Required: 1. The amount of purchase discounts lost to be recognized is 2. Accounts payable balance should be reduced by 3. The purchases account should be reduced by 4. Prepare the entry to record the conversion.

Required: 1. The amount of purchase discounts lost to be recognized is 2. Accounts payable balance should be reduced by 3. The purchases account should be reduced by 4. Prepare the entry to record the conversion.

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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Concept explainers

Bookkeeping

Bookkeeping is the process of recording the financial transactions of a company on a regular basis. With the process of bookkeeping, companies can track important financial information that helps management in making crucial decisions.

Question

Answer the following items on the space provided. Show your computations as necessary..
Case 1
Yusuke Corporation records its purchases at gross amounts but wishes to change to recording of purchases
net of purchase discounts. Discounts on purchases recorded from January 1, 20x1 to December 31, 20x1
totaled P80,000. Of this amount, P8,000 is still available in the accounts payable balance. the balances in
Yusuke's accounts as of and for the year ended December 31, 20x1, before conversion are:
Purchases
P4,000,000
32,000
1,200,000
Purchase discounts
Accounts payable
Required:
1. The amount of purchase discounts lost to be recognized is
2. Accounts payable balance should be reduced by
3. The purchases account should be reduced by
4. Prepare the entry to record the conversion.
Case 2
Summer Company offers a set of building blocks to customers who send in three (3) UPC codes from Summer
cereal, along with P50.00. The blocks sets cost Summer P110 each to purchase and P60 each to mail to
customers. During 20x1, Summer sold 1,000,000 boxes of cereal. The company expects 30% of the UPC codes
to be sent in. During 20x1, 120,000 UPC codes are redeemed.
Required:
1. What is the cost of estimated claims outstanding?
2. Prepare Summer's December 31, 20x1 adjusting entry.

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