Problem 1-2
1. The following unadjusted sections of the Statement of Financial Position of Karen Incorporation as at December 31, 2018 were presented to you. Cash P 85,000 Accounts Receivable 282,400 Merchandise inventory 92,000 Deferred charges 8.600 Current assets P 468.000 Trade accounts payable, net of PS, 000 debit balance P 125.000 Interest payable 3.000 Income tax payable 12 000 Money claims of Union pending final decision 45,000 Mortgage payable due in four annual installments 100.000 Current liabilities P 285. 000 A review of the above indicate that the Cash account of P85,000 included the following: Customer's check returned by the bank marked NSF amounting to P1,250 Employee's IOU of P2,000 P 10.000 deposited with the regional trial court of San Carlos City Pangasinan for a case under litigation. Accounts receivable totaling P282,400 is composed of the following: Customers debit balances of P 181,400 Advances to subsidiaries of P 20,000 Advances to suppliers of P 15,000 ... . Receivables from the Karen Incorporation officers of P 18,000 Allowance for Bad Debts of P 8,000 Merchandise invoiced at 140% of cost but not yet delivered - P56,000 (goods were not included in merchandise inventory). QUESTIONS: Based on the above and the result of your audit, answer the following 1. The correct balance of current assets on December 31, 2018 2. The correct balance of current liabilities on December 31, 2018 2. 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 P 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 12,000 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) P 167,000 Petty sash, including unreplenished petty cash expense vouchers of P150 500 Customers advance deposit in check dated January 15, 2019 2.500 P 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 mventory count. Also, it includes a customer's deposit in check dated Janmary 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. Trade and other receivables Total current assets Trade and other payables Total current liabilities
