 14,000 14,000
Repairs & Maintainance 16,000 16,000 16,000
Miscellaneous Expense 23,000 3,000 26,000 26,000
Bad debt expense 9,750 9,750 9,750
Depreciation Expense 39,200 39,200 39,200
Insurance Expense 1,200 1,200 1,200
Total 5035000 5035000 195950 195950 5,136,950 5,136,950 3812150
Profit(Loss) Balance Sheet
131,000
615,000
30,750
650,000 650,000
6,800
80,000
312,000
90,000
115,600
60,000

593,000
54,000
10,000

600,000
182,800
30,000

3,500,000
50,800

4200800 1,974,800 1,586,150


388650
Charity Company
Working Trial Balance

Per books Per audit Audited Balances Profit(Loss)


Cash 191000 125,000 15,000 301,000
Accounts Receivable 615,000 15,000 2,500 627,500
Less: AFDA 21,000 2,500 12,875 31,375
Inventory 584,000 584,000 584,000
Prepaid Expenses 8,000 6,000 2,000
Investments 110,000 110,000
Furniture & Equipment 312,000 3,000 309,000
Miscellaneous Equipment 90,000 32,000 58,000
Accumulated Depreciation 76,400 2,630 44,400 118,170

Accounts Payable 543,000 50,000 593,000


notes payable 100,000 100,000
Accrued Expenses 51,000 51,000
Unearned Rent Income 12,800 11,815 985
discount on np 10,000 5,000 5,000
Ordinary Share Capital 600,000 600,000
Retained Earnings 182,800 182,800

Sales 3,500,000 3,500,000


Rent Income 48,000 11,815 59,815
Gain on sale 2,630 2,630
Purchases 2424000 50,000 2,474,000 2,474,000
Salaries Expense 400,000 400,000 400,000
Advertising Expense 124,000 124,000 124,000
Commission Expense 80,000 80,000 80,000
Utilities Expense 32,000 32,000 32,000
Supplies Expense 12,000 12,000 12,000
Transportation Expense 14,000 14,000 14,000
Repairs & Maintainance 16,000 16,000 16,000
Miscellaneous Expense 23,000 23,000 23,000
Bad debt expense 12,875 12,875 12,875
Depreciation Expense 44,400 44,400 44,400
Insurance Expense 6,000 6,000 6,000
I nt expense 5,000 5,000

Total 5035000 5035000 285220 285220 5,229,775 5,244,775 3,827,275


Profit(Loss) Balance Sheet
301,000
627,500
31,375
571,200 571,200
2,000
110,000
309,000
58,000
118,170

593,000
100,000
51,000
985
5,000
600,000
182,800

3,500,000
59,815
2,630

4,133,645 1,978,700 1,682,330


306,370 306,370
Adjustments

1.) the cash account includes a cutomers check for 15,000 deposited on December 25 but returned by the bank for Dec 28 for
Accounte receivable 15,000
Cash in bank 15,000

2.) the AFDA should be adjusted to 5% of the customers outstanding balance, after writing off 2,500 of uncollectible accounts.
Allowance for doubtful accounts 2,500
Accounts receivable 2,500

Bad debt expense 12,875


Allowance for doubtful accounts 12,875

3.) A physical inventory count of the merchandise at year end amounted to 601,200

Merchandise inventory, end 601,200


Merchandise inventory, beg 601,200

4.) a purchase of merchandise FOB shipping point, 50,000, were in transit on december 31, 2014 was neither taken as liability
Purchases 50,000
Accounts payable 50,000

5.) Goods received on consignment still unsold were included in the inventory at the agreed selling price of 30,000
Merchandise inventory, beg 30,000
Merchandise inventory, end 30,000

6.) the beginning inventory is correctly stated


no entry

7.) On July 1, 201,4 equipment acquired on october 1, 2011 with a carrying value of 32,000 on dec 31, 2013 was sold for 35,00
Accumulated depreciation 2630
Cash 35,000
Gain on sale of equipment 2,630
furniture and equipment 3,000
Miscellaneous equipment 32,000
8.) depreciation for the year 2014 has not been recorded, depreciation rate is 12%
Depreciation expense 44,400
Accumulated depreciation 44,400
9.) an insurance policy was renewed on the inventory and equipment on April 1, 2014 with an annual premium of 8,000 paid o
Insurance expense 6,000
Prepaid insurance 6,000

10.) the unearned rent account consisted of rent collected for 13 months ending january 31, 2015.
Unearned rent 11,815
rent income 11,815

11.) the one year note payable of 100,000 taken on July 1, 2014 at an annual interest rate of 10% was not recorded the net pro
int exp 5,000
disc 5,000

cash 90,000
discount on np 10,000
notes payable 100,000
rned by the bank for Dec 28 for lack of counter signature no entry was made by the company for the return of the check or its re deposit o

2,500 of uncollectible accounts.


Accounts receivable 615,000
Add: adj for #1 15,000
Less: 2,500
Multiply: 5% 0.05
Required AFDA 31,375
Less: AFDA recorded in books 21,000
Adj 10,375
Add: Write off 2,500
12,875

14 was neither taken as liability nor included in the inventory on that date.

lling price of 30,000

dec 31, 2013 was sold for 35,000 cash. The sales proceed was credited to the furniture and equipment account.

960
annual premium of 8,000 paid on that date.

0% was not recorded the net proceeds was 90,000


n of the check or its re deposit on January 2, 2015
Proposed Audit Adjustments
1. Accounts Receivable
Cash in Bank
#
2. Doubtful Accounts Expense
Allowance for Doubtful Accounts
#
3. Cost of Goods Sold
Inventory, end
Purchase Returns and Allowances
Purchases
Inventory, beg
#
4. Purchases
Accounts Payable
#
5. Inventory, end I/S
Inventory, end B/S
#
6. NO ENTRY

7. Accumulated Depreciation -Equipment


Gain on Sale of Equipment
Furniture and Equipment
#
8. Depreciation Expense -Furniture
Accumulated Depreciation -Furniture
#
9. Prepaid Insurance
Insurance Expense
#
10. Prepaid Rent
Rent Expense
#
11. Discount on Notes Payable
Interest Expense
#
12. Retained Earnings
Goodwill
#
DR CR
15,000.00
15,000.00

15,650.00
ul Accounts 15,650.00

2,120,500.00 Dito po binawas ko na agad sa invty end yung goods


621,200.00 on consignment
36,500.00
2,209,300.00
568,900.00

50,000.00
50,000.00

30,000.00 Ito po diko sure, pero for the benefit lang na maipaki
30,000.00 yung entry na binawas siya sa invty end ng balance
sheet, pero hindi po ako marunong kung paano
ilalagay yung invty end na debit sa income statemen

11,000.00
6,000.00
5,000.00

64,300.00
ation -Furniture 64,300.00

4,200.00
4,200.00

10,000.00
10,000.00

11,000.00
11,000.00

300,000.00
300,000.00
Dito po binawas ko na agad sa invty end yung goods
on consignment

Ito po diko sure, pero for the benefit lang na maipakita


yung entry na binawas siya sa invty end ng balance
sheet, pero hindi po ako marunong kung paano
ilalagay yung invty end na debit sa income statement

Ito po, 100,000 x 12% x 11/12. dapat pag


acquire niya palang ng note, since 1 year lang
yun, kung given agad na may discount, dapat
nakadebit na siya ng "discount on n/p na
12,000" . Since nung aug 31 lang sya
nagdiscount, tapos bago lang nagkaroon ng
discount on n/p, dapat 1 month palang ang
discount niya, september palang. kaya ganern
Per Books
Account Titles DR CR
Cash 225,000.00
Accounts Receivables 936,000.00
Allowance for Doubtful Accounts 31,900.00
Notes Receivable 155,000.00
Merchandise Inventory 568,900.00
Furniture and Equipment 618,000.00
Accumulated Depreciation 187,500.00
Goodwill 300,000.00
Accounts Payable 536,000.00
Notes Payable 100,000.00
Common Stock 1,000,000.00
Retained Earnings 552,500.00
Sales 3,728,200.00
Sales Returns and Allowances 47,600.00
Purchases 2,159,300.00
Purchases Returns and Allowances 36,500.00
Advertising Expense 96,100.00
Sales Salaries 288,500.00
Commission Salaries 152,000.00
MiscellaneousSelling Expenses 29,900.00
Rent Expense 130,000.00
Office Salaries 197,200.00
Light and Water 15,000.00
Insurance Expense 10,800.00
Taxes and Licences 47,800.00
General Expenses 163,400.00
Interest Expense 41,200.00
Interest Income 9,100.00
TOTAL 6,181,700.00 6,181,700.00

Doubtful Accounts Expense - -


Costs of Goods Sold - -
Merchandise Inventory, end - -
Gain on Sale of Equipment - -
Depreciation Expense - -
Prepaid Insurance - -
Prepaid Rent - -
Discount on Notes Payable - -
Income Tax Expense
Income Tax Payable
Profit
6,181,700.00 6,181,700.00
Audit Adjustments Per Audit
DR CR DR CR
15,000.00 210,000.00
15,000.00 951,000.00
15,650.00 47,550.00
155,000.00
568,900.00 -
5,000.00 613,000.00
11,000.00 64,300.00 240,800.00
300,000.00 -
50,000.00 586,000.00
100,000.00
1,000,000.00
300,000.00 252,500.00
3,728,200.00
47,600.00
50,000.00 2,209,300.00 -
36,500.00 -
96,100.00
288,500.00
152,000.00
29,900.00
10,000.00 120,000.00
197,200.00
15,000.00
4,200.00 6,600.00
47,800.00
163,400.00
11,000.00 30,200.00
9,100.00

15,650.00 15,650.00
2,120,500.00 2,120,500.00
621,200.00 621,200.00
6,000.00 6,000.00
64,300.00 64,300.00
4,200.00 4,200.00
10,000.00 10,000.00
11,000.00 11,000.00
3,259,350.00 3,259,350.00 5,970,150.00 5,970,150.00
Income Statement Per Audit
DR CR

3,728,200.00
47,600.00
-
-
96,100.00
288,500.00
152,000.00
29,900.00
120,000.00
197,200.00
15,000.00
6,600.00
47,800.00
163,400.00
30,200.00
9,100.00

15,650.00
2,120,500.00

6,000.00
64,300.00
3,394,750.00 3,743,300.00
Per Books
Account Titles DR
Cash 225,000.00
Accounts Receivables 936,000.00
Allowance for Doubtful Accounts
Notes Receivable 155,000.00
Merchandise Inventory 568,900.00
Furniture and Equipment 618,000.00
Accumulated Depreciation
Goodwill 300,000.00
Accounts Payable
Notes Payable
Common Stock
Retained Earnings
Sales
Sales Returns and Allowances 47,600.00
Purchases 2,159,300.00
Purchases Returns and Allowances
Advertising Expense 96,100.00
Sales Salaries 288,500.00
Commission Salaries 152,000.00
MiscellaneousSelling Expenses 29,900.00
Rent Expense 130,000.00
Office Salaries 197,200.00
Light and Water 15,000.00
Insurance Expense 10,800.00
Taxes and Licences 47,800.00
General Expenses 163,400.00
Interest Expense 41,200.00
Interest Income
TOTAL 6,181,700.00

Doubtful Accounts Expense -


Costs of Goods Sold -
Merchandise Inventory, end -
Gain on Sale of Equipment -
Depreciation Expense -
Prepaid Insurance -
Prepaid Rent -
Discount on Notes Payable -
Income Tax Expense
Income Tax Payable
Profit
6,181,700.00
Per Books Audit Adjustments Per Audit
CR DR CR DR
15,000.00 210,000.00
15,000.00 951,000.00
31,900.00 15,650.00
155,000.00
568,900.00 -
5,000.00 613,000.00
187,500.00 11,000.00 64,300.00
300,000.00 -
536,000.00 50,000.00
100,000.00
1,000,000.00
552,500.00 300,000.00
3,728,200.00
47,600.00
50,000.00 2,209,300.00 -
36,500.00 36,500.00
96,100.00
288,500.00
152,000.00
29,900.00
10,000.00 120,000.00
197,200.00
15,000.00
4,200.00 6,600.00
47,800.00
163,400.00
11,000.00 30,200.00
9,100.00
6,181,700.00

- 15,650.00 15,650.00
- 2,120,500.00 2,120,500.00
- 621,200.00 621,200.00
- 6,000.00
- 64,300.00 64,300.00
- 4,200.00 4,200.00
- 10,000.00 10,000.00
- 11,000.00 11,000.00
6,181,700.00 3,259,350.00 ### 5,970,150.00
Per Audit Balance Sheet per Audit
CR DR CR
210,000.00
951,000.00
47,550.00 47,550.00
155,000.00
-
613,000.00
240,800.00 240,800.00
-
586,000.00 586,000.00
100,000.00 100,000.00
1,000,000.00 1,000,000.00
252,500.00 252,500.00
3,728,200.00

9,100.00

621,200.00
6,000.00

4,200.00
10,000.00
11,000.00

104,565.00
243,985.00
5,970,150.00 2,575,400.00 2,575,400.00