PROBLEM 2:You are auditing the financial statements of Light Inc. for the year 2021. The details of thecompany's Retained Earnings account, before any adjustments, are as follows:Retained EarningsDate1/1/19 Balance12/31/19 Net income for the year1/31/20 Dividends paid4/30/20 Paid in Capital in excess of par8/31/20 Gain on retirement of preference12/31/20 Net loss for the year1/31/21 Dividends paid12/31/21 Net loss for the yearParticularsYour examination disclosed the following:a. The following are omitted at the end of the year:Accrued incomePrepaymentsTotalUnearned incomeAccrued expensesTotalDebit210,000307,500150,000248,250202111,70011,70014,40014,25028,650Credit465,000135,00096,75020209,30011,10020,40013,05013,050Balance870,0001,335,0001,125,0001,260,0001,356,7501,049,250899,250651,00020198,4008,40011,7009,30021,00020187,05012,75019,8008,1008,100 b. Dividends had been declared in 2019 and in 2020 but were not recorded until paid the following year.Dividends declared in December 31, 2021, but paid and recorded only in 2022 amounted to P 125,000.c. The company received transportation equipment as donation from stockholders on September 30, 2020.As of the date of donation, the equipment has a remaining useful life of 3 years and a fair value of P360,000. The only entry made at the date of the donation was expensing P 45,000, which was the feepaid to effect the transfer of ownership.d. Merchandise inventory costing P 51,000 and P 48,000 were in transit from a supplier at the end of 2020and 2021, respectively. These were purchased under FOB shipping point and the goods were excluded fromthe physical count made at the end of each year. The purchases; however, were recorded the immediatelyfollowing year, upon receipt of the complete purchase invoice documents.e. Merchandise inventories with sales invoice prices of P 90,000 and P 120,000 were in transit tocustomers at the end of 2019 and 2021, respectively. These goods, sold at 40% gross profit based on sales,sold under FOB Destination, were recorded as sales in 2019 and 2021, respectively. Since goods havealready been physically delivered as of the count date, these goods were no longer included in thephysical count at the end of each year.Requirements: Compute for the adjusted balances of the following:5. Adjusted retained earnings balances at the end of 2018, 2020 and 2021.6. Adjusted net income for the year ended December 31, 2019, and 2021.

Retained earnings is the accumulated profit of the business that is used for the growth of the…

PROBLEM 2: You are auditing the financial statements of Light Inc. for the year 2021. The details of the company's Retained Earnings account, before any adjustments, are as follows: Retained Earnings Particulars Date 1/1/19 Balance 12/31/19 Net income for the year 1/31/20 Dividends paid 4/30/20 Paid in Capital in excess of par 8/31/20 Gain on retirement of preference 12/31/20 Net loss for the year 1/31/21 Dividends paid 12/31/21 Net loss for the year Debit 210,000 307,500 150,000 248,250 Credit 465,000 135,000 96,750 Balance 870,000 1,335,000 1,125,000 1,260,000 1,356,750 1,049,250 899,250 651,000

PROBLEM 2: You are auditing the financial statements of Light Inc. for the year 2021. The details of the company's Retained Earnings account, before any adjustments, are as follows: Retained Earnings Particulars Date 1/1/19 Balance 12/31/19 Net income for the year 1/31/20 Dividends paid 4/30/20 Paid in Capital in excess of par 8/31/20 Gain on retirement of preference 12/31/20 Net loss for the year 1/31/21 Dividends paid 12/31/21 Net loss for the year Debit 210,000 307,500 150,000 248,250 Credit 465,000 135,000 96,750 Balance 870,000 1,335,000 1,125,000 1,260,000 1,356,750 1,049,250 899,250 651,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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