Questions: 37. The effect on the Note Receivable account for the discounting of Jefferson note on February 29 a. Under by P24,960 c. Under by P25,000 b. Over by P25,000 d. Over by P24,960
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
You are examining the financial statements of Oliver Company for the year ended December
31, 2005. You analysis of the 2005 Notes
1. As of January 1, 2005, the balances of the following three notes were:
a. Macasarte note is P70,000, which has been received on August 31, 2004, and
payable in annual installments of P10,000 principal plus accrued interest at 6% each
August 31.
b. Jeanina note is P8,000, which has been discounted by a bank to Oliver Company at
6% on November 1, 2004 and will due on November 1, 2005.
c. Noynay note is P40,000 at 6% interest dated December 31, 2004, and due on
September 1, 2005.
2. Other balances as of January 1, 2005 were confirmed:
a. Debit of P1,400 in the Interest Receivable account.
b. Credit of P400 in the Prepaid Interest Expense account.
3. Analysis of the transactions for the year discloses the following:
a. On February 29, received P25,000 6% note due October 29, 2005 from Jefferson
whose trade account was past due. On the same date the said note has been
discounted by a bank at 6%. The cash proceeds amounting to P24,960 was been
credited to the Notes Receivable account.
b. On August 30, P34,200 has been credited to the Notes Receivable account
representing the receipt of the principal and interest due from Macasarte which is in
accordance with agreement including the two-year principal payments in advance.
c. On September 4, Oliver paid protest fee on note dishonored by Noynay. The P5
payment has been debited to the Note Receivable account.
d. On November 1, Oliver received a check dated February 1, 2006, in settlement of
Jeanina note. The check amounting to P8,120 was included in cash on hand on
December 31, 2005, and credited to the Note Receivable account.
e. On November 4, the company paid protest fee and maturity value of Jefferson note
to the bank, because the note discounted on February 29, 2005 was dishonored.
The total cash paid by the company is P26,031 and was debited to the Note
Receivable account.
f. On December 27, the company accepted furniture and fixtures with a fair market
value of P24,000 in full settlement from Jefferson. The amount has been credited to
the Note Receivable account.
g. On December 31, received principal and interest on Noynay note amounting to
P42,437. The said amount has been credited to the Note Receivable account.
h. On December 31, an accrued interest on Macasarte note of P1,200 has been debited
to the Note Receivable account.
Questions:
37. The effect on the Note Receivable account for the discounting of Jefferson note on
February 29
a. Under by P24,960 c. Under by P25,000
b. Over by P25,000 d. Over by P24,960
38. The entry on the receipt of principal and interest due from Macasarte note has a
a. Debit to interest receivable at P2,800.
b. Credit to interest income at P1,400.
c. Credit to notes receivable at P34,200.
d. Debit to notes receivable at P4,200.
39. The account receivable to be recognized from Noynay note which has been dishonored
on September 4
a. P 40,000 b. P 40,005 c. P 41,600 d. P 41,605
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