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The following are the transactions of K-Dynamite Company for the calendar year ended December 2021. Accounts Payable and Est Warranty Liability has beginning balances of P128,000 and P67,500 on December 1, respectively. The company uses perpetual inventory for their inventory management system. Dec 1 Received P200,000 from a lessee as payment for rent of a specialized equipment. The lease has a term of five months starting November 2021. Dec 8 Purchased P975,000 merchandise inventory on account. Credit term is 2/10, n30 with sales discount allowed on partial payments within the discount period. Dec 10 Billed a customer who bought 600 units of Product V at P4,200 each. It is expected that 5% of the units will be defective and that repair costs will average P850 per unit. The standard warranty coverage period on the company's products is 1 year. Dec 11 Returned P15,000 worth of defective merchandise from Dec 8's purchase. During the last board meeting, the company's board of directors approved the company's strategic plan to expand its operations in Iloilo. Borrowed P1,200,000 from a bank by signing an 8-month, 12% interest-bearing note. Dec 15 Dec 18 Paid 75% of the balance on the inventory purchased on December 8. Sued by an employee who claims to have been illegally dismissed. Legal counsel believes that there is a 35% probability that the company will have to pay P80,000 in damages next year. Dec 28

The following are the transactions of K-Dynamite Company for the calendar year ended December 2021. Accounts Payable and Est Warranty Liability has beginning balances of P128,000 and P67,500 on December 1, respectively. The company uses perpetual inventory for their inventory management system. Dec 1 Received P200,000 from a lessee as payment for rent of a specialized equipment. The lease has a term of five months starting November 2021. Dec 8 Purchased P975,000 merchandise inventory on account. Credit term is 2/10, n30 with sales discount allowed on partial payments within the discount period. Dec 10 Billed a customer who bought 600 units of Product V at P4,200 each. It is expected that 5% of the units will be defective and that repair costs will average P850 per unit. The standard warranty coverage period on the company's products is 1 year. Dec 11 Returned P15,000 worth of defective merchandise from Dec 8's purchase. During the last board meeting, the company's board of directors approved the company's strategic plan to expand its operations in Iloilo. Borrowed P1,200,000 from a bank by signing an 8-month, 12% interest-bearing note. Dec 15 Dec 18 Paid 75% of the balance on the inventory purchased on December 8. Sued by an employee who claims to have been illegally dismissed. Legal counsel believes that there is a 35% probability that the company will have to pay P80,000 in damages next year. Dec 28

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The following are the transactions of K-Dynamite Company for the calendar year ended December 2021. Accounts Payable and Est Warranty Liability has beginning balances of P128,000 and P67,500 on December 1, respectively. The company uses perpetual inventory for their inventory management system. Dec 1 Received P200,000 from a lessee as payment for rent of a specialized equipment. The lease has a term of five months starting November 2021. Dec 8 Purchased P975,000 merchandise inventory on account. Credit term is 2/10, n30 with sales discount allowed on partial payments within the discount period. Dec 10 Billed a customer who bought 600 units of Product V at P4,200 each. It is expected that 5% of the units will be defective and that repair costs will average P850 per unit. The standard warranty coverage period on the company's products is 1 year. Dec 11 Returned P15,000 worth of defective merchandise from Dec 8's purchase. During the last board meeting, the company's board of directors approved the company's strategic plan to expand its operations in Iloilo. Borrowed P1,200,000 from a bank by signing an 8-month, 12% interest-bearing note. Dec 15 Dec 18 Paid 75% of the balance on the inventory purchased on December 8. Sucd by an employce who claims to have been illegally dismissed. Legal counsel believes that there is a 35% probability that the company will have to pay P80,000 in damages next year. Dec 28
Transcribed Image Text:The following are the transactions of K-Dynamite Company for the calendar year ended December 2021. Accounts Payable and Est Warranty Liability has beginning balances of P128,000 and P67,500 on December 1, respectively. The company uses perpetual inventory for their inventory management system. Dec 1 Received P200,000 from a lessee as payment for rent of a specialized equipment. The lease has a term of five months starting November 2021. Dec 8 Purchased P975,000 merchandise inventory on account. Credit term is 2/10, n30 with sales discount allowed on partial payments within the discount period. Dec 10 Billed a customer who bought 600 units of Product V at P4,200 each. It is expected that 5% of the units will be defective and that repair costs will average P850 per unit. The standard warranty coverage period on the company's products is 1 year. Dec 11 Returned P15,000 worth of defective merchandise from Dec 8's purchase. During the last board meeting, the company's board of directors approved the company's strategic plan to expand its operations in Iloilo. Borrowed P1,200,000 from a bank by signing an 8-month, 12% interest-bearing note. Dec 15 Dec 18 Paid 75% of the balance on the inventory purchased on December 8. Sucd by an employce who claims to have been illegally dismissed. Legal counsel believes that there is a 35% probability that the company will have to pay P80,000 in damages next year. Dec 28
Dec 31 Purchased new equipment for P750,000, paying P150,000 cash and signing a 3-year, 7% note for the remainder. The note will be paid in three equal, annual installments of P200,000 starting Dccember 31, 2022. Dec 31 Honored waranty contracts on 12 units for a total cost of P11,500. Coverage for 30 units have expired from the warranty contracts included in the December 1 balance. Repair costs for these units were estimated at P675. Requirements: a. Journalize each transaction and prepare the necessary adjusting entries. b. Prepare the liabilities section of the balance sheet for the year ended December 31, 2021.
Transcribed Image Text:Dec 31 Purchased new equipment for P750,000, paying P150,000 cash and signing a 3-year, 7% note for the remainder. The note will be paid in three equal, annual installments of P200,000 starting Dccember 31, 2022. Dec 31 Honored waranty contracts on 12 units for a total cost of P11,500. Coverage for 30 units have expired from the warranty contracts included in the December 1 balance. Repair costs for these units were estimated at P675. Requirements: a. Journalize each transaction and prepare the necessary adjusting entries. b. Prepare the liabilities section of the balance sheet for the year ended December 31, 2021.
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