1. In the course of your audit of Scarlet Inc.'s December 31, 2020 liabilities the following schedule was presented to you by Scarlet Inc.'s bookkeeper:<\/p>
<\/p>
Accounts payable P225,000<\/p>
Estimated premiums liability ?<\/p>
Estimated warranties payable 320,750<\/p>
Accrued salaries 240,400<\/p>
Deferred tax liability 200,000<\/p>
Notes payable, 20% due 4\/1\/21 500,000<\/p>
Interest payable on Notes payable 75,000<\/p>
Serial bonds payable, 12% 1,000,000<\/p>
Total<\/p>
<\/p>
<\/p>
Audit notes:<\/p>
The accounts payable balance is net of a P35,000 advances made to a supplier for merchandise to be delivered in 2021.<\/p>
<\/p>
Moreover, the following summarizes the result of your purchases cut-off procedures. You have ascertained that all related inventories were correctly accounted for.<\/p>
<\/p>
Receiving Report (RR) No. Amount Supplier's Shipment Date. Receiving Report Date Shipment Terms<\/p>
Last entries on the December 2020 Journal<\/p>
0633 P5,500 12\/26\/2020 12\/28\/2020 FOB Destination<\/p>
0634 6,000 12\/28\/2020 1\/2\/2021 FOB Destination<\/p>
0635 7,900 12\/28\/2020 12\/30\/2020 FOB Shipping Point<\/p>
<\/p>
First entries on the January 2021 Journal<\/p>
0636 8,900 12\/28\/2020 1\/3\/2021 FOB Shipping Point<\/p>
0637 10,000 12\/29\/2020 12\/31\/2020 FOB Destination<\/p>
0638 15,000 1\/3\/2021 1\/1\/2021 FOB Shipping Point<\/p>
<\/p>
The company started a promotional program in 2020 whereby for every five product labels customer surrenders with P25 cash, a customer shall receive an especially designed t-shirt. The company sold 40,000 units of the product covered by the said promotional program and purchased 4,500 t-shirts in anticipation of the premium's redemption which the company appropriately debited to premiums inventory account upon purchase. Each t-shirt costs P95. The company estimates that 60% of the product labels accompanying sales shall ultimately be presented for the redemption of premiums. 1,200 t-shirts remained on hand as of December 31, 2020. Actual redemptions during the year were appropriately recorded, while accrual at year-end is yet to be made.<\/p>
<\/p>
The company also has a two-year warranty on its products.The warranty estimate is at 8% of the peso sales, two thirds of which is expected to be incurred during the year of sale and one-third on the year following the year of sale.The summary of the company's total sales and actual warranty costs incurred for the past three years are presented below (Assume sales were made evenly throughout the year):<\/p>
<\/p>
<\/p>
2018 2019 2020<\/p>
Net Sales P4,000,000 4,525,000 5,275,000<\/p>
Actual costs paid 127,500 233,750 285,250<\/p>
<\/p>
The company is yet to update its warranty liabilities as of December 31, 2020<\/p>
<\/p>
The deferred tax liability is net of a P50,000 deferred tax asset, and has resulted from excess tax depreciation over financial depreciation and is expected to reverse the following year.<\/p>
<\/p>
The 20% Notes payable was to a bank and was originally dated April 1, 2018 with a 3 year term with interest payable annually every April 1. On December 31, 2020, the company entered into an agreement with the bank to refinance the notes payable by issuing another 5 year notes payable, the proceeds of which shall be used to refinance the obligation maturing currently.As part of the agreement, the company is to offer an asset as a security\/collateral on the loan and that the loan amount will be set at 75% of the fair market value of the asset being offered as collateral.As of December 31, 2020, the asset offered as collateral had a fair market value of P600,000. Due to the nature of the asset, its fair market value is not expected to materially change at any time up to the execution of the refinancing agreement.<\/p>
<\/p>
The 12% bonds payable matures at the rate of P200,000 annually every December 31. Interests are also payable every December 31. The last P200,000 bonds will be paid on December 31, 2026.<\/p>
<\/p>
What is the correct balance of the accounts payable?<\/p>
a. 264,000<\/p>
b. 282,900<\/p>
c. 272,900<\/p>
d. 282,900<\/p>
<\/p>
<\/p>
2. What is the correct estimated premiums liability as of December 31, 2020?<\/p>
a. 329,000<\/p>
b. 105,000<\/p>
c. 231,000<\/p>
d. 336,000<\/p>
<\/p>
<\/p>
3. What is the correct estimated warranties payable as of December 31, 2020?<\/p>
a. 423,500<\/p>
b. 411,750<\/p>
c. 457,500<\/p>
d. 421,750<\/p>
<\/p>
<\/p>
4. How much from the 20% Notes payable is classified as noncurrent as of December 31, 2020?<\/p>
a. None<\/p>
b. 50,000<\/p>
c. 450,000<\/p>
d. 500,000<\/p>
<\/p>
<\/p>
5. How much should be presented as current liabilities in the December 31, 2020 statement of financial position?<\/p>
a. 1,150,800<\/p>
b. 1,200,800<\/p>
c. 1,400,800<\/p>
d. 1,650,800<\/p>
<\/p>
<\/p>
6. How much should be presented as non-current liabilities in the December 31, 2020 statement of financial position?<\/p>
a. 1,450,000<\/p>
b. 1,650,000<\/p>
c. 1,700,000<\/p>
d. 1,750,000<\/p>", "transcribed_text": "", "related_book": { "title": "Managerial Accounting Tools for Business Decision Making", "isbn": "978-1118334331, 1118334337, 978-1119036449, 1119036445, 978-1119036432", "edition": "7th edition", "authors": "Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/1003.jpg", "uri": "\/textbooks\/managerial-accounting-tools-for-business-decision-making-7th-edition-1003", "see_more_uri": "" }, "free_related_book": { "isbn": "0813526140", "uri": "\/textbooks\/african-fractals-modern-computing-and-indigenous-design-1st-edition-978-0813526140-273305", "name": "African Fractals Modern Computing And Indigenous Design", "edition": "1st Edition" }, "question_posted": "2024-06-28 05:47:00", "see_more_questions_link": "\/study-help\/questions\/business-general-management-2023-February-20", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/sprouse-and-moonitz-proposed-that-quantification-is-an-element-of", "description": "Sprouse and Moonitz proposed that quantification is an element of the economic environment that is relevant for accounting. Required: a. 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