CASE 1 – PART 1: Adjusting Journal Entries
1. Change in Useful Life
Dr. Accumulated Depreciation 4,000
Cr. Depreciation Expense 4,000
2. Interest Deducted in Advance
Dr. Prepaid Interest 12,200
Cr. Interest Expense 12,200
3. Merchandise in Transit
Dr. Inventory 30,000
Cr. Purchases 30,000
4. Prior Year Inventory in Ending Inventory Only
Dr. Purchases 12,000
Cr. Inventory 12,000
5. Prepaid Insurance
Dr. Prepaid Insurance 6,000
Cr. Insurance Expense 6,000
6. Store Supplies Inventory Previously Omitted
Dr. Store Supplies 2,900
Cr. Retained Earnings 2,700
Cr. Supplies Expense 200
7. Accrued Sales Commissions Missed
Dr. Commissions Expense 4,750
Cr. Accrued Commissions 4,750
8. Outstanding Checks from 20x2
Dr. Cash 1,300
Cr. Miscellaneous Income 1,300
9. Inventory Included, Purchase Not Yet Recorded
Dr. Purchases 1,600
Cr. Accounts Payable 1,600
10. Sale of Share Dividends Incorrectly Treated
Dr. Cash 8,500
Cr. Investment in Shares 7,500
Cr. Gain on Sale of Investments 1,000
11. Advertising Cost for 20x4
Dr. Prepaid Advertising 180,000
Cr. Advertising Expense 180,000
12. Unrecorded Employee Repayment
Dr. Cash 12,000
Cr. Employee Advances 12,000
13. Capitalizable Costs Charged to Expense
Dr. Machinery 40,000
Cr. Repairs and Maintenance 40,000
14. Incorrect Treasury Share Accounting
Dr. Land 80,000
Cr. Treasury Shares 70,000
Cr. APIC - Treasury Shares 10,000
Dr. Cash 4,000
Cr. Land 4,000
15. Change in Doubtful Accounts Estimate
Dr. Bad Debts Expense 29,000
Cr. Allowance for Doubtful Accounts 29,000
CASE 1 – PART 2: Adjustments to 20x3 Trial Balance
Column A (20x2 Error) Column B (Adjustment to 20x3 Trial Balance)
Dr. Retained Earnings
1. Purchases / Accounts Payable Merchandise Cr. Inventory
included in inventory but omitted from purchases (Inventory was overstated in 20x2. Reverse by
reducing inventory.)
2. Retained Earnings / Wages Accrued wages at Dr. Retained Earnings
12/31/20x1 were not recorded Cr. Accrued Wages (or Wages Payable)
3. Retained Earnings / Accumulated Depreciation Dr. Retained Earnings
Missed 20x1 depreciation Cr. Accumulated Depreciation
4. Depreciation Expense / Accumulated
Dr. Depreciation Expense
Depreciation
Cr. Accumulated Depreciation
Omission of 20x2 depreciation
Dr. Machinery
5. Machinery / Repairs and Maintenance
Cr. Retained Earnings(Since error was
Capitalizable item expensed in error
made in 20x2, affect Retained Earnings)
6. Additional adjustment in 20x3 for Item Dr. Depreciation Expense
5(Depreciation not recorded on capitalized asset) Cr. Accumulated Depreciation
7. Taxes / Accrued Taxes Unrecorded accrued Dr. Retained Earnings
taxes at 12/31/20x2 Cr. Accrued Taxes
CASE 2: Financial Statements and Schedules
a. Cost of Goods Sold (COGS)
Particulars Amount (₱)
Beginning Inventory 75,600
Add: Purchases 346,000
Less: Purchase Returns (12,400)
Less: Purchase Discounts (8,200)
Net Purchases 325,400
Add: Freight-in 27,000
Goods Available for Sale 428,000
Less: Ending Inventory (68,200)
Cost of Goods Sold ₱359,800
b. Selling Expenses
Item Amount (₱)
Sales Commissions & Salaries 36,400
Sales Supplies Used 11,200
Delivery Expense 15,400
Promotion and Advertising 34,000
Depreciation – Sales Equipment 19,200
Total Selling Expenses ₱116,200
c. General and Administrative Expenses
Item Amount (₱)
Office Supplies Expense 2,800
Office & Admin Salaries 64,000
Insurance and Property Tax 17,000
Depreciation – Buildings & Equip. 29,000
Bad Debts Expense 5,400
Interest Expense 7,400
Loss on Sale of Office Equipment 10,000
Total General & Admin Expenses ₱135,600
d. Total Depreciation Expense
Asset Amount (₱)
Depreciation – Buildings & Equip. 29,000
Depreciation – Sales Equipment 19,200
Total Depreciation Expense ₱48,200
Wilson Company
Statement of Comprehensive Income
For the Year Ended December 31, 20x1
Particulars Amount (₱)
Sales 681,400
Less: Sales Returns and Allowances (24,200)
Less: Sales Discounts (9,800)
Net Sales 647,400
Particulars Amount (₱)
Less: Cost of Goods Sold (359,800)
Gross Profit 287,600
Less: Selling Expenses (116,200)
Less: General and Administrative Expenses (135,600)
Add: Rent Revenue 13,800
Income from Continuing Operations Before Tax 49,600
Less: Income Tax Expense (Continuing Ops) (14,880)
Net Income from Continuing Operations 34,720
Discontinued Operations:
Operating Loss (Jan–Apr) (17,400)
Gain on Sale of Segment A 20,000
Subtotal 2,600
Less: Tax on Discontinued Ops (780)
Net Income from Discontinued Operations 1,820
Extraordinary Item:
Loss from Flood (24,000)
Tax Benefit 7,200
Net Extraordinary Loss (16,800)
Net Income for the Year ₱19,740
