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    Accounting 162 - Material 002

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    Angelli Lamique
    1. Machine A was purchased in 2013 for $150,000 and fully depreciated that year over its 15 year useful life. Machine B was purchased in 2014 for $525,000 and was expected to have a 12 year useful life, but in 2018 its remaining life was estimated to be 4 years with a $25,000 residual value. A building was purchased in 2015 for $3,000,000 with a 20 year useful life. 2. The document provides information about several assets, depreciation methods and estimates, and asks for journal entries to record depreciation and changes in estimates. It also asks accounting questions related to adjusting entries, errors, and financial statement amounts. 3. The

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    Accounting 162 - Material 002

    Uploaded by

    Angelli Lamique
    51 views2 pages
    1. Machine A was purchased in 2013 for $150,000 and fully depreciated that year over its 15 year useful life. Machine B was purchased in 2014 for $525,000 and was expected to have a 12 year useful life, but in 2018 its remaining life was estimated to be 4 years with a $25,000 residual value. A building was purchased in 2015 for $3,000,000 with a 20 year useful life. 2. The document provides information about several assets, depreciation methods and estimates, and asks for journal entries to record depreciation and changes in estimates. It also asks accounting questions related to adjusting entries, errors, and financial statement amounts. 3. The

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    1. Machine A was purchased in 2013 for $150,000 and fully depreciated that year over its 15 year useful life. Machine B was purchased in 2014 for $525,000 and was expected to have a 12 year useful life, but in 2018 its remaining life was estimated to be 4 years with a $25,000 residual value. A building was purchased in 2015 for $3,000,000 with a 20 year useful life. 2. The document provides information about several assets, depreciation methods and estimates, and asks for journal entries to record depreciation and changes in estimates. It also asks accounting questions related to adjusting entries, errors, and financial statement amounts. 3. The

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    51 views2 pages

    Accounting 162 - Material 002

    Uploaded by

    Angelli Lamique
    1. Machine A was purchased in 2013 for $150,000 and fully depreciated that year over its 15 year useful life. Machine B was purchased in 2014 for $525,000 and was expected to have a 12 year useful life, but in 2018 its remaining life was estimated to be 4 years with a $25,000 residual value. A building was purchased in 2015 for $3,000,000 with a 20 year useful life. 2. The document provides information about several assets, depreciation methods and estimates, and asks for journal entries to record depreciation and changes in estimates. It also asks accounting questions related to adjusting entries, errors, and financial statement amounts. 3. The

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Accounting 162 – Material 002

    The following information pertains to ABC’s depreciable assets:


    1. Machine A was purchased for P150,000 on January 1, 2013. The entire cost was expensed in the year of acquisition. The estimated
    useful life of this machine is 15 years with no residual value. Prepare the entry to record the depreciation for the year and the entry
    (if any) to record the cumulative effect of the change.
    2. Machine B cost P525,000 and was acquired on January 1, 2014. On the acquisition date, the expected useful life was 12 years with
    no residual value. The straight line depreciation method was used. On January 2, 2018, it was estimated that the remaining life of
    the asset would be 4 years and that there would be a P25,000 residual value. Prepare the entry to record the depreciation for the
    year and the entry (if any) to record the cumulative effect of the change. 81,250
    3. A building was purchased on January 3, 2015 for P3,000,000. The building was expected to have a useful life of 20 years with no
    residual value. The straight line depreciation method was used. On January 1, 2018, a change was made to the sum-of-the-years’
    digit. Prepare the entry to record the depreciation for the year and the entry (if any) to record the cumulative effect of the change.
    4. What is the carrying value of machine B on January 1, 2018? 350,000
    5. The book value of the building on December 31, 2018 is 2,266,667

    6. The income statement of ABC shows unadjusted net income of P125,000 for the year ended December 31, 2018. The following are
    the errors under consideration:
     December 31, 2017, inventory overstated by P22,500.
     December 31, 2018, inventory understated by P37,500.
     A P10,000 customer’s deposit received in December 2018 was credited to sales in 2018. The goods were actually shipped in
    January 2019.
    Compute the adjusted net income of ABC for the year ended December 31, 2018. 175,000

    7. The following errors were made in preparing a trial balance: the P1,350 balance of Inventory was omitted; the P450 balance of
    Prepaid Insurance was listed as a credit; and the P300 balance of Salaries Expense was listed as Utilities Expense. The debit and
    credit totals of the trial balance would differ by 2,250

    CASE 1 You have been engaged to examine the financial statements of ABC for the year ended December 31, 2018. Your examination
    reveals the following situations: Prepare the necessary adjusting journal entries at December 31, 2018. Ignore income tax consideration.
    8. Depreciation of P16,000 for 2018 on equipment was not recorded.
    9. The physical inventory count on December 31, 2017, improperly excluded merchandise costing P95,000 that had been temporarily
    stored in a public warehouse. ABC uses a periodic inventory system.
    10. The physical inventory count on December 31, 2018, improperly included merchandise with a cost of P42,500 that had been recorded
    as a sale on December 29, 2018, and held for the customer to pick up on January 2, 2019.
    11. A collection of P28,000 on account from a customer received on December 31, 2018, was not recorded until January 3, 2019.
    12. In 2018, ABC sold for P18,500 fully depreciated equipment that originally cost P110,000. The proceeds from the sale were credited
    to the equipment account.
    13. During December 2018, a competitor company filed a patent infringement suit against ABC claiming damages of P1,000,000. The
    company’s legal counsel has indicated that an unfavorable outcome is probable and a reasonable estimate of the court’s award to
    the competitor is P600,000. The company has not reflected or disclosed this situation in the financial statements.
    14. ABC has a portfolio of current equity securities acquired in 2017 for trading purposes. No valuation entry has been made. Information
    on cost and market value is as follows:
    Cost Market
    December 31, 2017 P475,000 P475,000
    December 31, 2018 475,000 500,000
    15. At December 31, 2018, an analysis of payroll information shows accrued salaries of P61,000. The accrued salaries payable account
    had a balance of P80,000 at December 31, 2018, which was unchanged from its balance at December 31, 2017.
    16. A piece of equipment was acquired on January 2, 2018 for P160,000 and was charged to repairs expense. The equipment is expected
    to have a useful life of 8 years and no residual value. ABC normally uses the straight line method to depreciate this type of equipment.
    17. A P75,000 insurance premium paid on July 1, 2017 for a policy that expires on June 30, 2012, was charged to insurance expense.
    18. A patent was acquired at the beginning of 2017 for P250,000. No amortization has been recorded since its acquisition. The patent
    had a 10 year useful life on the date of acquisition.

    8. DE 16K; A/D 16K


    9. COGS/ INVNTORY BEG 95K; R/E 95K
    10. COGS 42.5K; INVTY 42.5 K
    11. CASH; A/R 28K
    12. DR. A/D 1110K; CR. GAIN 18.5; EQUIPMNT 91.5K
    13. LOSS 600K; LIAB 600K
    14. TS 25K; UNREALIZED GAIN 25K
    15. SP 19K; CR SE 19K
    16. DE 20K EQUIPMNT 160K; CR, R/E 160K; A/D 20K
    17. I/E 25K; PREP INS 37.5; CR. R/E 62.5K
    18. AMORT 26K R/E 25K; CR PATENT 50K

    CASE 2 While reviewing the books of your employer, you found out that certain adjustment s had been overlooked at the end of 2017
    and 2018. You also discovered that other items had been improperly recorded. These omissions and other failures for each year are
    summarized as follows: December
    2017 2018
    Salaries payable 145,600 130,000
    Interest receivable 43,200 35,500
    Prepaid insurance 64,000 51,300
    Advances from customers* 78,400 93,500
    Equipment** 94,000 87,000
    * Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods
    were not shipped until the following year.
    ** Capital expenditures had been recorded as repairs but should have been charged to equipment; the depreciation rate is 10% per year,
    but depreciation in the year of the expenditure is to be recognized at 5%.

    Assuming that the nominal accounts for 2018 have not yet been closed into the income summary account, Prepare all the necessary
    adjusting journal entries on December 31, 2018.
    1 RE 145,600 SE 15600 SP 130,000
    2. IR 35500 II 7700 RE 43200
    3. PI 51300 IE 12700 RE 64000
    4. S 15100 RE 78400 Adv 93500
    5. E 181000 DE 13750 AD 18450 Rep 87000 RE 89300

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