AUDIT OF CURRENT LIALIBITIES

Case 1

Yusuke Corporation records its purchases at gross amounts but wishes to change to recording of purchases net of purchase discounts. Discounts on purchases recorded from January 1, 20x1 to December 31, 20x1 totaled P80,000. Of this amount, P8,000 is still available in the accounts payable balance. the balances in Yusuke's accounts as of and for the year ended December 31, 20x1, before conversion are:

PurchasesP4,000,000

Purchase discounts32,000

Accounts payable1,200,000

REQUIRED:

1.The amount of purchase discounts lost to be recognized is _

2.Accounts payable balance should be reduced by _

3.The purchases account should be reduced by

4.Prepare the entry to record the conversion.

Case 2

Summer Company offers a set of building blocks to customers who send in three (3) UPC codes from Summer cereal, along with P50.00. The blocks sets cost Summer P110 each to purchase and P60 each to mail to customers. During 20x1, Summer sold 1,000,000 boxes of cereal. The company expects 30% of the UPC codes to be sent in. During 20x1, 120,000 UPC codes are redeemed.

Required:

1.What is the cost of estimated claims outstanding?

2.Prepare Summer's December 31, 20x1 adjusting entry.