3-37

CASE A:1. List Price P56,200Less: Trade Discount (56,200 x 10%) 5,620Invoice Price P50,580Less: Cash Discount (50,580 x 0.02) 1,011.60Acquisition Cost

2. Acquisition Cost P49,568.40Less: Scrap Value 1800Depreciable Cost P47,768.40Divided by: Estimated Useful Life 4Annual Depreciation P11,942.10X Fractional Year 3/12Depreciation Expense on year of acquisition

P2,985.53

Since purchased on October 4, 20X9, we need to get the depreciation expense from Oct 1-Dec 31, 20x9= 3 months

3. Depreciation Expense 2,985.53 Accumulated Depreciation-Office Equipment

2,985.53

4. Office Computer (Acquisition Cost) P49,568.40Less: Accumulated Depreciation to date 2,985.53Carrying Value P46,582.87*This is seen in the Note of Property, plant, and equipment

CASE B 1. Invoice Price P12,600Less: Cash Discount [(12,600-6300) x 0.02]

126

Acquisition Cost P12,474*Already a good accounting format for problem solving part (lack of time)

Explanation:How to compute cash discount:

Invoice Price P12,600

Less: Downpayment 6,300Balance P6,300x Discount percentage 0.02Cash Discount P126

2. Depreciation Expense 11,186.40 Accumulated Depreciation-Office Equipment

11,186.40

Solutions: Office Furniture A Office Furniture B Office Cabinet

Acquisition Cost P60,000 P26950 P12,474Less:Scrap Value 4,500 3100 2000Depreciable cost P55,500 P23850 P10474Divided: Useful Life 7 10 5Annual Depreciation P7928.57 P2385 P2094.80x Fractional yr 5/12Depreciation Expense P872.83P7,928.57 + 2385 + 872.83 = P11,186.40

3. Office Furniture A Office Furniture B Office Cabinet

Acquisition Cost P60,000 P26950 P12,474Less:Scrap Value 4,500 3100 2000Depreciable cost P55,500 P23850 P10474Divided: Useful Life 7 10 5Annual Depreciation P7928.57 P2385 P2094.80x Fractional yr 2 yrs & 9.5

months2 yrs & 8 months 5/12

Depreciation Expense P22,133.93 P6,360 P872.83

4. Office Furniture (60,000+26950+12474) P99,424Less: Accumulated Depreciation-Office Furniture

29,366.76

Carrying Value P70,057.40

3-38

1. Office Furniture Delivery

EquipmentOffice Equipment

Acquisition Cost P137,900 P654,000 P87,300Less: Salvage Value 5,700 45,000 2,000Depreciable Cost P132,200 P609,000 P85,300Divided: Useful life 5 10 5Annual Depreciation

P26,440 P60,900 P17,060

Since the problem is just asking for annual depreciation, disregard the 5-31-x8 to 12-31-x8*This structure is advisable to problem solving type due to lack of time.

2. Office Furniture Delivery

EquipmentOffice Equipment

Acquisition Cost P137,900 P654,000 P87,300Less: Salvage Value 5,700 45,000 2,000Depreciable Cost P132,200 P609,000 P85,300Divided: Useful life 5 10 5Annual Depreciation

P26,440 P60,900 P17,060

X fractional yr 5/12 (x 7/12) 9,951.67Depreciation Expense

P25,375 P27,011.67

This time the problem is asking for the Accumulated Depreciation (meaning the depreciation from the date of purchase up to the Dec 31, 20x9) so we need to compute for the depreciation for 1 year and 7 months. Depreciation Expense: 1 year = P17,0607 months = P9,951.67total Depreciation Expense = P27,011.67

3. A. Carrying Value as of December 31, 2014 Office Furniture Delivery

EquipmentOffice Equipment

Acquisition Cost P137,900 P654,000 P87,300Less: Accumulated Depreciation

26440 25,375 27,011.67

Carrying Value P111,460 P628,625 60,288.33*The amount in the Accumulated Depreciation account title must be the depreciation from the date of purchase up to Dec 31, 20x9

b. At the end of asset’s useful lifeOffice Furniture Delivery

EquipmentOffice Equipment

Acquisition Cost P137,900 P654,000 P87,300Less: Accumulated Depreciation

132,200 609,000 85,300

Carrying Value 5,700 45,000 2,000

*The depreciable cost is said to be the maximum depreciation/decline in the amount of the asset. Meaning, we should decrease that to its cost in order to get the asset’s carrying value.

4. Depreciation Expense 26,440 Accumulated Depreciation-Office Furn 26,440

Depreciation Expense 25,375 Accumulated Depreciation-Delivery E 25,375

Depreciation Expense 17,060 Accumulated Depreciation-Office Equip 17,060

*Since these are adjusting entries, the amount should cover only one year or simply the annual depreciation amount.

5. Cash 40,000Accumulated Depreciation- office furniture 79,320Loss on sale of office furniture 18,580 Office Furniture 137,900

Solution: Office Furniture P137,900Less: Accumulated Depreciation 79,320Carrying Value P58,580Vs. Resale Price 40,000Loss on sale of Furniture P18,580

Accumulated Depreciation from Jan 1, 20x9 to Dec 31, 2011 = 3 yearsAnnual Depreciation (26,440) x 3 years = P79,320

3-39

32,174.10

A Doubtful Account Expense 32,174.10 Allowance for Doubtful Account 32,174.10

B Doubtful Account Expense 13500 Allowance for Doubtful Account 13500

C Doubtful Account Expense 2500 Allowance for Doubtful Account 2500

D(A) Doubtful Account Expense 42874.10 Allowance for Doubtful Account 42874.10

D(B) Doubtful Account Expense 13500 Allowance for Doubtful Account 13500

D(C) Doubtful Account Expense 13200 Allowance for Doubtful Account 13200

Computation: CASE A: Accounts Receivable 403,851 (70%) 12,760 (Returns) 142,850 (beg) 158,700 (Cash collection)

P375,241

P576,930 x 70% = P403851

This is an Increased to assumption.

Allowance for Bad Debts 5350 (beginning balance as of Oct 1) adjustment needed P37,524.10 P375,241 x 10%

Computation for Problem Solving: Accounts Receivable P375,241X Estimated percentage of loss 10%Allowance balance end P37,524.10

Less; Unadjusted credit balance 5350Bad Debts Expense P32,174.10

CASE B: INCREASED BY ASSUMPTION Allowance for Bad Debts

5350 adjustment

CASE C: INCREASED TO ASSUMPTION Allowance for Bad Debts 5350

7850

Allowance balance end 7850

Less; Unadjusted credit balance 5350Bad Debts Expense P2500

CASE D(A): What if P5350 is a debit? Allowance for Bad Debts

5350

P37,524.10

Allowance balance end P37,524.10

Add; Unadjusted debit balance 5350Bad Debts Expense P42,874.10 CASE D(B): INCREASED BY ASSUMPTION Allowance for Bad Debts

5350 adjustmentCASE D©: INCREASED TO ASSUMPTION Allowance for Bad Debts 5350

13500

2500

42874.10

13500

13200

7850

Allowance balance end 7850

Add; Unadjusted debit balance 5350Bad Debts Expense P13,200

CASE B:1 Doubtful Account Expense 11,248.60

Allowance for Doubtful Account 11,248.60

2 Doubtful Account Expense 5348.60 Allowance for Doubtful Account 5348.60

3 Doubtful Account Expense 10128.60 Allowance for Doubtful Account 10128.60

SOLUTIONS: CASE 1: INCREASED TO ASSUMPTION Allowance for Bad Debts 1120 adjustment needed

P10,128.60

CASE 2: Allowance for Bad Debts 4780

adjustment needed

P10,128.60 3-40 1. Accounts Receivable P152,260X Estimated percentage of loss 3.5%

11248.60

5348.60

1254.10

9,404.10

Allowance balance end P5329.10

Less; Unadjusted credit balance 4075Bad Debts Expense P1,254.10

Accounts Receivable 624960 81215 (Cash sales) 34260 (beg) 10000 (Cash collection) 326,247 (collected within DP) 89,498 (collected after DP)

P152,260

Allowance for Bad Debts 4075 (beginning balance) adjustment needed P5329.10 P152260 x 3.5%

2. Accounts Receivable P152,260Less: Allowance for Bad Debts 5329.10Net realizable Value P146,930.90

*This is seen in the Trade and other receivables section

3. Allowance balance end P5329.10

Add; Unadjusted debit balance 4075Bad Debts Expense P9,404.10

Allowance for Bad Debts 4075 (beg)

14772

adjustment needed P5329.10

3-41 Cash (687,920 x 30%) 206,376Accounts Receivable (687,920 x 70%) 481544 Sales 687,920

Sales Returns and Allowances 15744 Accounts Receivable 15744

Cash (98%) 307,720Sales Discount (2%) 6280 Accounts receivable (307720/.98) 314,000

Cash 22500 Accounts Receivable 22500

Allowance for Doubtful accounts 10000 Accounts Receivable 10000

Cash 3000 Miscellaneous Income 3000

B. Doubtful Account Expense 14,772 Allowance for Doubtful Account 14772Adjusting Entry

Accounts Receivable 102850 (beg) 15744 (ret) 481544 314,000 (Cash collection) 22,500 (Cash collection) 10,000,498 (written off)

P222,150

Allowance for Bad Debts 4114 (beginning balance)10000 (written off)

P8886 P222,150 x 4%

C.Trade and other receivablesAccounts Receivable P222,150Less: Allowance for Bad Debts 8,886 P213,264

3-42

CASE A B CMerchandise inventory beginning P25300 P12400Add: Net cost of Purchases Purchases 474500 474500 474500 Less: Purchase Discount (4839.10) (4839.10) (4839.10) Purchase Returns & Allowances

(6800) (6800) (6800)

Net Purchases P462,860.10 P462,860.10 P462,860.10 Add: Freight In 4900 4900 4900Cost of Goods Available for Sale 493,060.10 P480160.10 467,760.10Less: Cash Sales (25%) (123,265.025) (120,040.025) (116940.025) Charge Sales (65%) (320,489.065) (312,104.065) (304044.065)Merchandise Inventory end P49306.10 P48,016.01 P46776.10

Merchandise Inventory 49306.10 Income Summary 49306.10

Merchandise Inventory P48,016.01 Income Summary P48,016.01

Merchandise Inventory P46776.10 Income Summary P46776.10

SOLUTIONS: Journal Entries for the amount of Purchases, purchase discount etc. Purchases 474,500 Cash 189,800 Accounts Payable 284,700

Accounts Payable 241,995 Cash 237,155.10 Purchase Discount 4839.90

Accounts payable 42705 Cash 42705

Cash 6800 Purchase Returns and Allowances 6800

Freight in 4900 Cash 4900

Accounts payable 2100 Cash 2100