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* What is the correct balance of the salaries payable in the form of liability for compensated absences as of December 31, 2018

* What is the correct balance of the salaries payable in the form of liability for compensated absences as of December 31, 2018

FINANCIAL ACCOUNTING
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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You auditing Adel Corp's various liability accounts. The following schedule of liabilities was presented to you by the company's accountant in relation to your audit Accounts payable P460,000 Accrued expenses 29,400 Warranties payable 153,250 Salaries payable 268,500 10%, Note payable - bank 2,000,000 AuditNotes : Continuation in the pictures * What is the correct balance of the salaries payable in the form of liability for compensated absences as of December 31, 2018?
Audit notes: a. You have rendered a purchases cut-off to ascertain the completeness of the company's accounts payable balance. The following is the summary of the entries 10 days before and after the balance sheet date and your audit observations: Purchases Journal Entries: Dec. 20 - Dec. 31, 2018: Receiving Report Suppliers Invoice Date Dec. 20, 2018 Dec. 23, 2018 Dec. 28, 2018 Jan. 2, 2019 Jan, 3, 2019 RR number 9910 Amount FOB Term/Remark Date 9911 9912 9914 9915 Dec. 19, 2018 Dec. 22, 2018 Dec. 26, 2018 Dec 29, 2018 Jan. 2, 2019 30,000 From Consignor 60,000 Shipping Point 42,000 Destination 45,000 Destination 30,000 Shipping point Purchases Journal Entries: January 2 - January 10, 2019: Receiving Report Date Jan. 2, 2019 Jan. 3, 2019 Jan. 4, 2019 Jan. 5, 2019 RR number Suppliers Invoice Date FOB Term/Remark P20,000 From Consignor 55,000 Destination 34,000 Shipping Point 42,000 Shipping Point Amount 9916 Dec. 28, 2018 Dec. 30, 2018 Dec. 31, 2018 Dan. 3, 2019 9917 9918 9919 *note 1: RR number 9913 is for goods received on December 30, but related the suppliers' invoice document has not been received yet, thus was not recorded in the purchases jouroval yet. Cost af these guods amounts to P25,000, *note 2: assume suppliers' invoice date as suppliers shipment date of goods and ending inventories were appropriately established through an inventory count. b. You also conducted a cash disbursement cut-off to search for unrecorded liabilities. Your review is summarized below: Description Amount Account Charged Accrued expense Repairs and maintenance Entry date Voucher Reference Legal services; received 12/2/2018 Repairs services on equipment in 2018 Jan. 3, 2019 1-1 16,500 Jan. 4, 2019 1-2 22,000 expense Salaries and 84,500 Payroll 12/21/2018 to 1/6/2019 (13 working days, 5 days in Jan.) Electricity bill for December Jan. 10, 2019 1-3 wages expense Utilities expense Accrued 1-4 21,600 Jan. 12, 2019 12,900 Jan. 14, 2019 Water bill for December 1-5 expcnsε c. The company started its 1-year warranty program for merchandise sold starting 2017. The company estimates that it vaill iinzur P350 in pat ant liabo frorrepairing adiuumt af mertiantlie The company further estimates that 70% of the units sold shall be returned for repairs. The following information is dieemed relievart faryaurautit: 2017 2018
Transcribed Image Text:Audit notes: a. You have rendered a purchases cut-off to ascertain the completeness of the company's accounts payable balance. The following is the summary of the entries 10 days before and after the balance sheet date and your audit observations: Purchases Journal Entries: Dec. 20 - Dec. 31, 2018: Receiving Report Suppliers Invoice Date Dec. 20, 2018 Dec. 23, 2018 Dec. 28, 2018 Jan. 2, 2019 Jan, 3, 2019 RR number 9910 Amount FOB Term/Remark Date 9911 9912 9914 9915 Dec. 19, 2018 Dec. 22, 2018 Dec. 26, 2018 Dec 29, 2018 Jan. 2, 2019 30,000 From Consignor 60,000 Shipping Point 42,000 Destination 45,000 Destination 30,000 Shipping point Purchases Journal Entries: January 2 - January 10, 2019: Receiving Report Date Jan. 2, 2019 Jan. 3, 2019 Jan. 4, 2019 Jan. 5, 2019 RR number Suppliers Invoice Date FOB Term/Remark P20,000 From Consignor 55,000 Destination 34,000 Shipping Point 42,000 Shipping Point Amount 9916 Dec. 28, 2018 Dec. 30, 2018 Dec. 31, 2018 Dan. 3, 2019 9917 9918 9919 *note 1: RR number 9913 is for goods received on December 30, but related the suppliers' invoice document has not been received yet, thus was not recorded in the purchases jouroval yet. Cost af these guods amounts to P25,000, *note 2: assume suppliers' invoice date as suppliers shipment date of goods and ending inventories were appropriately established through an inventory count. b. You also conducted a cash disbursement cut-off to search for unrecorded liabilities. Your review is summarized below: Description Amount Account Charged Accrued expense Repairs and maintenance Entry date Voucher Reference Legal services; received 12/2/2018 Repairs services on equipment in 2018 Jan. 3, 2019 1-1 16,500 Jan. 4, 2019 1-2 22,000 expense Salaries and 84,500 Payroll 12/21/2018 to 1/6/2019 (13 working days, 5 days in Jan.) Electricity bill for December Jan. 10, 2019 1-3 wages expense Utilities expense Accrued 1-4 21,600 Jan. 12, 2019 12,900 Jan. 14, 2019 Water bill for December 1-5 expcnsε c. The company started its 1-year warranty program for merchandise sold starting 2017. The company estimates that it vaill iinzur P350 in pat ant liabo frorrepairing adiuumt af mertiantlie The company further estimates that 70% of the units sold shall be returned for repairs. The following information is dieemed relievart faryaurautit: 2017 2018
c. The company started its 1-year warranty program for merchandise sold starting 2017. The company estimates that it will incur P350 in part and labor for repairing each unit of merchandise. The company further estimates that 70% of the units sold shall be returned for repairs. The following information is deemed relevant for your audit: 2017 2018 Number of units sold 1,250 1,410 Actual warranty costs 153.000 250.000 The balance of the warranties payable is the accrued warranty cost at the end of 2017. Actual warranty costs were charged to current-year warranty expense. Adjusting entry'at the end af 2018 is yet to be made. Further audit examination revealed that from the amount paid in 2018 for warranties, P143,250 relates to the 2017 sales/warranties. d. Salaries payable reflects the probable unused sick leaves and vacation ledaves in 2017 and prior to 2017 corried over 2018. No entry had been made during the cunrent yaar affecting the salluries payable account. Employees are allowed to carry-over unused leaves over 2 years from vear of grant. thereafter it shall expire. Salary rates increased for the carment year by 10%.. Amaralysik af ttle cumulative unused sick leaves and vacation leaves are as follóws: Prior to 2017 leaves carried over to 2018 270 days 2017 leaves carried over to 2018 625 days Prior to 2018 leaves used in 2018* 700 days 550 days Leaves earned in 2018 carried over 2019 *from prior to 2018 leaves used in 2018, 200 were earned by employees prior to 2017. e. The 12% note payable to the bank was originated on June 30, 2016 and is due on June 30, 2019. Semi-annual interest on the note is payable every Jlume 31 ant Dionoeniber 31, Or. Deceniba 31 2018 the company has the option of refinancing the liability by issuing another long term debt security to the same bank due on June 30, 2020, The grooeetk af tihe ltoan tte the matie, aE mer agreement shall not exceed 80% of the fair market value of the property to be attached to the loan as a collateral. As of the balance sheet dlate, the sait praperty that a fiairwalur af PDED(EDI anti is not expected to materially change until the refinancing transaction is completed.
Transcribed Image Text:c. The company started its 1-year warranty program for merchandise sold starting 2017. The company estimates that it will incur P350 in part and labor for repairing each unit of merchandise. The company further estimates that 70% of the units sold shall be returned for repairs. The following information is deemed relevant for your audit: 2017 2018 Number of units sold 1,250 1,410 Actual warranty costs 153.000 250.000 The balance of the warranties payable is the accrued warranty cost at the end of 2017. Actual warranty costs were charged to current-year warranty expense. Adjusting entry'at the end af 2018 is yet to be made. Further audit examination revealed that from the amount paid in 2018 for warranties, P143,250 relates to the 2017 sales/warranties. d. Salaries payable reflects the probable unused sick leaves and vacation ledaves in 2017 and prior to 2017 corried over 2018. No entry had been made during the cunrent yaar affecting the salluries payable account. Employees are allowed to carry-over unused leaves over 2 years from vear of grant. thereafter it shall expire. Salary rates increased for the carment year by 10%.. Amaralysik af ttle cumulative unused sick leaves and vacation leaves are as follóws: Prior to 2017 leaves carried over to 2018 270 days 2017 leaves carried over to 2018 625 days Prior to 2018 leaves used in 2018* 700 days 550 days Leaves earned in 2018 carried over 2019 *from prior to 2018 leaves used in 2018, 200 were earned by employees prior to 2017. e. The 12% note payable to the bank was originated on June 30, 2016 and is due on June 30, 2019. Semi-annual interest on the note is payable every Jlume 31 ant Dionoeniber 31, Or. Deceniba 31 2018 the company has the option of refinancing the liability by issuing another long term debt security to the same bank due on June 30, 2020, The grooeetk af tihe ltoan tte the matie, aE mer agreement shall not exceed 80% of the fair market value of the property to be attached to the loan as a collateral. As of the balance sheet dlate, the sait praperty that a fiairwalur af PDED(EDI anti is not expected to materially change until the refinancing transaction is completed.
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