200 THE FOLLOWING ARE THE ACCOUNTING POLICIES OF SMALLSPOON COMPANY: 201 202 1. Investment properties are measured using cost mode 203 2. A full year depreciation is taken in the year of acquisition and no depreciation is taken in the year of disposition 204 3. The accounting policy is to report inventory at lower of cost and net realizable value applied to total inventory. Cost is determined under the first-in, first-out method. 205 The entity used the direct write-off method of recording inventory write-down. Any inventory loss will be charged directly to cost of goods sold account. 206 4. In estimating allowance for doubtful accounts, the entity used percentage of accounts receivables. The policy is to maintain an allowance for doubtful accounts equal to 10% of the outstanding accounts receivable. 207 5. The entity opted to use the straight line method of depreciation for all property, plant and equipment. Residual values are ignored because they are considered immaterial. 208 The following are the estimated useful life of the properties: 209 a. Office building 20 years 210 b. Office Fumitue and Fixtures 5 years 211 c. Store Building 20 years 212 d. Store Equipment 6 years 213The Smallspoon Company is a retail company that began operations on January 1, 2018. The Smallspoon Company is authorized to issue 1,000,000 shares of P10 par value ordinary share and 500,000 sahres of 3%, P50 par value preferred share. The company sells a product that includes a one-year warranty and records estimated warranty payable each month The company uses a perpetual inventory system, FIFO method. The following is the trial balance of Smallspoon Company as of September 30, 2022: Note Acct No. Acct No. Debit Credit 1 000 1 Property, Plant & Equipment, net 5,640,000 2 000 2 Investment in bonds 3,766,72 000 3 Cash in bank 3,653,240 000 4 Cost of Goods sold 3,543,600 000 5 Accounts Receivable 1,960,000 3 000 6 Invesment property 1,800,000 4 000 7 nvestment in Associate, at equity ,200,000 000 Sales Salaries 830,700 000 9 Warranty Expense 720,000 0 10 Merchandise Inventory 560,000 00 11 Office Salaries 439,920 5 00 12 Financial assets at Fair Value 408,000 00 13 Utilities Expense - Store 121,875 6 00 14 Prepaid Expenses - Store Insurance 90,000 00 15 Utilities Expense - Admin 65,625 00 16 Store Supplies Expenses 51,000 00 17 Sales - Employer SSS, PHIC, & HDMF Expense 21,600 00 18 Taxes and licences 20,000 00 19 Office Supplies Expenses 20,000 7 00 20 Life Insurance Expense 15,000 00 21 Cash Surrender value 15,00 00 22 Office - Employer SSS, PHIC, & HDMF Expense 10,800 00 23 Advertising Expenses 10,000 00 24 Interest Expense 9,600 00 25 Sales 5,906,000 00 26 Prefence Share Capital, 3%, P50 par 5,000,000 00 27 Ordinary Share Capital, P10 par 5,000,000 00 28 Retained Earnings 2,810,800 00 29 Share premium - ordinary 2,000,000 8 00 30 Bonds Payable 1,200,000 00 31 Retained Earnings appropriated for contingencies 1,000,000 9 00 32 Note payable, 8% due July 1, 2022 720,000 00 33 Share premium - preference 500,000 00 34 Accounts Payable 420,000 10 00 35 Notes payable, 12%, due Dec 15, 2020 180,000 00 36 Warranty liability 144,000 00 37 Premium on Bonds Payable 42,240 00 38 Allowance for doubtful accounts 39,200 11 00 39 Employer SSS, PHIC, & HDMF Payable 3,600 11 00 40 Employee SSS, PHIC, & HDMF Payable 3,600 11 00 41 Employee Income Tax Payable 3,240 00 42 Accrued Interest Payable 00 43 Accrued Interest Receivable 00 44 Bank Charges 00 45 Cash Dividend Payable 00 46 Depreciation Expense - Admin 00 47 Depreciation Expense - Store 0 48 Dividend Income 00 49 Doubtful accounts expense 00 50 Financial assets at Fair Value - OC 00 51 Interest Income 00 52 Investment Income 00 53 Miscellaneous Expense 00 54 Miscellaneous Income 00 55 Mortgage Payable 00 56 Notes payable, 10% due Oct 1, 2021 00 57 Retained Earnings appropriated for treasury shares 00 28 Share Dividend Distributable 00 59 Store Insurance Expense 00 60 Treasury Shares, at cost 00 61 Unrealized Gain - OCI 00 62 Unrealized Gain - PL 00 63 Unrealized Loss - OCI 00 64 Unrealized Loss - PL TOTAL 24,972,680 2497268075 NOTES 76 77 1 Schedule of Property, Plant and Equipment 01.01.2022 01.01.2022 78 01.01.2022 Accumulated Carrying 79 Property, plant and equipment Cost Depreciation amount 80 Land 81 Office Building 2,400,000 480,000 1,920,000 Office Furniture and Fixtures 400,000 160,000 240,000 83 Store Building 3,600,000 720,000 2,880,000 84 Store equipment 1,200,000 600,000 600,000 Total 7,600,000 1,960,000 5,640,000 2 The investment in the bonds of Manda Company was acquired on April 1, 2022 with a face amount of P4,000,000, for P3,766,720. The bonds mature on April 1, 2026 and pays 12% interest annually on April 1 with a 14% effective yield. The investment is to be held as financial asset at amortized cost. 90 3 The investment property is a vacant land that was acquired during 2020 and currently has undetermined use. 91 92 4 On January 1, 2022, SmallSpoon purchase 20,000 shares of Horizon Company, P30 par at P60 per share, representing 20% equity interest. 93 At the time of acquisition, the net assets of investee are fairly stated. 94 95 5 Smallspoon purchased 10,000 shares of marketable equity securities of Lagoon Company on June 1, 2022, for P408,000 and held these as financial assets for trading. 96 97 6 The one year store insurance policy was purchased last October 1, 2021 for an annual premium of P120,000 98 99 7 SmallSpoon insured the life of its president for P1,000,000 with annual premium of P15,000, the entity being the beneficiary of the ordinary life policy. 100 The policy date was January 1,2020 and carried the following cash surrender value: 101 102 End of policy year Cash Surrender Value 103 2020 104 2021 - 105 2022 15,000 106 2023 21,000 107 2024 29,00 108 109 8 The 3-year, P1,200,000 face amount, 10% bonds was issued by SmallSpoon on January 1, 2022 for P1,242,240, with an effective yield of 8%. 110 The principal and interest are payable annually starting on December 31, 2022 111 112 9 The P720,000 note payable was 2-year, 8% promissory note, issues on July 1,2022. Principal payment is due on maturity date but interest is payable every first of the month, beginning August 1,2022. 113 114 10 The 12%, P180,000 note payable was a 6-month promissory note, issued on June 15,2022. Interest was payable at maturity date. 115 116 11 Smallspoon has the following payroll information. All employees worked January 1 through December 31: 117 Employee Share: Employer Share 118 Employee Monthly Monthly Monthly Monthly 119 Designation Salary Income Tax w/held SSS, PHIC, & HDMF SSS, PHIC, & HDMF 120 Mirabel Sales personnel *22,100 255 600 600 121 Luisa Sales personnel 23,920 620 500 600 122 Camilo Sales personnel 22,880 410 600 600 123 Bruno Office personnel 24,180 670 600 600 124 Isabela Sales personnel 23,400 515 600 600 125 Antonio Office personnel 24,700 770 600 600 126 P141,180 P3,240 P3,600 P3,600146 147 November 2022 148 1 Paid the first mortgage payment. 149 2 Purchased 6,000 ordinary shares at P110 per share of Jack Source Co. as a long-term investment, representing 4% ownership. SmallSpoon 150 irrevocably designate this investment at fair value through other comprehensive income. 151 3 Paid interest due on the 8% note payable issued last July 1, 2022. 152 4 Paid suppliers for merchandise inventory purchased on October 3. 153 5 Purchased merchandise inventory on account for P1,500,000, terms n/30 154 6 Collected 80% of accounts receivable. 155 7 Purchased 50,000 ordinary shares as treasury for P16 per share. These shares were originally issued for P14 per share. 156 8 Paid all liabilities associated with the October 31 payroll. 157 9 Paid P60,000 to satisfy warranty claims. 158 10 Declared cash dividends of P2 per outstanding share to ordinary shareholders and the preference dividends at the preference rate. 159 11 Paid P24,500 for utilities 160 12 Received a cash dividend of P6.6 per share on the Jack investment. 161 13 Paid the cash dividends declared on November 17. 162 14 Recorded cash sales for the month of P420,000 and credit sales of P980,000 The cost of the goods sold was P840,000 and estimated warranty payable was 8%. 163 15 Recorded November payroll and paid employees. 164 16 Accrued employer additional payroll contributions for November