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PROBLEM 1The 2012 audit of the financial statements of KITTEN Company discloses the following information:2011 2012 Accounts receivable, ending P558,000 P561, Allowance for doubtful accounts, ending 22,200 21, Allowance for sales, returns and allowances, ending14,100 11,Gross sales returns and allow...

Description

PROBLEM 1 The 2012 audit of the financial statements of KITTEN Company discloses the following information: Accounts receivable, ending Allowance for doubtful accounts, ending Allowance for sales, returns and allowances, ending Gross sales returns and allowances (estimated for the year) Estimated bad debts for the year Sales discounts not taken at end of year Credit sales during the year (terms, 2/10, n/60) Cash collected on accounts receivable during the year (net of discounts taken)

2011 P558,000 22,200 14,100

2012 P561,300 21,000 11,748

14,700

11,748

21,600 0 1,125,000

22,500 1,200 1,140,000

1,056,000

1,102,500

REQUIRED: Reconstruct the journal entries that were made by Kitten Company during 2012 to record changes in the following accounts. (Assume that sales returns and allowances are estimated in the period of sale and the net method is used in accounting for sales discounts). a. Allowance for doubtful accounts b. Allowance for sales returns and allowances c. Accounts receivable

PROBLEM 2 Shown below is GOROSPE COMPANY’S aging schedule of its accounts receivable on December 31, 2012. Balance Days Past Due Customers Due Current 1-30 31-60 Over 60 AA Co. P 23,000 P0 P0 P23,0 P0 00 BB, Inc. 105,000 62,000 20,000 13,00 10,000 0 CC Corp. 87,500 23,000 14,500 10,00 40,000 0 DD, Inc. 93,500 53,000 20,500 10,00 10,000 0 EE Transport 40,000 0 0 0 40,000 FF, Inc. 31,000 15,000 16,000 0 0 GG Co. 1,000 1,000 0 0 0 HH Corp. 64,000 20,000 18,000 16,00 10,000 0 II Company 60,000 60,000 0 0 0 Totals P505,00 P234,00 P89,000 P72,0 P110,000 0 0 00 The accounts receivable balance per general ledger is P505,000 on December 31, 2012. The following are audit comments for possible adjustment: AA Co. Merchandise found defective; returned by the customer on November 10 for credit, but the credit memo was issued by Gorospe only on January 2, 2013. BB, Inc. Account is good but usually pays late. CC Corp. Merchandise worth P40,000 destroyed in transit on June 4, 2012. The carrier was billed on July 1. (See EE Transport and II Company). DD, Inc. Customer billed twice in error for P10,000. Balance is collectible.

EE Transport

Collected in full on January 15, 2013. FF, Inc. Paid in full on December 29, 2012, but not recorded. Collections were deposited January 3, 2013. GG Co. Received account confirmation from customer for P11,000. Investigation revealed an erroneous credit for P10,000. (See HH Corp). HH Corp. Neglected to post P10,000 credit to customer’s account II Company Customer wants to know the reason for receipts of P40,000 credit memo as its account payable balance is P100...