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Aud of Liabilities

The document outlines various financial problems related to the liabilities and financial statements of companies, including ISANG-SILYA INC and Mary Grace Company, as of December 31, 2024. It details specific debt obligations, required journal entries for adjusting accounts, and calculations for current and non-current liabilities. Additionally, it discusses warranty contracts for Piattos Inc., including revenue recognition and expense reporting related to warranties.

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Haezel Daluz
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36 views3 pages

Aud of Liabilities

The document outlines various financial problems related to the liabilities and financial statements of companies, including ISANG-SILYA INC and Mary Grace Company, as of December 31, 2024. It details specific debt obligations, required journal entries for adjusting accounts, and calculations for current and non-current liabilities. Additionally, it discusses warranty contracts for Piattos Inc., including revenue recognition and expense reporting related to warranties.

Uploaded by

Haezel Daluz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Name: __________________________

Problem 1
ISANG-SILYA INC is a manufacturer and retailer of household furniture. Your audit of the company's financial statements for the year
ended December 31, 2024, discloses the following debt obligations of the company at the end of its reporting period.

ISANG-SILYA's financial statements are authorized for issuance on March 6, 2025.

a. A P150,000 short-term obligation due on March 1, 2025. Its maturity could be extended to March 1, 2027, provided ISANG-
SILYA agrees to provide additional collateral. On February 12, 2025, an agreement is reached to extend the loan's maturity
to March 1, 2027.

b. A short-term obligation of P3,600,000 in the form of notes payable due February 5, 2025. The company issued 75,000
ordinary shares for P36 per share on January 25, 2025. The proceeds from the issuance, plus P900,000 cash, were used to
fully settle the debt on February 5, 2025.

c. A long-term obligation of P2,500,000 on December 1, 2024. On November 10, 2024. ISANG-SILYA breaches a covenant on
its debt obligation and the loan becomes payable on demand. An agreement is reached to provide a waiver of the breach
on December 11, 2024.

d. A long-term obligation of P4,000,000. The loan is maturing over 4 years in the amount of P1,000,000 per year. The loan is
dated Sep 1, 2024, and the first maturity date is Sep 1, 2025.

e. A debt obligation of P1,000,000 maturing on December 31, 2027. The debt is callable on demand by the lender at any time.

Required:
Determine the amount to be reported on the statement of financial position as at December 31, 2024:
1. Current Liabilities __________________________
2. Non-Current Liabilities ______________________
Problem 2
In conjunction with your firm’s examination of the financial statements of BSA, Co. as of December 31, 2024, you obtained the
information from the Company’s voucher register shown in the work paper below:

Item no. Entry Date Reference Description Amount Account Charged


1 12.18.24 12-200 Supplies shipped FOB Destination 15,000 Supplies on hand
12.15.24; received 12.17.24
2 12.18.24 12-203 Auto insurance, 12.15.24 to 12.15.25 22,000 Prepaid insurance
3 12.21.24 12-209 Repair services, received 12/20/24 19,000 Repairs and
maintenance
4 12.26.24 12-212 Merchandise, shipped FOB shipping 123,000 Inventory
point, 12.20.24; received 12.24.24
5 12.21.24 12-210 Payroll 12.07.24 to 12.21.24 (12 working 69,000 Salaries and wages
days)
6 12.21.24 12-234 Subscription to industry magazine for 5,000 Dues and
2025 subscription
7 12.28.24 12-236 Utilities – Dec 2024 24,000 Utilities expense
8 12.28.24 12-241 Merchandise, shipped FOB Destination, 111,500 Inventory
12.24.12; received 01.02.25
9 12.28.24 12-242 Merchandise, shipped FOB Destination, 84,000 Inventory
12.24.12; received 01.02.25
10 01.02.25 1-1 Legal services; received 12.28.24 46,000 Legal and
professional fees
11 01.02.25 1-2 Medical services for employees – Dec 25,000 Medical expenses
2024
12 01.05.25 1-3 Merchandise, shipped FOB Shipping 55,000 Inventory
point, 12.29.24; received 01.04.25
13 01.10.25 1-4 Payroll, 12.21.24 to 01.05.25 (12 working 72,000 Salaries and wages
days in total, 4 working days in January
2025)
14 01.10.25 1-6 Merchandise, shipped FOB shipping 64,000 Inventory
point, 01.02.25; received 01.06.25
15 01.12.25 1-8 Merchandise, shipped FOB Destination, 38,000 Inventory
01.03.25; received 01.10.25
16 01.13.25 1-9 Maintenance services; received 01.09.25 9,000 Repairs and
maintenance
17 01.14.25 1-10 Interest on bank loan, 10.10.24 to 30,000 Interest expense
01.10.25
18 01.15.25 1-11 Manufacturing equipment; installed 254,000 Machinery and
12.29.24 equipment
19 01.15.25 1-12 Dividend declared, 12.15.24 160,000 Dividends payable

Accrued liabilities as of December 31, 2024 were as follows:


Accrued payroll 48,000
Accrued interest payable 26,666
Dividends payable 160,000

The accrued payroll and accrued interest payable were reversed effective January 01, 2013.

Required:
Review the data given above and prepare journal entries to adjust the accounts on December 31, 2024. Assume that the Company
follows FOB terms for recording inventory purchases.

Note: at least 8 adjusting entries (8 points)


Problem 3
Mary Grace Company has the following three loans payable scheduled to be repaid in February of next year. The company's
accounting year ends on December 31.

a. The company intends to repay Loan 1 for P100,000 when it comes due in February. In the following October, the company
intends to get a new loan for P80,000 from the same bank.

b. The company intends to refinance Loan 2 for P150,000 when it comes due in February. The refinancing agreement, for
P180,000, will be signed in April, after the financial statements for this year have been authorized for issue.

c. The company intends to refinance Loan 3 for P200,000 before it comes due in February. The actual refinancing, for
P175,000, took place in January, before the financial statements for this year have been authorized for issue.

Required:
Determine the amount to be reported on the statement of financial position as at December 31:
1. Current Liabilities __________________________
2. Non-Current Liabilities ______________________

Problem 4
Piattos Inc., a dealer of household appliances, sells washing machines at an average price of P8,100. The company also offers to each
customer a separate 3-year warranty contract for P810 that requires the company to provide periodic maintenance services and to
replace defective parts.

During 2024, Piattos Inc sold 300 washing machines and 270 warranty contracts for cash. The company estimates that the warranty
costs are P180 for parts and P360 for labor.

Assume sales occurred on December 31, 2024, Piattos Inc's policy is to recognize income from the warranties on a straight-line basis.
In 2025, Piattos Inc Incurred equal costs relative to 2024 warranty sales of P18,000 for parts and P36,000 for labor.

Required:
1. Determine the amount to be reported on the statement of financial position as at December 31, 2024 relative to the warranty
contracts
a. Current Liabilities __________________________
b. Non-Current Liabilities ______________________

2. Determine the amount to be reported on the statement of financial position as at December 31, 2025 relative to the warranty
contracts
c. Current Liabilities __________________________
d. Non-Current Liabilities ______________________

3. What amount of warranty expense would be shown in the statement of comprehensive income for the year ended December
31, 2025?

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