Viray, Nhicole S. Asynchronous Quiz 2 - Accounting Changes and Errors

ACC412/415/416/417
NAME: ________________________________________
UNIVERSITY OF LUZON
COLLEGE OF ACCOUNTANCY
1st Semester/SY 2020 – 2021
ASYNCHRONOUS QUIZ 2
INSTRUCTIONS:
1. Prepare unadjusted trial balance for Honest Corporation.

2. Prepare adjusting or correcting entries. If no adjusting entry is necessary, write “none.”
Problem 1:
The bookkeeper of Honest Corporation prepared the following list of accounts in alphabetical order
with their unadjusted balances as of September 30, 2020, the end of its fiscal year. Refer to
Instruction 1 for the requirement.
Accounts payable 62,850.00

Accounts receivable 135,000.00
Accrued expenses 2,850.00
Accumulated depreciation-equipment 6,600.00
Advertising 5,840.00
Allowance for bad debts 5,800.00
Building under construction 95,585.00
Cash 72,000.00
Commissions 11,685.00
Depreciation-equipment 3,600.00
Equipment 36,000.00
Freight in 6,255.00
Goodwill 30,000.00
Insurance expense 2,415.00
Interest income 150.00
Inventory, September 30, 2019 130,500.00
Investments in securities 15,000.00
Land 25,000.00
Miscellaneous expense 2,985.00
Mortgage payable 55,000.00
Notes receivable 13,600.00
Prepaid insurance 1,440.00
Purchases 565,840.00
Repairs and maintenance expense 4,800.00
Retained earnings 49,160.00
Salaries and wages 24,595.00
Sales 831,640.00
Share capital 177,000.00
Supplies expense 2,180.00
Taxes and licenses 1,690.00
Transportation expenses 3,790.00
Utilities expense 1,250.00

1
ACC412/415/416/417
NAME: ________________________________________
Honest Corporation
Unadjusted Trial Balance
30-Sep-2020
Accounts Debit Credit

Cash 72,000
Accounts Receivable 135,000
Notes Receivable 13,600
Allowance for Bad debts 5,800
Inventory 130,500
Prepaid Insurance 1,440
Land 25,000
Building - under construction 95,585
Equipment 36,000
Accumulated Depreciation - equipment 6,600
Investments in Securities 15,000
Goodwill 30,000
Accounts Payable 62,850
Accrued Expenses 2,850
Mortgage Payable 55,000
Share Capital 177,000
Retained Earnings 49,160
Interest Income 150
Sales 831,640
Advertising 5,840
Commissions 11,685
Depreciation Expense - equipment 3,600
Insurance Expense 2,415
Miscellaneous Expense 2,985
Repairs and Maintenance Expense 4,800
Taxes and Licenses 1,690
Salaries and Wages 24,595
Supplies Expense 2,180
Transportation Expense 3,790
Utilities Expense 1,250
Purchases 565,840
Freight-in 6,225
1,191,050 1,191,050

2
ACC412/415/416/417
NAME: ________________________________________
Problem 2:
Adjustment data for Honest Corporation are as follows: (refer to instruction 2)
a. The corporation was organized with an authorized share capital of P500,000, divided into
50,000 shares with a par value of P10 each. Upon full payment of the original subscription at
par, 10,000 shares were issued to the incorporators. Subsequently, 7,000 shares were
subscribed and paid at P11 and share capital account was credited upon receipt of P77,000 full
payment from subscribers.
Share Capital 7,000

Share Premium 7,000
b. Except for equipment purchased on December 1, 2019 at a cost of P6,000, all equipment were
acquired upon the company’s organization on October 1, 2018. The estimated useful life of the
equipment is 10 years with no scrap value.
Accumulated Depreciation 100
Depreciation Ecpense 100
c. Based on the company’s past experience, the allowance for bad debts should be adjusted to 5%
of the outstanding accounts receivable.
Bad Debt Expense 3,800

Allowance for Bad Debts 3,800
d. Uncollectible accounts amounting to P3,000 should be written off against allowance.
Allowance for Bad Debts 3,000
Accounts Receivable 3,000
e. A liability of P6,000 for merchandise in transit, purchased on FOB shipping point term late in
September 2019, was recorded but the goods were not included in the September 30, 2019
inventory.
Inventory 6,000
f. On August 15, 2020, 1,000 shares of Honest Corporation stock were acquired for P12,000, the
market price on that date, and charged to investments in securities account.
3
ACC412/415/416/417
NAME: ________________________________________
Investment in Securities 12,000

Share Capital 10,000
Share Premium 2,000
g. Honest Corporation also acquired 100 shares of Paradise Co., Inc. at P100 a share. Only the
partial payment of P3,000 was charged to investments in securities. Honest Corporation does
not have intention to hold these shares on long term period and intends to sell it within the next
fiscal period.
Investment in Securities 7,000
h. On September 1, 2020, a 20% cash dividend was declared to stockholders of record on

September 30, 2020, payable on December 10, 2020.
Dividends Payable 32,000
i. Upon instructions from the company’s president, goodwill account was set up by a credit to
retained earnings.
Retained earnings 30,000

Goodwill 30,000
j. The bank statement showed a balance of P45,000 on September 30, 2020. Outstanding checks
at the end of the month were P4,500. Receipts not yet deposited on the same date amounted to
P5,500. Cash sales of P1,000, deposited on September 25, 2020, were not entered in the cash
receipts book.
Cash 1,000
Sales 1,000
k. Accrued expenses account on the trial balance includes the accrual for salaries of the last week
of September 2019 of P750. This amount was paid on the first payday of October of that year.
Accrued Expense 750

Salaries and Wages 750
l. The bookkeeper charged retained earnings for P20 ,000 upon receipt of an excerpt of a board
resolution “to reserve a portion of surplus profits to meet payment of a possible liability arising
4
ACC412/415/416/417
NAME: ________________________________________
from a damage suit filed against the Company by Maharlika Corporation”. This amount was
credited to accounts payable. The company lawyer believes the outcome of the case uncertain.

Retained Earnings-appropriated 20,000
m. Commissions consist of amounts:
Paid to agents on all sales up to August 31, 2020 P9,425

Paid to a real estate agent for purchase of land on October 10, 2019 1,000
Accrued on sales made in September 2020 1,440
P11,685
Commission 180
Accrued Expense 180
n. Notes receivable include a 90-day, 9% note for P4,000 dated August 31, 2020. Interest was
received on the date of the note.
Interest Income 60
Unearned Interest 60
o. A one-year insurance premium for P720, starting on July 1, 2020, was charged to insurance
expense. No adjustment was made on this premium payment.
Prepaid Insurance 540
Insurance Expense 540
p. The land and all improvements thereon were mortgaged for P60,000 to finance the
construction of the building. The proceeds of the loan of P55,000 had been released to the
Company but the interest computed up to balance sheet date of P5,000, which was deducted by
the bank, was not recorded.
Interest Expense 5,000
Mortgage Payable 5,000

Viray, Nhicole S. Asynchronous Quiz 2 - Accounting Changes and Errors

Uploaded by

Copyright:

Available Formats

Viray, Nhicole S. Asynchronous Quiz 2 - Accounting Changes and Errors

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Viray, Nhicole S. Asynchronous Quiz 2 - Accounting Changes and Errors

Uploaded by

Copyright:

Available Formats

ACC412/415/416/417

1. Prepare unadjusted trial balance for Honest Corporation.

Accounts payable 62,850.00

Accounts Debit Credit

Share Capital 7,000

Accumulated Depreciation 100

Depreciation Ecpense 100

Bad Debt Expense 3,800

d. Uncollectible accounts amounting to P3,000 should be written off against allowance.

Allowance for Bad Debts 3,000

Accounts Receivable 3,000

Investment in Securities 12,000

Investment in Securities 7,000

Accounts Payable 7,000

h. On September 1, 2020, a 20% cash dividend was declared to stockholders of record on

Retained Earnings 32,000

Dividends Payable 32,000

Retained earnings 30,000

Accrued Expense 750

Accounts Payable 20,000

m. Commissions consist of amounts:

Paid to agents on all sales up to August 31, 2020 P9,425

Prepaid Insurance 540

Insurance Expense 540

Interest Expense 5,000

Mortgage Payable 5,000

You might also like