Cash To Inventories

THEORIES
CHAPTER 3 CASH AND CASH EQUIVALENTS

1C 1 Shorting is the act of selling a security at a given price without possessing i
2B Lapping occurs when an employee steals cash by diverting a payment from
3D Lapping is most likely to occur when the employee receives collection docu
4A Check kiting is the deliberate issuance of a check for which there is not suffi
5B Write a check for which there is not sufficient cash in the paye
6B Create a checking account at a different bank.
7C Deposit the fraudulent check in the checking account that wa
8C Withdraw the funds from the new checking account.
9C
10 D, prone to fr 3 Overstatment of disbursing account, overstatement of receiving account
11 B 4 Vouching of receipts is for Test of Control and Rollforward analysis
12 C D is testing total cash receipts and cash disbursements
13 C 8 Cutoff procedure, bank reconciliation has a weakness in terms of clearance
14 D
15 D
16 A
CHAPTER 4 RECEIVABLES AND RELATED REVENUES

1D 4i Completeness of sales
2C ii Existence
3C iii Existence/ Completeness
4C iv Valuation and allocation
5B
6D
7D
8B
9B
10 A
11 D
12 B
CHAPTER 5 INVENTORIES
1C
2D
3A
4C
5D
6B
7A
8A
9D
10 D *
11 B
given price without possessing it and purchasing it later at a lower price. (short selling)
sh by diverting a payment from one customer, and then hides the theft by diverting cash from another customer to offset the re
ployee receives collection documents and has access to records.
check for which there is not sufficient cash to pay the stated amount. The mechanics of this fraudscheme are as follows:
is not sufficient cash in the payer's account.
a different bank.
n the checking account that was just opened.
new checking account.
atement of receiving account

nd Rollforward analysis
ursements
weakness in terms of clearance
nother customer to offset the receivable from the first customer.
dscheme are as follows:

Chapter 3
LAST PROBLEM
A Total per Count 10,761.60
Cashier's Accountability:
PCF balance 10,500.00
Collections for a gift 350.00
Petty Cash Fund -
10,850.00
Cash Shortage - 88.40
Petty Cash Balance:

Currency and coins 1,156.60
Petty Cash Replenishment 3,450.00
4,606.60
Postage 670.00
IOUs 1,210.00
Miscellaneous 535.00
PDC check 1,500.00
DAIF check 1,890.00
Petty Cash Accounted 10,411.60
Petty Cash Balance, per books 10,500.00
B Total per Count 53,500.00
Cashier's Accountability:
PCF imprest balance 45,000.00
Replenishment -
Unused Postage 500.00
Payment to Meralco 3,500.00
Collection Handled by custodian 4,500.00
53,500.00
Cash shortage -
Petty Cash Balance:

Coins and Currency 17,000.00
Replenishment 18,000.00
35,000.00
PCVs 3,000.00
Advances to employees 3,000.00
DAIF 4,000.00

-
C Total Per Count 19,700.00
Cashier's Accountability
Customers check 4,800.00
19,800.00
Cash shortage - 100.00
Petty Cash Balance:

Currency and coins 6,400.00
6,400.00
Vouchers 3,000.00
IOUs 5,500.00
Cash shortage - 100.00
D Bills and coins 7,300.00

Vouchers
17-Dec 850.00
18-Jan 200.00
IOUs 17-Dec 4,200.00
Employees' check 17-Dec 2,800.00
Employees' check - PDC 18-Jan 4,250.00
Total per Count 19,600.00
Cashier's Accountability
Employees check 5,000.00
20,000.00
Petty Cash Balance

Bills and coins 7,300.00
Undisbursed vouchers (2018) 200.00
Employees check (2017) 2,800.00
10,300.00
Vouchers 850.00
PDC - Employees check (2018) 4,250.00
IOUs 4,200.00
19,600.00
Unsigned pay envelope payable to employee - 5,000.00
Petty cash accounted 14,600.00
Petty Cash Balance per book 15,000.00
E. Balance per book Balance per bank

608,700.00 850,000.00
Bank CM 150,000.00
Bank DM - 4,500.00
Outstanding checks - 120,400.00
Bank error 21,000.00
Book error - 3,600.00
750,600.00 750,600.00 -
Per books
Cash on hand and in bank 750,500.00
Cash on hand, per count - 88,000.00
Cash in bank 662,500.00
Should be, Cash in bank 608,700.00

141,800.00
Check #4523
Should be 19,500.00
As recorded 15,900.00
Adjustment 3,600.00
(2)
(1)
(4)
(3)
Cash in Bank (DIT)
Additional 5,500 needs to be accounted as Cash in Bank

(5)
(6)
Expenses
Cash
IOUs
Cash
Receivable
(8)
(7)
(10)
Unadjusted balance 750,500.00
Bank CM 150,000.00
Bank DM - 4,500.00
Book error - 3,600.00
Cash on hand and in bank, 892,400.00
Cash in bank 608,700.00
Cash on hand (should be) 283,700.00
Cash on hand per books 88,000.00
(9) Cash shortage 195,700.00
February
F. 31-Jan Receipts Disbursements 28-Feb-17
Unadjusted bank balance 13,500.00 790,450.00 647,700.00 156,250.00
Jan
OC - 65,000.00 - 65,000.00
DIT 54,500.00 - 54,500.00
Feb
OC 43,000.00 - 43,000.00
DIT 44,700.00 44,700.00
Adjusted balance 3,000.00 780,650.00 625,700.00 157,950.00

(14) (12) (13) (11)
Unadjusted book balance - 92,250.00 805,350.00 630,300.00 82,800.00
Jan
CM 123,500.00 - 123,500.00
SC - 3,250.00 - 3,250.00
DAIF - 25,000.00 - 25,000.00
Feb
CM 98,800.00 98,800.00
SC 4,650.00 - 4,650.00
DAIF 19,000.00 - 19,000.00
Adjusted balance 3,000.00 780,650.00 625,700.00 157,950.00
November Credits to Cash

G. Outstanding check, 90,000.00 190,400.00
Returned in Nov, recorded Dec - 6,000.00
SC in Nov, recorded Dec - 2,400.00
90,000.00 182,000.00
Checks and charges returned by bank

195,000.00
NSF - 12,000.00
SC - 3,000.00
Checks cleared with bank 180,000.00 180,000.00
Outstanding checks 2,000.00

0.018
0.020
Chapter 4
Problem 2
Count taken : December 30, 2017

Terms: FOB Shipping Point
(a) Cost of Sales 20,000

Inventory 20,000
To remove from inventory as sold
(b) Cost of Sales 18,000

Inventory 18,000
To remove from inventory as sold
(c) None
(d) Sales 40,000

Accounts Receivables 40,000
To remove revenues recognised for items not delivered as of 31 Dec
(e) Sales 60,000.00

Cost of sales 33,600.00
Accounts Receivables 60,000.00
Inventory 33,600.00
To remove revenues recognised for consigned items not sold as of 31 Dec
Consigned Unsold
Sales value 100,000.00 60,000.00
Cost 56,000.00 33,600.00
GP 44,000.00 26,400.00
GP % 0.79 0.79
(f) Sales 120,000

Accounts Receivables 120,000
To remove revenues recognised for items not delivered as of 31 Dec
(g) Accounts Receivables 60,000

Sales 60,000
To recognised sales on inventories that were delivered prior to 31 Dec
(h) None
(i) Accounts Receivables 80,000

Sales 80,000
(j) Accounts Receivables 90,000

Sales 90,000
d as of 31 Dec
r to 31 Dec
r to 31 Dec
r to 31 Dec
Chapter 4
Problem 3
Customer
A None. Payment received on 2 July 2017.
B Accounts Payable 74,000.00

Accounts Receivable 74,000.00
To offset the balance of purchase payable with receivable from customer
C Accounts Receivable - Cust 16,200.00

Accounts Receivable - Customer C 16,200.00
SL entry to correct balance of Customer C and L
D No adjustment. Await response for confirmation.

Meanwhile, perform subsequent receipts procedure and test cutoff of receivable.
E Sales 24,000.00
Inventory 16,500.00
FOB Destination, goods were not received as of 30 June
To remove sales recognised from the above goods.
F Deposit from Customer F 15,000.00

G Sales 85,000.00
Inventory 59,000.00
FOB Destination, goods were not received as of 30 June
To remove sales recognised from the above goods.
H Sales 2,500.00
To reduce the amount charged to customer
Receivable balance 10,000.00

Price as charged 200.00
Quantity of goods 50.00
Price as corrected 150.00
Receivable as corrected 7,500.00
Correction to be made - 2,500.00
I Sales 180,000.00
Inventory on consignment 120,000.00
Accounts receivables 180,000.00
To reverse the sales recognised for goods still on consignment
J Sales credit 5,000.00

Accounts receivables 5,000.00
To recognise adjustment on sales
om customer
Ask further!
Control on customer database
t cutoff of receivable.
Ask further!
Control on shipment
Ask further!
Control on pricing
Served as a confirmation of inventory on consignment
Note for disclosure on the inventory
Chapter 4
Problem 4 31-Dec-17
Days
Account Date DEBIT CREDIT BALANCE
outstanding
1 31-May 214 8,000 8,000
1-Jul 4,000 4,000
7-Jul 177 5,000 9,000
1-Sep 3,000 6,000
25-Sep 97 8,000 14,000
1-Nov 3,000 11,000
10-Dec 21 3,000 14,000
24,000 10,000 14,000
2 8-Aug 145 12,000 12,000

4-Oct 12,000 -
25-Nov 36 25,000 25,000
37,000 12,000 25,000
3 1-Jan 364 100,000 100,000

31-Mar 275 102,000 - 2,000
1-Dec 30 100,000 98,000
4 3-Feb 331 20,000 20,000

3-Aug 150 24,000 44,000
44,000 - 44,000
5 10-Feb 324 30,000 30,000

9-Apr 266 30,000 -
4-May 241 40,000 40,000
2-Jul 182 40,000 -
6-Sep 116 60,000 60,000
25-Nov 36 8,000 68,000
68,000 - 68,000
6 17-Jul 167 5,000 5,000

16-Aug 137 4,000 9,000
30-Sep 92 15,000 24,000
15-Oct 9,000 15,000
18-Oct 74 6,000 21,000
20-Dec 6,000 15,000
30,000 15,000 15,000
Subtotal
Required Allowance
Provision for doubtful accounts 5,370

Allowance for d/a
PROBLEM 7
Allowance for doubtful accounts 1 Jan 2017
Schedule for analyzing changes in allowance for doubtful accounts
Historical bad debts loss percentage
Year Credit Sales Accounts WrittenRecoveries Net

2013 1,500,000.00 15,000.00 - 15,000.00
2014 2,250,000.00 38,000.00 2,700.00 35,300.00
2015 2,950,000.00 52,000.00 2,500.00 49,500.00
2016 3,300,000.00 65,000.00 4,800.00 60,200.00
10,000,000.00 170,000.00 10,000.00 160,000.00
2017 4,000,000.00 83,000.00 5,000.00 78,000.00

14,000,000.00 253,000.00 15,000.00 238,000.00
Accounts Receivables
BB 1,250,000.00
Credit Sales 4,000,000.00
Collection 3,707,000.00
Write off 83,000.00
1,460,000.00
Allowance
20,000.00
Write off 83,000.00
Recovery 5,000.00
Allowance entry 82,820.00

24,820.00
Bad debts 20,000.00

Allowance for bad debts 20,000.00
To set up opening bad debts allowance
60 120 180 >180
Accounts 1-60 days Accounts 61-120 Accounts over 120
Accounts Not Due
past due days past due days past due
-
3,000.00
8,000.00
3,000.00
3,000.00 8,000.00 3,000.00 -
25,000.00
25,000.00 - - -
(3-month, 8% note)
(2-month, 9% note)
20,000.00
24,000.00
- - 24,000.00 20,000.00
60,000.00
8,000.00
8,000.00 60,000.00 - -
-
-
15,000.00
-
- 15,000.00 - -
36,000.00 83,000.00 27,000.00 20,000.00
1% 2% 5% 50%
360 1,660 1,350 10,000
13,370
Allowance, beg 8000

Should be 13,370
Adjustment 5,370
5,370
Net Write off 160,000.00

Bad debts %, 2016 0.02
Net Write off 238,000.00

Bad debts %, 2017 0.02
A/R, 31 Dec 2016 1,250,000.00

Bad debts allowance 20,000.00
A/R, 31 Dec 2016 1,460,000.00

Bad debts allowance 24,820.00
-
OPEN
-
Chapter 4 DONE
Problem 5
Sales at 25% over cost
Inventory, per count 98,000.00
Last receiving RR 1063

Last sales shipment SI 968
Unadjusted 98,000.00
Adjustments
Sales recorded after SI 968, no shipment

Sales Price
969 5,841.00
970 7,922.00
971 2,010.00
15,773.00
Received but late invoice
Sold and removed from inventory -
Late unloading 8,120.00

Sales Price Cost
12,700.00 10,160.00 10,160.00
Delayed shipment to customer

Sales Price Cost
19,270.00 15,416.00 15,416.00
Inventory write-down - 12,600.00
119,096.00
Another matter that should addressed is the accounting for freight charges. Relevant terms follow:
Freight collect – means freight is not yet paid upon shipment. The carrier will collect the shipping cost
Thus, freight is actually paid by the buyer but this does not mean that the buyer is the one who is supp
Freight prepaid – means freight is already paid in advance by the seller before shipment. Thus freight i
er but this does not mean that the seller is the one who is supposed to pay for the freight charges.
As a rule the entity who owns the goods being shipped should pay for the shipping costs. No special ac
is either FOB shipping point, freight collect or FOB destination, freight prepaid since the owner of the g
Special accounting arises when the term of the sale contract is either (a) FOB shipping point, freight p
Under FOB shipping point, freight prepaid, the buyer owns the goods being shipped but the seller alrea
Under FOB destination, freight collect, the seller owns the goods being shipped but the carrier will be c
Problem 6 DONE
a. No adjustment to inventory
Sales 60,000.00
Inventory billed but not shipped; FOB shipping point
b. Purchases/ Inventory 65,000.00

Accounts Payable 65,000.00
Inventory in transit; FOB shipping point
c. Work in Process - Inventory 50,000.00

Cost of Sales 50,000.00
WIP located outside plant
d. Tools - Inventory 32,000.00

Sales returns and allowances 45,000.00
Inventories returned at 31 Dec 2017; confirmed by subsequent events
e. Tools - Inventory 61,000.00

Tools en route to customer; FOB Destination. No bill has been issued.
f. Inventory 27,000.00
Goods received on 31 Dec 17; invoiced has been received and recorded
g. Purchases 56,000.00
Accounts Payable 56,000.00
Goods received but not billed
h. Freight-in/Inventory 8,000.00
Payable 8,000.00
To recognise late freight charges

Freight-in 4,000.00
To recognised portion of freight charges sold
Event after the reporting period: An event, which could be favourable or unfavourable, that occurs betw
and the date that the financial statements are authorised for issue. [IAS 10.3]
Adjusting event: An event after the reporting period that provides further evidence of conditions that e
including an event that indicates that the going concern assumption in relation to the whole or part of
Non-adjusting event: An event after the reporting period that is indicative of a condition that arose afte
PROBLEM 9 Maligaya
Amount of fire loss
Compute the GP Rate with solution
Beg. Balances
Cancelled checks for April 2018 130,000.00

Paid to A/P - 57,000.00
March Merchandise shipment - 34,000.00
Other expense - 39,000.00
-
Deposits for April 2018 129,500.00
Refund from vendor - 9,500.00
Sales 120,000.00
Unrecorded merchandise payables at Arpil 20 106,000.00

In transit - 23,000.00
Unrecorded merchandise on hand 83,000.00
Customers acknowledged sales 360,000.00

Uncollectible - 6,000.00
Collectible and acknowledged sales 354,000.00
Unacknowledged or unrecovered 80,000.00
Sales during April
On hand
In transit
Grand Total
Beginning Inventory 750,000.00

Purchases 650,500.00
Goods available for sale 1,400,500.00
GP Rate 45%
Cost of sales 830,500.00 830,500.00
Ending Inventory 570,000.00
In Transit - 23,000.00
Recovered (sold after April) - 80,000.00
Total inventories destroyed by fire 467,000.00 (1)
PROBLEM 10 Billy Corporation

GP Rate for 11 months, ended 31 May 17
Cost of Goods Sold for June 17
Inventory as of 30 June 17
Purchases
31-May-17
6,750,000.00
Purchases, recorded late 75,000.00
Merchadise received in unsalable condition - 10,000.00
Deposits incorrectly charged as purchases - 20,000.00
Error in timing recognition of merchandise - 55,000.00
Adjusted balances 6,740,000.00

COGS, For the 11 month period ended May
Beg. Inventory, 30 June 2016
Purchases, 11 months
Goods Available for Sale
Inventory, 31 May 2017
Cost of Goods Sold
Sales, for the 11 month period ended May

Gross Profit
GP Rate
Sales for month of June

Sales for 1 year
Sales, as of May
Goods Sold in June:

With Profit 1,100,000.00
At Cost 100,000.00
OR
Cost of Sale, June
Cost of Sales, as of May
PROBLEM 11 Verde Manufacturing Company

Year-end: 31-Dec-17
Physical Count: 30-Nov-17
Inventory
Nov-17
Job order costing sytem 601,000.00
Purchases recorded late

Obsolete materials
Adjusted balance, 17 Nov 601,000.00

(1)
Direct labor 120,000.00
Overhead (150% of DL) 180,000.00
Materials
Adjusted balance, 17 Dec 1,143,000.00
Materials
Beginning 104,000.00
Materials issued 200,000.00
146,000.00
WIP
Beginning 497,000.00
DM used 200,000.00
DL 120,000.00
OH 180,000.00
Cost of goods manufactured 786,000.00
211,000.00
Finished goods
Goods manufac 786,000.00

Goods sold 786,000.00
-
PROBLEM 13 Chi Fi Fai, Inc.
Perpetual Inventory
FIFO costing
Count cutoff: 29 Dec
Inventory
890,000.00
Goods out on consignment
Price 120,000.00
Cost 80,000.00
GP 40,000.00
Markup 50%
1.5
Sold
Price 50,000.00
Cost 33,333.33 - 33,333.33
Purchases late recorded

Cost 36,000.00
Goods received on consignment
Sales less commission = cost of sales

Accounts Payable
Sales 400,000.00
Commission 80,000.00
Cost of sales 320,000.00 320,000.00

Commission - 80,000.00
Accounts Payable - 400,000.00
-
Remove impact on sales and cost of sales
Adjusted before allowance 1,176,666.67
Goods sold subsequently at a loss

Price 160,000.00
Cost to sell 20,000.00
140,000.00
Cost 230,000.00
Writedown loss - 90,000.00 - 90,000.00
COST 1,176,666.67
NRV
946,666.67
230,000.00
1,176,666.67 1,086,666.67
Inventory writeoff
800,000.00
Understatement/(Overstatement)
1 Inventory, for goods out on consignment - 33,333.33
2 Accounts Receivables, for goods out on consignment 50,000.00
3 Net income, for goods out on consignment 16,666.67
4 Accounts payable, for goods held for consignment 320,000.00
5 Effect on GP fo sales made for consignors 80,000.00
6 Inventory ending balance, before adjustments 1,176,666.67
7 Inventory ending balance 1,086,666.67
Sales 15,773.00
Sales with no shipment
a. Purchases 2,183.00
Accounts payable 2,183.00 ok
Received merchandise but not billed
b. No adjustment

c.1 Cost of Sales 8,120.00 ok
Inventories not included in warehouse count
c.2 Ending Inventory 10,160.00

Shipments to customers subsequent to December 31, 2017; FOB Shipping Point, Freight Collect
Sales 12,700.00
Shipments to customers subsequent to December 31, 2017; FOB Shipping Point, Freight Collect
d Ending Inventrory 15,416.00
Shipments delayed; FOB Destination, Freight Collect
Sales 19,270.00
Shipments delayed; FOB Destination
e No entry (yet)
FOB Destination, Freight Collect
For reference:
Inventory Net of freight
Accounts Payable
f Inventory write-down 12,600.00

Inventory 12,600.00
Contingent Asset 11,250.00 disclosure only
rges. Relevant terms follow:
ier will collect the shipping cost from the buyer upon delivery.
the buyer is the one who is supposed to pay for the freight charges.
before shipment. Thus freight is actually paid by the sell

pay for the freight charges.
the shipping costs. No special accounting necessary if the term of the sales contract
prepaid since the owner of the goods in transit is also the one who pays for the freight charges.
a) FOB shipping point, freight prepaid or (b) FOB destination, freight collect.
eing shipped but the seller already paid the shipping costs.
shipped but the carrier will be collecting the shipping costs from the buyer.
Accounts
Inventory Payable Net Sales
2,400,000.00 800,000.00 10,150,000.00
-
- 60,000.00
65,000.00
65,000.00
50,000.00
32,000.00
- 45,000.00
equent events
61,000.00
been issued.
27,000.00
d and recorded
56,000.00
8,000.00
8,000.00
- 4,000.00
2,639,000.00 929,000.00 10,045,000.00
or unfavourable, that occurs between the end of the reporting period
her evidence of conditions that existed at the end of the reporting period,
relation to the whole or part of the enterprise is not appropriate. [IAS 10.3]
tive of a condition that arose after the end of the reporting period. [IAS 10.3]
110
Inventory Purchases Sales Accounts Receivables

31-Dec-17 31-Mar-18 31-Mar-18 April 31, 2018
750,000.00 520,000.00 1,350,000.00 Beg. Balance 400,000.00
Sales 160,000.00
Collection 120,000.00
34,000.00 34,000.00
End. Receivables 440,000.00
Writeoff 6,000.00
- 9,500.00 - 9,500.00
Ending Balance 434,000.00
106,000.00
83,000.00
160,000.00
857,500.00 650,500.00 1,510,000.00

23,000.00
880,500.00 650,500.00 1,510,000.00
Dec-17 Dec-16 Overall

Audited Audited Gross Profit
Sales 5,300,000.00 3,900,000.00 9,200,000.00
Beginning Inventory 500,000.00 660,000.00 1,160,000.00

Purchases 2,800,000.00 2,350,000.00 5,150,000.00
Goods Available for Sale 3,300,000.00 3,010,000.00 6,310,000.00
Ending Inventory - 750,000.00 - 500,000.00 - 1,250,000.00
Cost of Sales 2,550,000.00 2,510,000.00 5,060,000.00
Gross Profit 2,750,000.00 1,390,000.00 4,140,000.00

52% 36% 45%
Purchases Inventory
30-Jun-17 31-May-17
8,000,000.00 950,000
- 15,000.00
- 20,000.00
- 55,000.00
7,965,000.00 895,000.00
COGS, For 1 year ended June
875,000.00 Beg. Inventory, 30 June 2016 875,000.00
6,740,000.00 Purchases, 1 year 7,965,000.00
7,615,000.00 Goods Available for Sale 8,840,000.00
- 895,000.00 Inventory, 30 June 2017 (GP Rate Method) - 1,140,000.00
6,720,000.00 Cost of Goods Sold
With Profit 7,600,000.00
At Cost 100,000.00 7,700,000.00
8,400,000.00 Sales, For 1 year ended June 9,600,000.00

1,680,000.00 Inventory sold at cost - 100,000.00
20% (1) Sales on regular profit 9,500,000.00
Ending Inventory Rolledforward from May

9,600,000.00 Inventory, 31 May 2017 895,000.00
8,400,000.00 Purchases
1,200,000.00 As of June 7,965,000.00
As of November 6,740,000.00
1,225,000.00 1,225,000.00
880,000.00 Goods Available for Sale 2,120,000.00
100,000.00 Ending Inventory (SQUEEZED) - 1,140,000.00
980,000.00 (2) Cost of Goods Sold, December 980,000.00
7,700,000.00
6,720,000.00
980,000.00 (2)
Material WIP
Nov-17 Nov-17
100,000.00 497,000.00
8,000.00
- 4,000.00
104,000.00 497,000.00 -
242,000.00 Reduce the impact of purchases pertaining to November
120,000.00
180,000.00
- 200,000.00 200,000.00
146,000.00 997,000.00 -
(2)
Accounts Accounts
Receivables Payable Sales Cost of Sales Gross Profit
1,200,000.00 800,000.00 13,200,000.00 8,600,000.00 4,600,000.00
50,000.00 50,000.00 50,000.00
33,333.33 - 33,333.33
36,000.00 36,000.00
320,000.00 - 320,000.00 - 320,000.00 -
- -
1,250,000.00 1,156,000.00 12,930,000.00 8,349,333.33 4,616,666.67

36,000.00
1,250,000.00 1,156,000.00 12,930,000.00 8,349,333.33 4,652,666.67
nt, Freight Collect
nt, Freight Collect

Beginning Inventory 750,000.00
Goods available for sale 1,400,500.00
GP Rate 0.45
Cost of sales 830500 830,500.00
In Transit - 23,000.00
Scrap value (sold during April) - 30,000.00
Total inventories destroyed by fire 517,000.00 (1)

(3)
(3)
Other
Selling and Operating
Admin Expense Net Income
1,800,000.00 250,000.00 2,550,000.00
50,000.00
- 33,333.33
Entry Made
Cash
Consignor Payable
Consignor Payable
- Commission revenue
1,800,000.00 250,000.00 2,566,666.67
90,000.00 - 90,000.00
1,800,000.00 340,000.00 2,476,666.67
Should be
400,000.00 Cash 400,000.00
nsignor Payable 400,000.00 Consignor Payable
Commission revenue
nsignor Payable 80,000.00
mmission revenue 80,000.00
Per client
Cash 400,000.00
Sales on consigned goods
Commission revenue

Inventory
Correcting entry
Sales 320,000.00
Consignor Payable
Inventory 320,000.00
Cost of sales
320,000.00
80,000.00
320,000.00
80,000.00
320,000.00
320,000.00
320,000.00
Chapter 4 DONE
MEEMEE, INC (Last Problem)
Balance per GL Adjustment Adjusted balance Items 15
a Petty Cash 10,000.00 - 1,760.00 8,240.00 Cash Entries 13
b BPI S.A. #0150680558 (depository 280,250.00 - 22,456.00 257,794.00 Cash 28
c BPI C.A. #01553354865 (payroll) 60,800.00 15450 76,250.00 Cash
d BPI C.A. #01552743360 (gen. disb 170,000.00 44150 214,150.00 Cash
e Security Bank S.A. #0141741929 403,000.00 3,625.00 406,625.00 Restricted Cash/ Other asset
f Cash 924,050.00 556,434.00
g Accounts Receivables (Gross) 724,674.00 39,400.00 764,074.00
h Allowance for bad debts 27,000.00 - 9,655.59 17,344.41
i Bad debts expense 24,000.00 - 4,655.59 19,344.41
j Notes Receivables 31,800.00 - 21,800.00 10,000.00
k Liability on Discounted Notes - 5,250.00 5,250.00
l Interest Receivable 516.39 516.39
m Interest Income 2,800.00 4,785.39 7,585.39
n Receivable from Officers and Emp - 9,300.00 9,300.00
o Customer Credit Balances - 13,800.00 13,800.00
Petty Cash Fund:

Coins and currencies 5,640.00
Undisbursed vouchers 1,100.00 Various expenses 1,260.00
IOUs 1,500.00 Advances to employees 500.00
8,240.00 Cash shortage -
Vouchers 1,260.00 Petty Cash Fund 1,760.00
IOUs 500.00 To adjust the balance of PCF
Total per count 10,000.00
Cashier's accountability
Petty Cash Fund 10,000.00
10,000.00
Cash shortage -
Adjustments:
Vouchers 2,360.00
2018 voucher - 1,100.00
Unreplenished voucher 1,260.00
IOUs 2,000.00
2018 IOUs - 1,500.00
Advances to employees 500.00
Summary of Cash in Bank:

Per books Per bank Difference
BPI S.A. #0150680558 ( 280,250.00 227,069.00 53,181.00
BPI C.A. #01553354865 ( 60,800.00 101,350.00 - 40,550.00
BPI C.A. #01552743360 170,000.00 297,650.00 - 127,650.00
Security Bank S.A. #01 403,000.00 406,625.00 - 3,625.00
Per books Per bank

BPI S.A. #0150680558 ( 280,250.00 227,069.00 Accounts Receivables 12,800.00
Interest for 4Q 394.00 Accounts Receivables - PDC 4,550.00
Insufficient fund - 12,800.00 Bank charges 5,500.00
Deposit in transit 35,275.00 Interest income 394.00
Post dated check - 4,550.00 - 4,550.00 BPI S.A. #0150680558 (depository) 22,456.00
Bank debit - 5,500.00 To adjust the balance of BPI S.A. #0150680558 (depository)
Adjusted balance 257,794.00 257,794.00
Per books Per bank BPI C.A. #01553354865 (payrol 15,450.00
BPI C.A. #01553354865 ( 60,800.00 101,350.00 Bank charges 150.00
Outstanding check - 40,700.00 Accounts Payable 10,400.00
Stale check 5,200.00 5,200.00 Accounts Payable - stale 5,200.00
Unreleased check 10,400.00 10,400.00 To adjust the balance of BPI C.A. #01553354865 (payroll)
Bank charges - 150.00
Per books Per bank BPI C.A. #01552743360 (gen. d 44,150.00

BPI C.A. #01552743360 170,000.00 297,650.00 Accounts Payable 900.00
Outstanding checks - 132,700.00 Bank charges 150.00
Unreleased checks 45,200.00 45,200.00 Accounts Payable 45,200.00
Bank error 4,000.00 To adjust the balance of BPI C.A. #01552743360 (gen. disb)
Correction - 900.00
Bank charges - 150.00
Per books Per bank Security Bank S.A. #01417419 3,625.00

Security Bank S.A. #01 403,000.00 406,625.00 Interest Income 3,625.00
Interest income 3,625.00 - To adjust the balance of Security Bank S.A. #0141741929
Aging of receivables and allowance for bad debts computation:
Days Outstanding Current Overdue Overdue Overdue Overdue Others Total
31-Dec-17 1-30 days 31-60 days 61-90 >91 days Dishonored Notes
Balance 362,412.00 202,895.00 130,480.00 17,500.00 11,387.00 724,674.00
Add back:
Credit balance 9,000.00 4,800.00 13,800.00
Adjustments from cash:
BPI S.A. #0150680558 (depository 30-Oct-17 62 12,800.00 12,800.00
BPI S.A. #0150680558 (depository 20-Nov-17 41 4,550.00 4,550.00
Dishonored notes 20-Nov-17 41 -
-
Non-trade receivable:
Due from officers/ employees - 2,000.00 - 2,000.00
Dishonored Notes 15,250.00
For write off:
Over 91 days - 5,000.00 - 5,000.00
369,412.00 202,895.00 139,830.00 30,300.00 6,387.00 15,250.00 748,824.00
0.50% 1.00% 3.00% 10.00% 50.00% 20.00%
1,847.06 2,028.95 4,194.90 3,030.00 3,193.50 3,050.00 17,344.41
Allowance for bad debts 5,000.00

Should be balance 17,344.41 Accounts Receivables 5,000.00
Balance per books To record write off of bad debts
Unadjusted balance 27,000.00
Adjustment - writeof- 5,000.00 Allowance for bad debts 4,655.59
22,000.00 Bad debts expense 4,655.59
Adjustment to be made- 4,655.59 To record the ending allowance for doubtful accounts
Receivables from employees 2,000.00
To reclassify the receivables from employees (from trade receivables)

Customer credit balances 13,800.00
To reclassify the customer credit balances with no corresponding debit
Notes receivables summary:

Days Outstanding
Debtor Date Issued 31-Dec-17 Amount Interest Earned
Creative co. 90-day @ 28-Oct-17 64 10,000.00 426.67
Diamond Co. 30-day @ 20-Nov-17 41 15,000.00 250.00 Dishonored note (only 30 days)
President, 30-day @ 2 12-Dec-17 19 6,800.00 89.72
31,800.00
Interest receivable (Creative c 516.39

Interest income 516.39
To record accrued interest on notes receivables

Notes Receivable 15,000.00
Interest income 250.00
To record dishonoring of the Note at full amount
(related adjustment for allowance, recorded above)
Receivable from Officers and 6,800.00

Notes receivables 6,800.00
To reclassify receivables from employees (from Notes)
A dishonored note is a note that the maker failed to pay at maturity. Since the note has matured,
the holder or payee removes the note from Notes Receivable and records the amount due in Accounts Receivable.
Dishonored Note Summary
Discounted Notes Days Outstanding Maturity Notes Value at

(with recourse) Date of Note at Discount Date Principal Full Interest Value Interest Earned Discount Date
30-Nov-17
Infra Co. 60-day @ 18% 18-Nov-17 12 8000 240.00 8,240.00 48.00 8,048.00
City Co 2-month @ 30% 30-Oct-17 31 5000 250.00 5,250.00 129.17 5,129.17
13,000.00 490.00 13,490.00 177.17 13,177.17
Discount Discounted Value Interest Expense

Discounted Notes (ASSUMED) (ASSUMED) (ASSUMED)
Infra Co. 60-day @ 18% 197.76 8,042.24 5.76

City Co 2-month @ 30% 126.88 5,123.13 6.04
324.64 13,165.37 11.80
Discounting of Maturity Value Discount Entry made at discounting date (for illustration ONLY, already recorded)
Notes (Discount) = of Note x Discount % x Period* Interest expense 11.80
*The discount period is the length of time between a note's sale and its due Cash 13,165.37
date. Notes Receivable 13,000.00
Interest revenue 177.17
Discounting of Note Receivable "with recourse" means that if the original maker fails to pay the amount due
at maturity date to the bank, then the holder of the note/ company that discounted the note with the bank
is liable for the full amount to the bank.
Maker Principal Days Outstanding Value-to-date
31-Dec-17 Interest due @ 18%
Infra Co. Note 8,000.00 43 172 8,172
Disclosure
The Company has a contingent liability amounting to 8,172 equivalent to the principal and the interest due
from the Notes from Infra Co. discounted with the bank. The notes were discounted with recourse.
Provision 5,250.00
Liability on Discounted Notes 5,250.00
To recognised the liability for notes discounted which has matured on 31 Dec 2017.
IAS 37 Provisions, Contingent Liabilities and Contingent Assets
Liability:
a) present obligation as a result of past events
b) settlement is expected to result in an outflow of resources (payment)
Contingent liability:
a) a possible obligation depending on whether some uncertain future event occurs, or
b) a present obligation but payment is not probable or the amount cannot be measured reliably
Recognition of a provision
a) An entity must recognise a provision if, and only if: [IAS 37.14]
b) a present obligation (legal or constructive) has arisen as a result of a past event (the obligating event),
payment is probable ('more likely than not'), and
c) the amount can be estimated reliably.

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THEORIES

CHAPTER 3 CASH AND CASH EQUIVALENTS

CHAPTER 4 RECEIVABLES AND RELATED REVENUES

atement of receiving account

dscheme are as follows:

A Total per Count 10,761.60

Cash Shortage - 88.40

Petty Cash Balance:

Petty Cash Balance, per books 10,500.00

Cash Shortage - 88.40

B Total per Count 53,500.00

Petty Cash Balance:

Petty Cash Balance, per books 45,000.00

C Total Per Count 19,700.00

Cash shortage - 100.00

Petty Cash Balance:

Petty Cash Balance, per books 15,000.00

Cash shortage - 100.00

D Bills and coins 7,300.00

Cash Shortage - 400.00

Petty Cash Balance

Petty Cash Balance per book 15,000.00

Cash Shortage - 400.00

E. Balance per book Balance per bank

Should be, Cash in bank 608,700.00

Cash in Bank (DIT)

Additional 5,500 needs to be accounted as Cash in Bank

Adjusted balance 3,000.00 780,650.00 625,700.00 157,950.00

Unadjusted book balance - 92,250.00 805,350.00 630,300.00 82,800.00

November Credits to Cash

Checks and charges returned by bank

Outstanding checks 2,000.00

Count taken : December 30, 2017

(a) Cost of Sales 20,000

(b) Cost of Sales 18,000

(d) Sales 40,000

(e) Sales 60,000.00

(f) Sales 120,000

(g) Accounts Receivables 60,000

(i) Accounts Receivables 80,000

(j) Accounts Receivables 90,000

B Accounts Payable 74,000.00

C Accounts Receivable - Cust 16,200.00

D No adjustment. Await response for confirmation.

F Deposit from Customer F 15,000.00

Receivable balance 10,000.00

Correction to be made - 2,500.00

J Sales credit 5,000.00

2 8-Aug 145 12,000 12,000

3 1-Jan 364 100,000 100,000

4 3-Feb 331 20,000 20,000

5 10-Feb 324 30,000 30,000

6 17-Jul 167 5,000 5,000

Provision for doubtful accounts 5,370

Historical bad debts loss percentage

Year Credit Sales Accounts WrittenRecoveries Net

2017 4,000,000.00 83,000.00 5,000.00 78,000.00

Allowance entry 82,820.00

Bad debts 20,000.00

36,000.00 83,000.00 27,000.00 20,000.00

Allowance, beg 8000

Net Write off 160,000.00

Bad debts %, 2016 0.02