Problem 1 On the morning of January 2, 2020, the Accounting Manager of ML Corporation, extracted a trial balance as of December 31, 2019, from the company's online accounting software. It was the first day of operations in 2020 since the company closed after its operating hours last December 31, 2019. The following details are shown: ML CORPORATION TRIAL BALANCE December 31, 2019 Credit Debit 5,000 37,900 1,800,000 1,700,000 97,000 Petty Cash Fund Cash in Bank Investments Accounts Receivable Allowance for Bad Debts Notes Receivable Interest Receivable Merchandise Inventory Office Supplies on Hand Prepaid Insurance Leasehold Improvements Accumulated Depreciation - Leasehold Improvements Equipment Accumulated Depreciation - Equipment Accounts Payable Loan Payable Utilities Payable Deferred Revene Ordinary Share Capital, P100 par Share Premium 60,150 2,500 815,000 22.000 120.000 200,000 30,000 550.000 206,250 914,000 200,000 54,600 175,000 1,000,000 200,000 1,000,000 200,000 150,000 1,044,100 7,000,000 2,500 100,000 Ordinary Share Capital, P100 par Share Premium Treasury Shares, 1,000 shares Retained Earnings Sales Interest Income Dividend Income Repairs Expense Transportation Expense Purchases Rent Expense Advertising Expense Taxes and licenses Salaries Expense Utilities Expense Commission Expense Interest Expense Bank Service Charge Income from discountinued operations TOTAL 135,000 14,200 3,000,000 240,000 60,000 85,000 1,750,000 387,500 259,000 30,000 200 400,000 11,423,450 11,423,450 Additional pieces of information were gathered as shown below: 1. An examination of the petty cash fund on the morning of January 2, 2020, discloses the following items in the petty cash drawer. Coins and currency P 1,165 Postage stamps 40 An L.O.U. from Eddie, an employee for cash advance 500 Check payable to ML from JM, an employee, marked NSF 350 An envelope containing cash collected by employees to be used as prizes for their Christmas party 2,000 Vouchers for the following: Postage Stamps P 200 Computer repairs 1.230 1.9301 Total P5.985 Based on the practice of the company, any petty cash shortage is charged to the petty cash eustadion using the account "Receivable from petty cash custodian", which is due to be settled within the month Any pelly cash oversiga is charged to Other Income" 2. The correct balance of the Cash in Bank account on October 31, 2019, was P40,000. Subsequent transactions during November and December relating to the records of ML. and Mae Bank are summarized below. ML Books Mae Bank Books November deposits P75,600 P71.100 November checks 67,900 61,300 November service charge 200 November 30 balance 47.700 49.600 December deposits 82,500 82.800 December checks 92.100 93.200 December service charge 150 Note collected by bank in December 10.150 November service charge recorded in December 2001 December 31 balance 37.900 49.200 3. The Investments account comprises of the following items: Investment A - This is a commercial paper with a cost of P100,000 which was purchased on December 30, 2019. Its term is 2 years; it has three months to go until maturity at the date of purchase. Investment B - This a 10-year treasury bill with a cost of P200,000 which was purchased in August 2019. As of December 31, 2019, it has 2 months to go until maturity. Investment C - This is a 5-year money market instrument purchased on October 23, 2019 for P500,000, which will mature on December 31, 2022. Investment D - These are non-trading equity securities purchased in January 2019 for P1,000,000. The management made an election to classify this as investments measured at Fair Value through Other Comprehensive Income. The fair value at December 31, 2019 was P1,200,000 4. An examination of the company's allowance for bad debts reveals the following: Year Estimated Bad Debts Actual Bad Debts 2016 P100.000 P44.000 2017 130.000 69.000 2018 165.000 90,000 2019 95.000 In the past, the company has estimated that 3% of sales will be uncollectible. The company's accountant has determined that the percentage used in estimating bad debts has been inappropriate based on previous experiences of the company. He would like to revise the estimate downward to 2%. The president of the company has stated that if the previous estimates of bad debt expense were incorrect, the financial statements should be restated using the more accurate estimate. 5. Notes Receivable Tyra, a customer, owed the company P50,000 for goods that he purchased on June 1, 2019, the term is n/30. However, he failed to pay on time, instead on July 1, 2019, he issued a note for the entire amount with 10% annual interest. He promised to pay the principal and interest on January 15, 2019. Daniel , a customer, owed the company P10,150 for goods that he purchased on October 10, 2019. It was agreed that ML's bank will collect the note from him. 6. An examination of the company's December 31, 2019, inventory revealed errors in its inventory.count procedures that have caused inventories for the last 2 years to be incorrect, as follows: December 31, 2017 Understated by P 150.000 December 31, 2018 Overstated by P 200.000 Based on the count of the inventory, the amount of inventories as of December 31, 2019 is P465.000. However, later, the following were discovered a. Goods in transit to customers costing P30.000. FOB shipping point were excluded in the count and were already recorded as sales as of December 31, 2019 b. Goods amounting to P65.000 were ordered December 29, 2019 and are still in transit as of December 31, 2019. FOB destination. were included in the count but not yet recorded as purchases c. Goods in the hands of consignees costing P50.000 were excluded in the count 7. Property, Plant & Equipment a. Leasehold Improvements - On April 1, 2018, The Company made some improvements in the building that it occupies amounting to P200,000. The estimated useful life is 5 years with no residual value and the company uses straight-line method for its depreciation. b. Equipment - This was purchased on July 1, 2017 for P550,000. The management estimated that its useful life is 4 years. Straight- line method of depreciation was used until 2018. However, at the beginning of 2019, the management determined that the remaining useful life is 4 years with no residual value. It was further agreed that the method of depreciation should be changed from straight-line method to SYD method. 8. Loans Payable On January 1, 2019, the company borrowed P 300,000 from Easy Bank used for general purposes. The principal is payable in three equal installments every December 31, and annual interest of 10% of the outstanding principal is also payable every December 31. 9. Deferred Revenue The company received from a customer, an advance payment of P175,000 for goods to be produced and delivered on December 2021 10. Treasury Shares and Dividends declared In January 2019. the company bought its 1,000 shares for P150,000 On December 1, 2019, the company declared dividends of P5 per share for those shareholders in the record as of December 15, 2019, which is to be paid on January 10, 2020 The books of account for 2019 are still open as of January 2, 2020. Any necessary adjustments could still be made before finalizing the company's financial statements, QUESTIONS: 1) What is the amount of cash shortage or overage? (put a negative sign in your answer if it is a shortage, and input the absolute amount if it is an overage) 2) What is the amount of adjusted total bank disbursements in December? 3) What is the correct cash in bank balance on November 30,2019? 4) What is the correct cash in bank balance on December 31, 2019? 5) What is the total amount of cash and cash equivalents? 6) What is the adjusted balance of the allowance for bad debts on December 31, 2019? 7) What is the amount of merchandise inventories to be reported in the Statement of Financial Position as of December 31, 2019? B) What is the amount of depreciation expense to be reported in 2019? 9) What is the carrying of property, plant and equipment to be reported on the Statement of Financial Position? 10) What is the amount of total current assets to be reported in the Statement of Financial Position? 11) What is the amount of total non-current assets to be reported in the Statement of Financial Position 11) What is the amount of total non-current assets to be reported in the Statement of Financial Position? 12) What is the amount of total current liabilities to be reported in the Statement of Financial Position? 13) What is the amount of total non-current liabilities to be reported in the Statement of Financial Position? 14) What is the amount of Cost of Goods Sold to be reported in Statement of Comprehensive Income? 15) What is the amount of total expenses (excluding cost of goods sold) to be reported in the Statement of Comprehensive Income? 16) What is the amount of total net income shall be reported in Statement of Comprehensive Income? 17) What is the amount of Other Comprehensive Income to be reported in the Statement of Comprehensive Income? (a. put a negative sign in your answer if it is OCI loss. b. input the absolute mount if it is OCI gain and O if none) 18) What is the amount of Comprehensive Income to be reported in the Statement of Comprehensive Income? 19) What is the amount of unappropriated retained earnings to be reported in Statement of Changes in Equity? 20) What is the amount of total Shareholders' Equity to be reported in the Statement of Financial Position? Problem 1 On the morning of January 2, 2020, the Accounting Manager of ML Corporation, extracted a trial balance as of December 31, 2019, from the company's online accounting software. It was the first day of operations in 2020 since the company closed after its operating hours last December 31, 2019. The following details are shown: ML CORPORATION TRIAL BALANCE December 31, 2019 Credit Debit 5,000 37,900 1,800,000 1,700,000 97,000 Petty Cash Fund Cash in Bank Investments Accounts Receivable Allowance for Bad Debts Notes Receivable Interest Receivable Merchandise Inventory Office Supplies on Hand Prepaid Insurance Leasehold Improvements Accumulated Depreciation - Leasehold Improvements Equipment Accumulated Depreciation - Equipment Accounts Payable Loan Payable Utilities Payable Deferred Revene Ordinary Share Capital, P100 par Share Premium 60,150 2,500 815,000 22.000 120.000 200,000 30,000 550.000 206,250 914,000 200,000 54,600 175,000 1,000,000 200,000 1,000,000 200,000 150,000 1,044,100 7,000,000 2,500 100,000 Ordinary Share Capital, P100 par Share Premium Treasury Shares, 1,000 shares Retained Earnings Sales Interest Income Dividend Income Repairs Expense Transportation Expense Purchases Rent Expense Advertising Expense Taxes and licenses Salaries Expense Utilities Expense Commission Expense Interest Expense Bank Service Charge Income from discountinued operations TOTAL 135,000 14,200 3,000,000 240,000 60,000 85,000 1,750,000 387,500 259,000 30,000 200 400,000 11,423,450 11,423,450 Additional pieces of information were gathered as shown below: 1. An examination of the petty cash fund on the morning of January 2, 2020, discloses the following items in the petty cash drawer. Coins and currency P 1,165 Postage stamps 40 An L.O.U. from Eddie, an employee for cash advance 500 Check payable to ML from JM, an employee, marked NSF 350 An envelope containing cash collected by employees to be used as prizes for their Christmas party 2,000 Vouchers for the following: Postage Stamps P 200 Computer repairs 1.230 1.9301 Total P5.985 Based on the practice of the company, any petty cash shortage is charged to the petty cash eustadion using the account "Receivable from petty cash custodian", which is due to be settled within the month Any pelly cash oversiga is charged to Other Income" 2. The correct balance of the Cash in Bank account on October 31, 2019, was P40,000. Subsequent transactions during November and December relating to the records of ML. and Mae Bank are summarized below. ML Books Mae Bank Books November deposits P75,600 P71.100 November checks 67,900 61,300 November service charge 200 November 30 balance 47.700 49.600 December deposits 82,500 82.800 December checks 92.100 93.200 December service charge 150 Note collected by bank in December 10.150 November service charge recorded in December 2001 December 31 balance 37.900 49.200 3. The Investments account comprises of the following items: Investment A - This is a commercial paper with a cost of P100,000 which was purchased on December 30, 2019. Its term is 2 years; it has three months to go until maturity at the date of purchase. Investment B - This a 10-year treasury bill with a cost of P200,000 which was purchased in August 2019. As of December 31, 2019, it has 2 months to go until maturity. Investment C - This is a 5-year money market instrument purchased on October 23, 2019 for P500,000, which will mature on December 31, 2022. Investment D - These are non-trading equity securities purchased in January 2019 for P1,000,000. The management made an election to classify this as investments measured at Fair Value through Other Comprehensive Income. The fair value at December 31, 2019 was P1,200,000 4. An examination of the company's allowance for bad debts reveals the following: Year Estimated Bad Debts Actual Bad Debts 2016 P100.000 P44.000 2017 130.000 69.000 2018 165.000 90,000 2019 95.000 In the past, the company has estimated that 3% of sales will be uncollectible. The company's accountant has determined that the percentage used in estimating bad debts has been inappropriate based on previous experiences of the company. He would like to revise the estimate downward to 2%. The president of the company has stated that if the previous estimates of bad debt expense were incorrect, the financial statements should be restated using the more accurate estimate. 5. Notes Receivable Tyra, a customer, owed the company P50,000 for goods that he purchased on June 1, 2019, the term is n/30. However, he failed to pay on time, instead on July 1, 2019, he issued a note for the entire amount with 10% annual interest. He promised to pay the principal and interest on January 15, 2019. Daniel , a customer, owed the company P10,150 for goods that he purchased on October 10, 2019. It was agreed that ML's bank will collect the note from him. 6. An examination of the company's December 31, 2019, inventory revealed errors in its inventory.count procedures that have caused inventories for the last 2 years to be incorrect, as follows: December 31, 2017 Understated by P 150.000 December 31, 2018 Overstated by P 200.000 Based on the count of the inventory, the amount of inventories as of December 31, 2019 is P465.000. However, later, the following were discovered a. Goods in transit to customers costing P30.000. FOB shipping point were excluded in the count and were already recorded as sales as of December 31, 2019 b. Goods amounting to P65.000 were ordered December 29, 2019 and are still in transit as of December 31, 2019. FOB destination. were included in the count but not yet recorded as purchases c. Goods in the hands of consignees costing P50.000 were excluded in the count 7. Property, Plant & Equipment a. Leasehold Improvements - On April 1, 2018, The Company made some improvements in the building that it occupies amounting to P200,000. The estimated useful life is 5 years with no residual value and the company uses straight-line method for its depreciation. b. Equipment - This was purchased on July 1, 2017 for P550,000. The management estimated that its useful life is 4 years. Straight- line method of depreciation was used until 2018. However, at the beginning of 2019, the management determined that the remaining useful life is 4 years with no residual value. It was further agreed that the method of depreciation should be changed from straight-line method to SYD method. 8. Loans Payable On January 1, 2019, the company borrowed P 300,000 from Easy Bank used for general purposes. The principal is payable in three equal installments every December 31, and annual interest of 10% of the outstanding principal is also payable every December 31. 9. Deferred Revenue The company received from a customer, an advance payment of P175,000 for goods to be produced and delivered on December 2021 10. Treasury Shares and Dividends declared In January 2019. the company bought its 1,000 shares for P150,000 On December 1, 2019, the company declared dividends of P5 per share for those shareholders in the record as of December 15, 2019, which is to be paid on January 10, 2020 The books of account for 2019 are still open as of January 2, 2020. Any necessary adjustments could still be made before finalizing the company's financial statements, QUESTIONS: 1) What is the amount of cash shortage or overage? (put a negative sign in your answer if it is a shortage, and input the absolute amount if it is an overage) 2) What is the amount of adjusted total bank disbursements in December? 3) What is the correct cash in bank balance on November 30,2019? 4) What is the correct cash in bank balance on December 31, 2019? 5) What is the total amount of cash and cash equivalents? 6) What is the adjusted balance of the allowance for bad debts on December 31, 2019? 7) What is the amount of merchandise inventories to be reported in the Statement of Financial Position as of December 31, 2019? B) What is the amount of depreciation expense to be reported in 2019? 9) What is the carrying of property, plant and equipment to be reported on the Statement of Financial Position? 10) What is the amount of total current assets to be reported in the Statement of Financial Position? 11) What is the amount of total non-current assets to be reported in the Statement of Financial Position 11) What is the amount of total non-current assets to be reported in the Statement of Financial Position? 12) What is the amount of total current liabilities to be reported in the Statement of Financial Position? 13) What is the amount of total non-current liabilities to be reported in the Statement of Financial Position? 14) What is the amount of Cost of Goods Sold to be reported in Statement of Comprehensive Income? 15) What is the amount of total expenses (excluding cost of goods sold) to be reported in the Statement of Comprehensive Income? 16) What is the amount of total net income shall be reported in Statement of Comprehensive Income? 17) What is the amount of Other Comprehensive Income to be reported in the Statement of Comprehensive Income? (a. put a negative sign in your answer if it is OCI loss. b. input the absolute mount if it is OCI gain and O if none) 18) What is the amount of Comprehensive Income to be reported in the Statement of Comprehensive Income? 19) What is the amount of unappropriated retained earnings to be reported in Statement of Changes in Equity? 20) What is the amount of total Shareholders' Equity to be reported in the Statement of Financial Position