Question
In connection with the audit of the PAKYO COMPANY for the year ended December 31, 2010 you arecalled upon to verify the accounts payable transactions.
In connection with the audit of the PAKYO COMPANY for the year ended December 31, 2010 you arecalled upon to verify the accounts payable transactions. You find that the company does not make use of avoucher register but enters all merchandise purchases in a Purchases Journal, from which posting aremade to a subsidiary accounts payable ledger. The subsidiary ledger balance of P1,500,000 as ofDecember 31, 2010 agrees with the accounts payable balance in the company's general ledger. Ananalysis of the account disclosed the following:Trade creditors, credit balancesP 1,363,000Trade creditors, debit balances63,000NetP 1,300,000Estimated warranty on products sold100,000Customer's deposits9,000Due to officers and shareholders for advances50,000Goods received on consignment at selling price(offsetting debit made to Purchases)41,000P 1,500,000A further analysis of the "Trade Creditors" debit balances indicates:DateItemsAmountMiscellaneous debit balances prior to 2007.No information available due to lossof records in a fire.P 3,00003/03/07Manila Co.-Merchandise returned for credit,but the companyis now out of business8,00006/10/09Cebu Corp.-Merchandise returned but Cebusays "never received"7,00007/10/10Jolo Distributors-Allowance granted ondefective merchandise after the invoicewas paid5,00010/10/10Bulacan Co-Overpayment of invoice12,00012/05/10Advance to Zambales Co. This company agreesto supply certain articles on a cost-plus basis 24,00012/05/10Goods returned for credit and adjustments onprice after the invoices were paid; credit memosfrom supplier not yet received4,00063,000Your next step is to check the invoices in both the paid and the unpaid invoice files against ledger accounts.In this connection, you discover an invoice from Atlas Co. of P45,000 dated December 12, 2010 marked"Duplicate", which was entered in the Purchase Journal in January 2011. Upon inquiry, you discover thatthe merchandise covered by this invoice was received and sold, but the original invoice apparently has notbeen received.In the bank reconciliation working papers, there is a notation that five checks totaling P 63,000 wereprepared and entered in the Cash Disbursements Journal of December, but these checks were not issueduntil January 10, 2011.The inventory analysissummary discloses good in transit of P 6,000 at December 31, 2010, not taken up bythe company under audit during the year 2010. These goods are included in your adjusted inventory.1. The Accounts payable-Trade balance at December 31, 2010 should beA. P 1,471,000B. P 1,614,000C. P 1,214,000D. P 1,477,000
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