To substantiate the existence of the accounts receivable balances as at December 31, 2017 of LUKAS COMPANY, you have decided to send confirmation requests to customers.Below is a summary of the confirmation replies together with the exceptions and audit findings.Gross profit on sales is 20%.The company is under the perpetual inventory method.

Name of

Customer

Balance

Per Books

Comments

From Customers

Audit Findings

Concordia

P150,000

P90,000 was returned on December 30, 2017.Correct balance as is P60,000.

Returned goods were received December 31, 2017.

Falcon

P30,000

Your CM representing price adjustment dated December 28, 2017 cancels this.

The CM was taken up by Lukas Company in 2018.

Lazaro

P144,000

You have overpriced us by P150.Correct price should be P300.

The complaint is valid.

Silang

P112,500

We received the goods only on January 6, 2018.

Term is shipping point.Shipped in 2017.

Yakal

P135,000

Balance was offset by our December shipment of your raw materials.

Lukas Company credited accounts payable for P135,000 to record purchases.Yakal is a supplier.

21.If the necessary adjusting journal entry is made regarding the case of Concordia, the net income will

A.Decrease by P18,000.C.Increase by P18,000.

B.Decrease by P90,000.D.Increase by P90,000.

22.The effect on 2017 net income of Lukas Company of its failure to record the CM involving transaction with Falcon:

A.P30,000 over.C.P6,000 over.

B.P30,000 under.D.P6,000 under.

23.The overstatement of receivable from Lazaro is

A.P96,000B.P24,000C.P72,000D.P48,000

24.The accounts receivable from Silang is

A.Correctly stated.C.P112,500 under.

B.P112,500 over.D.P225,000 under.

25.The adjusting entry to correct the receivable from Yakal is

A.Purchases135,000

Accounts receivable135,000

B.Accounts payable135,000

Purchases135,000

C.Accounts receivable135,000

Accounts payable135,000

D.Accounts payable135,000

Accounts receivable135,000