Operating Expenses 16,000Accrued Expenses 15,000 Advances from Customers 80,000 Working Paper adjustments to restate 2006 financial statements Accrued Expenses 16,000.
Trang 1PROBLEMS 8-1
2007 net income 2008 net income
8-2 Jay Company
Understatement (overstatement)
2007 Net income
12/31/07 Working Capital
12/31/07 Retained Earnings
3 year insurance premium charged to expense in
Unrecorded sale of fully depreciated machine in
Overstatement of 2006 ending inventory ( 36,000) 36,000 Understated 2006 accrued expenses ( 40,000) 40,000 Unrecognized supplies inventory _ - 15,000
8-4 Jing, Inc.
Effect on 01/01/08Retained Earnings Understated (Overstated) Understated 2006 ending inventory 5,000
Overstated 2005 depreciation expense 12,500
Understated 2006 depreciation expense ( 4,000)
Net understatement in retained earnings P13,500
Retained earnings as of January 1, 2007 should be increased by P13,500
8-5 Resort Company
(a)
Operating expenses 3,100
Trang 2Trading Securities 16,750
Unrealized Gains on Trading Securities 24,250 202,500 – 178,250 = 24,250
Allowance for Bad Debts 5,500 98,000 – 92,500 = 5,500
(b)
2006 2007
Adjustments: a 12,400 ( 3,100)
b (16,750 24,250
d (37,750) 37,750
(49,500)
e 68,750 ( 6,250)
Corrected net income P514,150 P547,650
8-6 Spade Company
(b)Omission of unused supplies
(c) Omission of accrued salaries
8-7 Lily Corporation
8 2,000 4,000
Trang 3-Adjusted amounts P1,903,000 P1,264,000 P8,425,000
MULTIPLE CHOICE
MC6 A 30,000 over + 27,000 over + 7,500 over – 48,000 under = 16,500 net
overstatement
MC7 A 27,000 over – 7,500 under – 48,000 under = 28,500 net understatement MC8 C 27,000 over + 6,000 over – 48,000 under – 7,500 under = 22,500 net
understatement
MC9 A 250,000 – 100,000 + 150,000 – 50,000 – (30,000 x 4/6) + (120,000 x 18/24 =
320,000 MC10 A 1,550,000 + 10,000 – 80,000 + 120,000 – 55,000 – 100,000 = 1,445,000 MC11 D 312,500 + 25,000 - 4,000 – 50,000 – 18,000 – 30,000 = 235,500
MC12 A 10,000 – 8,000 = 2,000 net understated
MC13 D 10,000 + 25,000 – 8,000 = 27,000
MC15 C 2004 net income : 8,000 overstated – 2,000 understated ; 2005 net income
8,000 understated – 2,000 overstated
MC16 B 2,300,000 + 60,000 – 40,000 – 50,000 + 100,000 = 2,370,000
MC19 B 589,500 – 112,500 – 16,000
MC21 D 613,400 + 90,000 + 12,000 – 28,000
MC22 A 20,000 + 13,500 – 8,000
MC23 A The shares are treasury shares
MC29 A 60,000 – 4,000 – 12,000
MC32 C 1,500,000 X 12% x 3/12
MC36 D Retained earnings beginning of 430,000 as reported – correction of prior period
errors of P 20,500 ( - 36,000 + 31,500 – 16,000) + 2007 corrected net income
of 298,800
MC38 D 2,500,000 – 112,500 – 50,000 – 80,000
MC39 B 1,300,000 – 90,000 – 36,000 + 28,000
MC40 C 500,000 + 7,700 + 30,000 + 18,000 + 8,000 – 4,000 – 16,000 + 15,000
MC41 A 80,000 + 18,000 + Accrued interest of 150,000 * ( although finance costs
should be presented separately, as required by PAS 1, total interest cost included in other losses and expenses is 190,000); thus, other losses and expenses = 248,000 – 190,000 = 58,000
MC44 B 430,000 – 36,000 + 31,500 – 16,000
Trang 4MC45 A 950,000 + 36,000
MC46 C Errata: The question should have been the adjusted amount of 2006 expenses
instead of 2004 expenses ; 450,000 – 31,500 + 16,000
Correcting entries in 2007 for Take One Corporation (MC 17 – 47)
Accounts receivable 112,500
Allowance for Bad Debts 30,000
Accounts Payable 12,000
Investments in Stock 260,000
Retained Earnings 31,500
Prepaid Expenses 8,000
150,000
Current Portion of Mortgage Payable 500,000
Trang 5Operating Expenses 16,000
Accrued Expenses 15,000
Advances from Customers 80,000
Working Paper adjustments to restate 2006 financial statements
Accrued Expenses 16,000