PROBLEM 4: (ERROR CORRECTION)

You are auditing the financial statements of Nibi Inc. for the year 2019. The details of the

unadjusted balances of its Accumulated Profit account are as follows:

ACCUMULATED PROFIT

Date Particulars Debit Credit Balance

01.01.2017 Beginning Balance 500,000

08.31.2017 Gain on sale of treasury shares 40,000 540,000

12.31.2017 Net income for the year 200,000 740,000

02.28.2018 Payment of dividends declared in

2017

70,000 670,000

05.31.2018 Paid in capital in excess of par 20,000 690,000

07.31.2018 Loss on sale of treasury shares 30,000 660,000

09.30.2018 Loss on sale of debt investment at

fair value through OCI

10,000

650,000

12.31.2018 Net loss for the year 80,000 570,000

03.31.2019 Net income for the year 150,000 720,000

12.31.2019 Payment of dividends declared in

2018

90,000 630,000

Your examination disclosed the following:

a. Omissions at the end of each year of the following:

2016 2017 2018 2019

Merchandise Inventory, end 4,000 7,000

Accrued Expense 3,000 5,000

b. The cost of minor repairs on the company's equipment on January 1, 2016 in the

amount of P50,000 was capitalized and depreciated at 10% per annum.

c. On January 1, 2017, the company paid an operating expense in the amount of P30,000

covering the period, 2017 to 2019. The company charged the entire payment as

outright expense and no adjusting journal entry was ever made pertinent to this

transaction.

Compute for the following:

a. Accumulated profit as of December 31, 2017 and 2019

b. Profit (Loss) for the years ended December 31, 2017 and 2018

PROBLEM 5: (CASH/ACCRUAL; SINGLE ENTRY)

Tofu Corp.'s operating expenses and interest income under cash basis amounted to P420,000

and P770,000; respectively, for the year 2019. Further examination revealed the following

information:

January 1, 2019 December 31, 2019

Accrued operating expenses P 133,000 P 122,000

Prepaid operating expenses 56,000 90,000

Accrued interest income 44,000 25,000

Unearned interest income 102,000 76,000

Compute for the following under the accrual basis:

a. Operating expenses for the year

b. Interest income for the year

PROBLEM 6: (CASH/ACCRUAL; SINGLE ENTRY)

Julius Corp. accounts for its sales under the cash basis. For the year 2019, the total

collections from customers, including cash sales made and recoveries of previously writtenoff

accounts, based on Julius Corp.'s cash receipts books amounted to P1,800,000. Audit

investigation revealed the following additional information:

Trade receivable, beginning P 190,000

Trade receivable, end 450,000

Advances from Customers, beginning 80,000

Advances from Customers, end 60,000

Sales discounts 20,000

Sales returns before collections were made as evidenced

by the issuances of credit memos

35,000

Sales returns after collections were made, thus cash refunds were given 18,000

Write-offs of worthless accounts receivable 22,000

Cash recoveries from accounts previously written-off 4,000

Compute for the Net Sales under the accrual basis of accounting.