Problem 27-17 (AICPA Adapted) In auditing the records of Toronto Company for the year ended December 31, 2021, the following data are discovered; 1. Machine A listed at P4,500,000 was acquired on April 1, 2021 in exchange for P5,000,000 face value bonds maturing on April 1, 2031. The accountant recorded the nequisition by a debit to machinery and a credit to bonds payable for P5,000,000. The bonds are unquoted. Straight line depreciation was recorded based on a five year life and amounted to P600,000 for 9 months. 2. Machine B listed at P3,200,000 was purchased on January 1, 2021. The entity noid Pi00 000
Problem 27-17 (AICPA Adapted) In auditing the records of Toronto Company for the year ended December 31, 2021, the following data are discovered; 1. Machine A listed at P4,500,000 was acquired on April 1, 2021 in exchange for P5,000,000 face value bonds maturing on April 1, 2031. The accountant recorded the nequisition by a debit to machinery and a credit to bonds payable for P5,000,000. The bonds are unquoted. Straight line depreciation was recorded based on a five year life and amounted to P600,000 for 9 months. 2. Machine B listed at P3,200,000 was purchased on January 1, 2021. The entity noid Pi00 000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 27-17 (AICPA Adapted)
In auditing the records of Toronto Company for the year ended
December 31, 2021, the following data are discovered;
1. Machine A listed at P4,500,000 was acquired on April 1,
2021 in exchange for P5,000,000 face value bonds maturing
on April 1, 2031. The accountant recorded the nequisition
by a debit to machinery and a credit to bonds payable for
P5,000,000. The bonds are unquoted. Straight line
depreciation was recorded based on a five year life and
amounted to P600,000 for 9 months.
2. Machine B listed at P3,200,000 was purchased on January
1, 2021. The entity paid P500,000 down and P250,000 per
month for 12 months. The last payment was made on
December 30, 2021. Straight line depreciation based on a
five-year life and no residual value was recorded at P700,000
for the year. Freight of P150,000 on Machine B was charged
to freight in account.
3. Machine C was recorded at P3,000,000 which included the
carrying amount of P540,000 of a machine accepted as a
trade in. The list price of Machine C was P2,610,000 and
the trade in allowance was P150,000. This transaction took
place on December 22, 2021.
4. Machine D was acquired on January 10, 2021 in exchange
for a past due account receivable of P4,200,000 on which an
allowance of 20% was established at the end of prior year.
The fair value of the machine on January 10 was estimated
at P3,300,000. The machine was recorded by a debit to
machinery and a credit to accounts receivable for P4,200,000,
No depreciation was recorded on Machine D because it was
never installed for use. In March, the machine was
exchanged for 30,000 shares of the entity having a market
value of F120 per share. The treasury shares account was
debited for P4,200,000, the carrying amount of Machine D.
Required:
Prepare adjusting entries on December 31, 2021.
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