INTERMEDIATE ACCOUNTING - Accrual and Cash Basis PDF

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CHAPTER 32ACCRUALS/ CASH BASIS & SINGLE ENTRY 756 /U Gasoline company reported revenue of P3,100,000 in its accrual basis income statement for the year ended December 31, Additional information was as follows: Accounts receivable, December 31, 2013, P700,000; December 31, 2014, P1,100,000. Under...

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CHAPTER 32 ACCRUALS/ CASH BASIS & SINGLE ENTRY 756/U 1. Gasoline company reported revenue of P3,100,000 in its accrual basis income statement for the year ended December 31, 2014. Additional information was as follows: Accounts receivable, December 31, 2013, P700,000; December 31, 2014, P1,100,000. Under the cash basis, how much should Gasoline report as revenue for P2014? 2. Liquid Company reported revenue of P1,980, in its income statement for the year ended December 31, 2014. Additional information was made available: Accounts receivable: December 31, 2013, P415,000; December 31, 2014, P550,000. Allowance for doubtful accounts, December 31, 2013, P25,000; December 31, 2014, P40,000. No uncollectible accouints were written off during 2014. Had the cash basis of accounting been used instead, how much would have been reported as receipts for 2014 by Liquid Company 3. Wander Company reported revenue of P6,000,000 under the cash basis for the year ended 2014. Additional information was made available: Accounts receivable, December 31, 2013, P1,250,000; December 31, 2014, P1,375,000. Under accrual basis how much should Wander report as revenue for 2014? 4. Kerosene Company reported total purchases of P2,500,000 in its cash basis financial statement on December 31, 2014. Additional information revealed the following: Accounts payable: January 1, 2014, P600,000; December 31, 2014, P800,000. Under the accrual basis of measuring revenues and expenses, how much is the total purchases for the year ended December 31, 2014? 5. Tarzana Company reported total purchases of P3,200,000 in its accrual basis financial statement on December 31, 2014. Additional information is the following: Accounts payable, December 31, 2013, P900,000; December 31, 2014, P1,250,000. What is the amount of purchases under cash basis on December 31, 2014? 6. Under the accrual basis, rental income of diesel Company for the calendar year 2014 is P600,000. Additional information regarding rental income are presented as: unearned rental income, January 1, 2014, P50,000; December 31, 2014, P75,000. Accrued rental income, January 1, 2014, P30,000; December 31, 2014, P40,000. Under the cash basis how much renatal income should be reported by diesel Company in year 2014? 7. Hardy Boys Corporation acquires copyright from authors, paying advance royalties in some cases and in ithers, paying royalties within 30 days of year-end. Hardy Boys reported royalty expense of P375,000 for the year ended December 31, 2014. The following data are included in the corporation’s December 31 balance sheet: prepaid royalties, 2013,P60,000; 2014, P50,000. Royalties payable, 2013,P 75,000; 2014, P90,000. Under accrual bais, what amount of royalty expense should be reported in 2014 profit or loss? 8. The following information was obtained from the incomplete records of Tanker related to its operating expenses: December 31, 2014, total payments made in 2014, P670,000; total operating expense, 2014,P690,000; prepaid operating expenses, December 31, 2013, P120,000; Accrued operating expense, December 31, 2013, P230,000. What is the balance of prepaid operating expenses account on December 31, 2014? 9. On September 1, 2014 Windburn began a service proprietorship with an initial investment of P400,000. Windburn provided P800,000 of services during September. Collections were made except for P200,000 which were paid the following month. Expenses were incurred in the amount of P400000, including P100,000 which are to be paid next month. Windburn withdrew P60,000 against the capital account. On September 30, 2014 financial statement, what amount of capita should be reported under the cash basis accounting? 10. Passion Corporation maintains its accounting records on the cash basis but restates its financial statements to the accrual method of accounting. Passion had P600,000 in cash basis pre-tax income for 2014. The following information pertains to Passion’s operations for the years ended December 31, 2014 and 2013: accounts receivable, 2014, P400,000; 2013, P200,000; accounts payable, 2014, P150,000; 2013, P300,000. Under the accrual method what amount of income before taxes should Passion report in its December 31, 2014 profit and loss? 11. Groom company’s professional fee expense account had a balance of P164,000 on December 31,2014 before considering year-end adjustments relating to the following: Consultants were hired for a special project at a total fee not to exceed P130,000. Groom has recorded P110,000 of this fee based on billings for work performed in 2014. The attorneys letter requested by the auditors dated January 30, 2014 indicated that legal fees of P12,000 were bulled on January15, 2015 for work performed in November 2014 and unbilled fees for December 2014 were P14,000. What amount of professional fee expense should Groom report for the year ended December 31, 2014? 12. In 2013, Power designs Corporation sold a layout design to Mass, Inc. and will receive royalties of 20% of future revenues associated with the said layout design. On December 31, 2013, Power Design reported royalty receivable of P75,000 from ass, Inc. During 2014, Power Designs received royalty payments of P200,000. Mass inc. reported revenues of P1,500,000 in 2014 from the layout design. In its 2014 profit or loss, what amount should Power Designs report as royalty revenues? 13. The December 31, 2014 and 2013 comparative financial statements of World Gallery Company showed equipment with an

original cost P379,000 and 344,000 with accumulated depreciation of P153,000 and 128,000, respectively. During 2014, the company purchased equipment costing P50,000 and sold equipment with a carrying value of P9,000. What amount should the company report as depreciation expense for the year ended December 31, 2014? 14. On December 31, 2014, the advertising expense account of Starlight Company had a balance of P146,000 before any yearend adjustment relating to the following: Brochures and leaflets for sales promotional campaign in January 2015 amounting to P15,000 was included in the P146,000 balance. Airtime for the radio advertisement during December 2014 for P9,000 was...