Question 1: What is the correct amount of accounts payable to be presented in the statement of financial position?Question 2: The amount of contingent liability to be disclosed relating to the lawsuit from the employees is?Question 3: How much is the correct balance of the warranty liabilities account as of December 31, 2021?Question 4: The journal entry to correct the initial carrying value of the 10% bonds payable would include a credit to interest expense amounting to?Question 5: How much is the carrying value of the 10% bonds payable at the end of December 31, 2021? During the course of your December 31, 2021 audit of BeCareful Company'sliabilities, you have noted the following balances:Current liabilities:Accounts payableP 250,000Provisions100,000Warranty liabilityNILNoncurrent liabilities10% Bonds payableP1,000,0009% Convertible bonds487,5668% Notes payable320,000After performing related audit procedures for liabilities, the audit notes were asfollows:A. Accounts payableThe inspection of the purchase journal for cut-off procedures in relation to companypurchases from December 15, 2021 until January 15, 2022 revealed the followinginformation: The inventory count procedures were done in December 31, 2021 and the cut-off documents revealed that the last receiving reportused and recorded for the current year by the company is RR number 5635.Receiving report number 5634 is for a shipment made on December 27, 2021. The related invoice amounting to P12,500, wasmisplaced by the accounts payable clerk and was recovered only on January 5, 2022 and was recorded thereafter.B. ProvisionsThe review of the board minutes indicated that there was a pending lawsuit from an employee against BeCareful company for thedamages suffered by the employee from falling debris in the company's building. The confirmation letter from its legal counsel revealedthat they believe that the company will lose the lawsuit and will pay damages between P100,000 to P500,000. On December 31,2021, the employee has offered to settle the lawsuit out of court for P400,000. BeCareful company is not likely to agree with thesettlement. The company recorded P100,000 as its provisions for damages.C. Warranty LiabilitiesThe company has a two-year warranty on its product and uses the percent of sales to estimate its warranty expense. This rate is 5% ofsales. During the year, the rate increased to 9% of its total net sales. Based on past experience 80% of the warranties are claimedduring the year of sale and the remaining during the year after sale. You have obtained the following information in relation to youraudit:202020212022P30,000,000P32,000,000P31,750,000SalesActual warranty costs1,200,0001,550,0002,580,000paid The company records warranty expense based on actual costs incurred. No Accruals for warranties are being made.D. Bonds PayableBeCareful issued a 5-year 10% Bond on December 31, 2018 for P927,904. The bonds were initially issued to yield 12%. The interest ispayable every January 2, starting 2020. BeCareful incurred bond issue costs of P33,421. The effective rate of the bonds is 13% afterthe bond issue costs. The company recorded the transaction by debiting cash for the amount of proceeds, debiting bonds payable atface value and the difference to interest expense. The bond issue costs were recorded by the accountant as a debit to bond issueexpense and credit to cash. Payment of interest during the year is debited to interest expense and credited to cash.E. Convertible BondsThe company issued 500 of its 3-year, 9% P1,000 face value convertible bonds on January 1, 2021. The bonds were issued to yield10%, while interest is payable annually every January 1. The market interest rate of similar bonds without the conversion privilege is12%. Each P1000 bond may be converted into four, P10 par value ordinary shares of the company. The fair market value of theordinary shares of the company as of this date is P15. The bond holders may exercise the right anytime until maturity. BeCarefulrecorded the transaction by debiting cash and bonds payable at the amount of consideration received.F. Notes PayableThe notes payable is for a purchase of land on April 15, 2019. The note is payable after 3-years, the interest is payable annually everyApril 15. BeCareful was given the right to refınance the note for 13 months from date of refinancing. On November 14, 2021, thecompany and the seller agreed to refinance the note by replacing the old note with a new note.G. Adjusting Journal EntriesThe company has yet to make adjusting journal entries as of year-end. Receiving report no.AmountInvoice dateShipment DateShipment terms5631P5,50012/14/202112/15/2021FOB supplier56326,00012/17/202112/20/2021FOB supplier56337,90012/22/202112/24/2021FOB Buyer56358,90012/30/202112/30/2021FOB Buyer563610,00012/31/202112/31/2021FOB supplier56378,00012/29/20211/2/2022FOB supplier56389,50012/31/2021FOB Buyer12/31/2021563910,5001/2/20221/5/2022FOB Buyer564011,0001/5/20221/10/2022FOB supplier564112,0001/8/20221/11/2022FOB supplier564215,0001/12/20221/15/2022FOB Buyer

The question pertains to determining the correct current and non current liabilities of the…

Answered: Question 1: What is the correct amount…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q