PROBLEM # 11-12
11.In connection with your audit of the Karen Company for the year ended, you were able to gather the following accounts from its unadjusted trial balance as of December 31, 2018: Cash 170,000 Accounts receivable 525,000 Allowance for bad debts 4,000 Notes receivable 180,000 Prepaid rent expense 10.000 Trading securities 150,000 Merchandise inventory 450,000 Accounts payable 241,500 Note payable 100,000 Accrued expenses 22,000 Bonds payable (due semi-annually in June and December at P30, 000) 300,000 Income tax payable 30,000 SSS and HDMF premiums payable 12.DO0 Withholding tax payable 9,000 Mortgage payable, due July 31, 2020 200,000 Contingent liability 80,000 Additional information Cash consists of: Cash in bank per bank statement [outstanding checks, P 12,000) 167,000 Petty sash, including unreplenished petty cash expense vouchers of P150 500 Customers advance deposit in check dated January 15, 2019 2.500 170.000 Accounts receivable includes goods sent on consignment with a selling price of P125,000 at 125% of cost and was included in the inventory count. Notes receivable includes a notes discounted in the amount of P80, 000. Accounts payable includes a merchandise in transit, fob destination worth P40,000. The said delivery was not included in the inventory count. Also, it includes a customer's deposit in check dated January 15, 2019 of P 2,500. The note payable is in the form of a promissory note dated October 1, 2018 which will mature on March 31, 2019 with 18% interest per annum, a loan from Chubby Bank. No accrual of interest was recorded in relation to this liability. QUESTIONS: Based on the above and the result of your audit, determine the amounts to be presented in Karen Company's statement of financial position as of December 31, 2018 for the following: a. Cash b. Trade and other receivables G. Total current assets d. Trade and other payables e. Total current liabilities 12. Karen Corporation has recently decided to go public and hired you as an independent CPA. One statement that the entity is anxious is the preparation of the statement of cash flows. Financial statements of Karen Corporation for 2019 and 2018 are provided below. Statements of Financial Position 12/31/19 12/31/18 Cash P 153,000 P 72,000 Accounts receivable 195,000 81,000 Merchandise inventory 144,000 180,000 Property, plant and equipment (net of accumulated depreciation of P120,000 and P114,000 as of 12/31/19 and 12/31/18 respectivelyl 108 000 246,000 540.000 579.000 Accounts payable P 66.000 P 36,000 Income taxes payable 132,000 147,000 Bonds payable 135,000 225,000 Share capital 81.000 81.000 Retained earnings 126.000 90.000 P 540.000 P579,000 Income Statement For the year ended December 31, 2019 Sales P 3,150,000 Cost of Sales 2.682.DO0 Gross profit 468,000 Selling expenses P 225,000 Administrative expenses 72.000 297.000 Income from operations 171,000 Interest expense 27.000 Profit before taxes 144,000 Income taxes 36,000 Profit 108,000 The following additional data were provided: 1. Dividends for the year 2019 were P72,000. 2. During the year, an equipment was sold for P90,000. This equipment originally cost P132,000 and had a book value of P108,000 at the date of sale. The loss on sale was incorrectly charged to cost of sales. 3. All depreciation expense is in the selling expense category. QUESTIONS: Based on the above and the result of your engagement, you are asked to provide the following information for the year ended December 31, 2019 a. The net cash provided by operating activities. b. The net cash provided (used) by investing activities is C. The amount of cash received from customer d. Under the direct method, the cash paid for income taxes e. The net cash provided (used) by financing activities is
