You were assigned to reconstruct the financial statements of Bob Corporation in application for a bank loan. Bob Corporation maintains its accounting records under the cash basis of accounting. The following were discovered in line with your investigations:
You were assigned to reconstruct the financial statements of Bob Corporation in application for a bank loan. Bob Corporation maintains its accounting records under the cash basis of accounting. The following were discovered in line with your investigations:
A. Summary of cash transactions were as follows:
|
CASH RECEIPTS |
|
|
Cash sales |
P 3,550,000 |
|
Collections on |
28,950,000 |
|
Collections on trade notes receivables |
2,980,000 |
|
Interest on notes receivable |
260,000 |
|
Purchase returns and allowances |
420,000 |
|
|
|
|
CASH DISBURSEMENTS |
|
|
Cash purchases |
P 2,350,000 |
|
Payments on accounts payable |
17,590,000 |
|
Sales returns and allowances |
390,000 |
|
Insurance |
700,000 |
|
Salaries |
10,000,000 |
|
Equipment |
800,000 |
|
Other expenses |
1,500,000 |
|
Dividends |
1,000,000 |
B. The following changes in account balances would have been observed had accrual basis been used:
|
INCREASES |
|
|
Cash |
P4,200,000 |
|
Accounts receivable |
1,980,000 |
|
Allowance for |
111,000 |
|
Accounts payable |
970,000 |
|
Prepaid insurance |
200,000 |
|
Advances to suppliers |
255,000 |
|
|
|
|
DECREASES |
|
|
Interest receivable |
P 60,000 |
|
Equipment |
100,000 |
|
Trade notes receivable |
600,000 |
|
Accrued salaries expense |
300,000 |
|
Inventory |
875,000 |
C. Additional information:
- Total purchase returns and allowances amounted to P950,000 (including the refunded portion) while total sales returns and allowances amounted to P1,280,000 (including the refunded portion).
- Accounts receivable written-off during the year was at P315,000 while recovery of previous write off was at P150,000.
Based on the information above, answer the following questions:
- How much is the net sales under the accrual basis of accounting?
- How much is the cost of sales under the accrual basis of accounting?
- How much is the
depreciation expense under the accrual basis of accounting? - How much is the provision for doubtful accounts under the accrual basis of accounting?
- How much is the net income under the accrual basis of accounting?
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