Chapter 23 - answer.doc - CHAPTER 23 23-1 COMPREHENSIVE...

23-1. Daffodil, Inc.
Adjusting Journal Entries
12.31.16
AJE (1) Share donation 60,000
Treasury shares 35,000
Land 10,000
Building 15,000
(2) Accumulated depreciation - machinery 1,000
Loss on sale of machinery 2,000
Machinery 3,000
Cost P 5,000
Less: AD (20%) 1,000
NBV P 4,000
Proceeds 2,000
Loss P 2,000
(3) (a) Accumulated depreciation - building 300
Retained earnings 300
(b) Factory operating expenses 21,300
Accumulated depreciation - building 6,300
Accumulated depreciation - machinery 15,000
Building (P315,000 x 2%)
Machinery:
5,000 x 10% = P 500
145,000 x 10% = 14,500
P15,000
(4) Merchandise inventory, 12.31.16 B/S 175,000
Merchandise inventory, 12.31.16 I/S 175,000
CHAPTER
23
COMPREHENSIVE AUDIT OF
STATEMENT OF FINANCIAL POSITION AND
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME ACCOUNTS

23-2
Solutions Manual to Accompany Applied Auditing, 2014 Edition
(5) Administrative expenses 1,000
Allowance for doubtful accounts 1,000
(6) Factory operating expenses 3,000
Unexpired insurance 3,000
(7) Retained earnings 2,500
Bond interest expense 2,500
Unamortized bond discount 5,000
(8) Sinking fund assets 23,500
First Mortgage SF Bonds 23,500
(9) Sinking fund assets 1,500
Sinking fund income 1,500

Comprehensive Audit Cases and Problems
23-3
23-1. Daffodil, Inc. (continued)
Daffodil, Inc.
Working Trial Balance
12.31.16
Trial Balance Adjustments Statement of Profit or
Loss and Other
Comprehensive Income
Statement of
Financial Position
Dr Cr Dr Cr Dr Cr Dr Cr
Cash P 64,000 P
64,000
Accounts receivable 200,000 200,000
Provision for doubtful
accounts
P 1,000 (5) 1,000 P 2,000
Inventories, 12.31.15 223,000 P
223,000
Unexpired insurance,
12.31.15
6,000 (6) 3,000 3,000
Land 220,000 (1)
10,000
210,000
Buildings 330,000 (1) 15,000 315,000
Accumulated Depreciation -
Buildings
6,600 (3a) 300 (3b) 6,300 12,600
Machinery 148,000 (2) 3,000 145,000
Accumulated Depreciation -
Machinery
15,000 (2) 1,000 (3b)
15,000
29,000
Sinking fund assets 25,000 (8)
23,500
(9) 1,500 50,000
Unamortized bond discount 25,000 (7)
5,000
20,000
Treasury shares, ordinary 35,000 (1) 35,000 -
Accounts payable 88,000 88,000
Bond interest accrued 3,750 3,750
1st Mortgage, 6% SF Bonds 226,500 (8) 23,500 250,000
Ordinary shares 500,000 500,000
Premium on ordinary shares 50,000 50,000
Share donation 60,000 (1)
60,000
-
Retained earnings, 12.31.15 74,150 (7) 2,500 (3a) 300 71,950
Sales 875,000 P
875,000
Purchases 283,500 283,500
Payroll 169,000 169,000
Factory operating expenses 121,500 (3b)

21,300
(6) 3,000 145,800
Administrative expenses 35,000 (5) 1,000 36,000
Bond interest expense 15,00
0
(7) 2,500 17,500
P1,900,00
0
P1,900,00
0
Loss on sale of machinery (2) 2,000 2,000
Merchandise inventory
12.31.16
(4)
175,000
(4)
175,000
175,000 175,000
Sinking fund income (9)
1,500
1,5
00
P
293,600
P
293,600
P
876,800
P1,051,5
00
P1,182,0
00
P1,007,3
00
Net Income 174,70
0
174,7
00
P1,051,50
0
P1,051,5
00
P1,182,0
00
P1,182,0
00

23-5
Solutions Manual to Accompany Applied Auditing, 2014 Edition
23-2.
Part I Adjusting Journal Entries, 12-31-14
AJE (1) Depreciation expense 1,778
Accumulated depreciation 1,778
(2) Prepaid interest 5,000
Retained earnings 3,100
Interest expense 1,900
(3) Merchandise inventory, 12-31-16, BS 15,000
Merchandise inventory, 12-31-16, IS or
Cost of Sales
15,000
(4) Retained Earnings 6,000
Purchases 6,000
(5) Prepaid insurance 3,000
Insurance expense 3,000
(6) Store supplies inventory 1,450
Store supplies expense 550
Retained earnings 900
(7) Retained earnings 730
Commissions expense 240
Accrued commissions payable 970
(8) Cash in bank 650
Miscellaneous income 650
(9) Purchases 800
Accounts payable 800
(10) Income from Investment 3,000
Investment 3,000
(11) Prepaid advertising and promotions 90,000
Advertising and promotions expense 90,000
(12) NO AJE
(13) Machinery 20,000
Depreciation expense – machinery 167
Allowance for depreciation – machinery 167
Repairs and maintenance 20,000
[(P22,000 – P2,000) – P4,000]
9

23-6