The partnership of King, Queen and Prince engaged you to audit its accounting records. Some accounts...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The partnership of King, Queen and Prince engaged you to audit its accounting records. Some accounts are on the accrual basis and others are on the cash basis. The partnership's books were closed at December 31, 2007 by the bookkeeper who prepared the general ledger trial balance that appears below. Cash Accounts receivable Inventory Land King, Queen and Prince GENERAL LEDGER TRIAL BALANCE December 31, 2007 Buildings Accumulated depreciation-buildings Equipment Accumulated depreciation- equipment Goodwill Accounts payable Allowance for future inventory losses King, capital Queen, capital Prince, capital Totals Debit P 100,000 400,000 260,000 90,000 500,000 560,000 50,000 P1,960.000 December 31 2007 P7,000 2,000 Credit P 20,000 60,000 550,000 30,000 600,000 400,000 300,000 P1.960,000 Your inquiries disclosed the following: 1. The partnership was organized on January 1, 2006 with the partners making equal amount of contributions. The initial partnership agreement calls for an equal distribution of profit or loss among the partners. The partnership agreement was amended effective January 1, 2007 to provide for the following profit and loss ratio: King, 50%, Queen, 30%; and Prince, 20%. The amended partnership agreement also stated that the accounting records were to be maintained on the accrual basis and that any adjustments necessary for 2006 should be allocated according to the 2006 distribution of profits. 2. The following amounts were not recorded: December 31 2006 P 6,500 11,000 4,500 Prepaid insurance Advances from customers Accrued interest expense The advances from customers were recorded as sales in the year the cash was received. 3. In 2007 the Partnership recorded a provision of P30,000 for anticipated declines in inventory prices. You convinced the partners that the provision was unnecessary and should be removed from the books. 4. The partnership charged equipment purchased for P44,000 on January 3, 2007 to expense. This equipment has an estimated life of ten years and an estimated salvage value of P4,000. The partnership depreciates its capitalized equipment under the straight-line depreciation method. 5. The partners agreed to establish an allowance for doubtful accounts at two percent of current accounts receivable and five percent of past due accounts. At December 31, 2006 the partnership had P540,000 of accounts receivable, of which only P40,000 was past due. At December 31, 2007 fifteen percent of accounts receivable was past due, of which P40,000 represented sales made in 2006, and was generally considered collectible. The partnership had written off uncollectible accounts in the year the accounts became worthless as follows: 2007 accounts 2006 accounts 2. The capital balance of King on January 1, 2007 before adjustment is: a. P100,000 b. P125,000 c. P300,000 2007 P 8,000 10,000 6. Goodwill was recorded on the books in 2007 and credited to the partners' capital accounts in the profit and loss ratio in recognition of an increase in the value of the business resulting from improved sales volume. 7. No other capital transactions took place in 2006 and 2007. 8. Ignore tax implications. Based on the above information, answer the following: 1. The net income of the partnership in 2007, before adjustment is: a. P1,000,000 b. P980,000 c. P950,000 3. The capital balance of Queen on December 31, 2007 before adjustment is: a. P410,860 b. P374,140 c. P385,000 5. What is the carrying value of equipment on December 31, 2007? a. P600,000 b. P540,000 c. P544,000 Accounts Written Off in 8. The adjusted net income in 2007 is: a. P1,086,200 d. P400,000 4. What is the effect on 2007 net income of the omission of prepaid insurance, advances from customers, and accrued interest expenses in 2006 and 2007? a. P9,000 understated b. P9,000 overstated c. P5,000 understated d.P14,000 understated b. P1,027,200 2006 2,500 c. P1,008,200 9. What should be the capital balance of Prince at December 31, 2007? a. P310,240 b. P300,240 c. P317,240 d. P604,000 6. What should be the balance of the allowance for uncollectible accounts at December 31, 2007? a. P9,800 b. P12,000 c. P15,800 d. P14,500 d. P920,000 7. How much is the uncollectible account expense that should have been recognized in 2006? a. P24,500 b. P14,500 c. P12,000 d. P9,500 10. What is the adjusted capital balance of Queen on January 1, 2007? a. P107,000 b. P89,667 c. P93,000 d. P600,000 d. P1,036,200 d. P307,240 d. P79,000 11. By how much would the 2006 net income be misstated, if no adjustments were made for the above errors? a. P31,000 overstated b.P31,000 understated c. P21,000 overstated d.P21,000 understated 12. The adjusted partners' equity on December 31, 2007 is: a. P1,315,200 b. P1,336,200 c. P1,306,200 d. P1,365,200 The partnership of King, Queen and Prince engaged you to audit its accounting records. Some accounts are on the accrual basis and others are on the cash basis. The partnership's books were closed at December 31, 2007 by the bookkeeper who prepared the general ledger trial balance that appears below. Cash Accounts receivable Inventory Land King, Queen and Prince GENERAL LEDGER TRIAL BALANCE December 31, 2007 Buildings Accumulated depreciation-buildings Equipment Accumulated depreciation- equipment Goodwill Accounts payable Allowance for future inventory losses King, capital Queen, capital Prince, capital Totals Debit P 100,000 400,000 260,000 90,000 500,000 560,000 50,000 P1,960.000 December 31 2007 P7,000 2,000 Credit P 20,000 60,000 550,000 30,000 600,000 400,000 300,000 P1.960,000 Your inquiries disclosed the following: 1. The partnership was organized on January 1, 2006 with the partners making equal amount of contributions. The initial partnership agreement calls for an equal distribution of profit or loss among the partners. The partnership agreement was amended effective January 1, 2007 to provide for the following profit and loss ratio: King, 50%, Queen, 30%; and Prince, 20%. The amended partnership agreement also stated that the accounting records were to be maintained on the accrual basis and that any adjustments necessary for 2006 should be allocated according to the 2006 distribution of profits. 2. The following amounts were not recorded: December 31 2006 P 6,500 11,000 4,500 Prepaid insurance Advances from customers Accrued interest expense The advances from customers were recorded as sales in the year the cash was received. 3. In 2007 the Partnership recorded a provision of P30,000 for anticipated declines in inventory prices. You convinced the partners that the provision was unnecessary and should be removed from the books. 4. The partnership charged equipment purchased for P44,000 on January 3, 2007 to expense. This equipment has an estimated life of ten years and an estimated salvage value of P4,000. The partnership depreciates its capitalized equipment under the straight-line depreciation method. 5. The partners agreed to establish an allowance for doubtful accounts at two percent of current accounts receivable and five percent of past due accounts. At December 31, 2006 the partnership had P540,000 of accounts receivable, of which only P40,000 was past due. At December 31, 2007 fifteen percent of accounts receivable was past due, of which P40,000 represented sales made in 2006, and was generally considered collectible. The partnership had written off uncollectible accounts in the year the accounts became worthless as follows: 2007 accounts 2006 accounts 2. The capital balance of King on January 1, 2007 before adjustment is: a. P100,000 b. P125,000 c. P300,000 2007 P 8,000 10,000 6. Goodwill was recorded on the books in 2007 and credited to the partners' capital accounts in the profit and loss ratio in recognition of an increase in the value of the business resulting from improved sales volume. 7. No other capital transactions took place in 2006 and 2007. 8. Ignore tax implications. Based on the above information, answer the following: 1. The net income of the partnership in 2007, before adjustment is: a. P1,000,000 b. P980,000 c. P950,000 3. The capital balance of Queen on December 31, 2007 before adjustment is: a. P410,860 b. P374,140 c. P385,000 5. What is the carrying value of equipment on December 31, 2007? a. P600,000 b. P540,000 c. P544,000 Accounts Written Off in 8. The adjusted net income in 2007 is: a. P1,086,200 d. P400,000 4. What is the effect on 2007 net income of the omission of prepaid insurance, advances from customers, and accrued interest expenses in 2006 and 2007? a. P9,000 understated b. P9,000 overstated c. P5,000 understated d.P14,000 understated b. P1,027,200 2006 2,500 c. P1,008,200 9. What should be the capital balance of Prince at December 31, 2007? a. P310,240 b. P300,240 c. P317,240 d. P604,000 6. What should be the balance of the allowance for uncollectible accounts at December 31, 2007? a. P9,800 b. P12,000 c. P15,800 d. P14,500 d. P920,000 7. How much is the uncollectible account expense that should have been recognized in 2006? a. P24,500 b. P14,500 c. P12,000 d. P9,500 10. What is the adjusted capital balance of Queen on January 1, 2007? a. P107,000 b. P89,667 c. P93,000 d. P600,000 d. P1,036,200 d. P307,240 d. P79,000 11. By how much would the 2006 net income be misstated, if no adjustments were made for the above errors? a. P31,000 overstated b.P31,000 understated c. P21,000 overstated d.P21,000 understated 12. The adjusted partners' equity on December 31, 2007 is: a. P1,315,200 b. P1,336,200 c. P1,306,200 d. P1,365,200
Expert Answer:
Answer rating: 100% (QA)
1 The net income of the partnership in 2007 before adjustment is Calculation Net income Total revenue Total expenses Total revenue P1000000 Total expenses P980000 Therefore net income before adjustmen... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
The partnership of Cain, Gallo, and Hamm engaged you to adjust its accounting records and convert them uniformly to the accrual basis in anticipation of admitting Kerns as a new partner. Some...
-
The partnership of Cain, Gallo, and Hamm engaged you to adjust its accounting records and convert them uniformly to the accrual basis in anticipation of admitting Kerns as a new partner. Some...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Draw structures for the following molecules (a) Acrylonitrile, C3H3N, which contains a carbon-carbon double bond and a carbon-nitrogen triple bond (b) Ethyl methyl ether, C3H8O, which contains an...
-
Assume that the United States, as a steel-importing nation, is large enough so that changes in the quantity of its imports influence the world price of steel. The U.S. supply and demand schedules for...
-
If an organization has three information assets to evaluate for risk management, as shown in the accompanying data, which vulnerability should be evaluated for additional controls first? Which one...
-
What are some audit steps to catch skimming and money-laundering schemes?
-
SunNet is a residential Internet Service Provider (ISP) in the central Florida area. Presently, the company operates one centralized facility that all of its clients call into for Internet access. To...
-
The Peter Noone Company paid $200,000 for the rights to mine lead in Southeast Missouri and $2,400,000 to drill and erect a mine shaft. Equipment was also purchased for $1,800,000 to process the lead...
-
Continuing Payroll Project: Prevosti Farms and Sugarhouse - EERF (Static) Prevosti Farms and Sugarhouse pays its employees according to their job classification. The following employees make up...
-
Reversing Rapids Co. purchases an asset for $100,226. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%,...
-
Nick has been saving money using a bank account. Each month he deposits $400 into the account. Over the years, he has saved $125,000-an impressive achievement! Unfortunately, Nick just learned that...
-
1. The present break-even sale of eskinol Company is P550, 000 per year. It is computed that if fixed expenses will go up by P60, 000, the sales volume required to break-even will also increase to...
-
You currently own a license to operate a Planet Hollywood restaurant in Cancun, MX. Your leasing/franchising contract ends at the end of 2019. This means that the rights of the restaurant will go...
-
On August 18, 2011, Hewlett-Packard, a computer hardware manufacturer, announced that it would purchase Autonomy, a search and data analysis company. HP paid $11.1 billion for the acquisition,...
-
Mr. Muscle MANUFACTURING COMPANY lost the November 2022 cost of production reports of its two processing departments because of the corrupted data files. The company engages your services today to...
-
The ionization energy, IE, is the energy required to remove the electron. In the Bohr model, we can think of ionization in terms of an electron moving from the n = 1 level to the n = ? level. What is...
-
Could the owner of a business prepare a statement of financial position on 9 December or 23 June or today?
-
Pillow Company purchased 90% of the common stock of Satin Company on May 1, 2009, for a cash payment of $474,000. December 31, 2009, trial balances for Pillow and Satin were: Satin Company declared a...
-
Cash paid for interest expense amounted $10,000. Where is the cash out flow reported on the statement of cash flows?
-
Why does a debit balance in a partners' capital account create problems in the UPA order of payment for a partnership liquidation?
-
At the end of the accounting period, a journal entry is made to close variance accounts to_or________________________,and________________________,.
-
How does Porters competitive forces model help companies develop competitive strategies using information systems? Define Porters competitive forces model and explain how it works. Describe what...
-
True or false? Standard cost variances provide definitive evidence that costs are out of control and managers are not performing effectively.
Study smarter with the SolutionInn App