You are the senior in charge of the audit of the accounts of the Domino Industries, Inc. You and your staff have just completed the field work relative to the December 31, 2020 audit. The adjusted trial balance and certain additional information related thereto appearing in your working papers are as follows: Cash 240,000 Marketable Securities 95,000 Investment in Affiliated Companies 350,000 Accounts Receivable (including P120,000 due after one year) 680,000 Subscription Receivable 20,000 Inventories - Finished Goods 620,000 - Goods in Process 155,000 - Raw Materials 470,000 Treasury Stock (cost of 100 shares) 11,000 Construction in Progress 220,000 Land 460,000 Buildings, Machinery and Equipment 4,350,000 Cash Surrender Value of Life Insurance 60,000 Prepaid Expenses 50,000 Pre-operating Expenses 120,000 Unamortized Bond Discount 65,000 Amortization of Bond discount 7,000 Cost of Goods Sold 4,300,000 Interest Expense 235,000 Operating Expense 530,000 Provision for Income Tax 310,000 10% Debentures, due Jan. 1, 2032 250,000 Accounts Payable 1,000,000 Mortgage Payable (including current portion of P200,000) 330,000 Bank Overdraft 1,000,000 Reserve for Contingencies 200,000 Income Tax Payable 310,000 Accrued Expenses 210,000 Common Stock - - P100 par value Authorized - 50,000 shares Issued - 18,500 shares 1,850,000 Subscribed --500 shares 50,000 Preferred Stock, authorized and issued, 7% cumulative non-participating, 10,000 shares, P100 par value 1,000,000 Retained Earnings 153,000 Share Premium – common shares 350,000 Accumulated Depreciation 630,000 Allowance for Doubtful Accounts 75,000 Dividend Income 40,000 Sales 5,900,000 P13,348,000 P13,348,000 a) Marketable securities are carried in the books at cost. At Dec. 31, 2020 the market values of these securities totaled P265,000. b) Investments in affiliated companies are stated at cost. These are not listed in the stock ex-changes. Based on audited financial statements, the company's equity in net assets of these affiliates would be P340,000 at Dec. 31, 2020; its share in the net income for the year ended would be P7,700. For the past three years there were no dividends received from the affiliates. c) Inventories are carried now in the books at LCNRV. Last year the company used the average cost method. As a result of the change in method, the inventories at December 31, 2020 decreased by P95,000 and the net income for the year was reduced by P61,750. d) The land, building, machinery, and equipment are valued at cost. These are pledged to secure the overdraft and mortgage payable. e) The company has received an assessment from the BIR for additional sales taxes totaling P356,000 for the year 2018 to 2019. This is being contested by the company's legal counsel, who is of the opinion that there is no adequate basis for the assessment. Accordingly, NO provision has been made for this assessment. f) The President of the company is running for an elective position as an independent candidate. The company sells its products to the government and entities thru bids. For the past two years the volume of sales to the government is around 12 to 15% of the total. g) In a meeting of the Board of Directors on Jan. 10, 2021, it was approved that the land adjoining the plant site be purchased for future plant expansion. Based on current market prices this may involve the amount of around P500,000. It was also approved that cash in the amount of P200,000 be restricted to meet the down payment of this possible acquisition. Question: 1.) What are the adjustments of each additional information above? 2.) Prepare the Balance sheet and Income statement of December 31.
You are the senior in charge of the audit of the accounts of the Domino Industries, Inc. You and your staff have just completed the field work relative to the December 31, 2020 audit. The adjusted
|
Cash |
240,000 |
|
|
Marketable Securities |
95,000 |
|
|
Investment in Affiliated Companies |
350,000 |
|
|
|
680,000 |
|
|
Subscription Receivable |
20,000 |
|
|
Inventories |
|
|
|
- Finished Goods |
620,000 |
|
|
- Goods in Process |
155,000 |
|
|
- Raw Materials |
470,000 |
|
|
|
11,000 |
|
|
Construction in Progress |
220,000 |
|
|
Land |
460,000 |
|
|
Buildings, Machinery and Equipment |
4,350,000 |
|
|
Cash Surrender Value of Life Insurance |
60,000 |
|
|
Prepaid Expenses |
50,000 |
|
|
Pre-operating Expenses |
120,000 |
|
|
Unamortized Bond Discount |
65,000 |
|
|
Amortization of Bond discount |
7,000 |
|
|
Cost of Goods Sold |
4,300,000 |
|
|
Interest Expense |
235,000 |
|
|
Operating Expense |
530,000 |
|
|
Provision for Income Tax |
310,000 |
|
|
10% Debentures, due Jan. 1, 2032 |
|
250,000 |
|
Accounts Payable |
|
1,000,000 |
|
Mortgage Payable (including current portion of P200,000) |
|
330,000 |
|
Bank Overdraft |
|
1,000,000 |
|
Reserve for Contingencies |
|
200,000 |
|
Income Tax Payable |
|
310,000 |
|
Accrued Expenses |
|
210,000 |
|
Common Stock - - P100 par value Authorized - 50,000 shares |
|
|
|
Issued - 18,500 shares |
|
1,850,000 |
|
Subscribed --500 shares |
|
50,000 |
|
|
|
1,000,000 |
|
|
|
153,000 |
|
Share Premium – common shares |
|
350,000 |
|
|
|
630,000 |
|
Allowance for Doubtful Accounts |
|
75,000 |
|
Dividend Income |
|
40,000 |
|
Sales |
|
5,900,000 |
|
|
P13,348,000 |
P13,348,000 |
a) Marketable securities are carried in the books at cost. At Dec. 31, 2020 the market values of these securities totaled P265,000.
b) Investments in affiliated companies are stated at cost. These are not listed in the stock ex-changes. Based on audited financial statements, the company's equity in net assets of these affiliates would be P340,000 at Dec. 31, 2020; its share in the net income for the year ended would be P7,700. For the past three years there were no dividends received from the affiliates.
c) Inventories are carried now in the books at LCNRV. Last year the company used the average cost method. As a result of the change in method, the inventories at December 31, 2020 decreased by P95,000 and the net income for the year was reduced by P61,750.
d) The land, building, machinery, and equipment are valued at cost. These are pledged to secure the overdraft and mortgage payable.
e) The company has received an assessment from the BIR for additional sales taxes totaling P356,000 for the year 2018 to 2019. This is being contested by the company's legal counsel, who is of the opinion that there is no adequate basis for the assessment. Accordingly, NO provision has been made for this assessment.
f) The President of the company is running for an elective position as an independent candidate. The company sells its products to the government and entities thru bids. For the past two years the volume of sales to the government is around 12 to 15% of the total.
g) In a meeting of the Board of Directors on Jan. 10, 2021, it was approved that the land adjoining the plant site be purchased for future plant expansion. Based on current market prices this may involve the amount of around P500,000. It was also approved that cash in the amount of P200,000 be restricted to meet the down payment of this possible acquisition.
Question:
1.) What are the adjustments of each additional information above?
2.) Prepare the
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