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Audit Liability 04 Chapter 7
Audit Liability 04 Chapter 7
Accrued Expenses
ANGLIN CORPORATION must determine the December 31,2010, year-end
accruals for advertising and rent expenses. A P50,000 advertising
bill was received January 10,2011, comprising costs of P37,000
for advertisements in December 2010 issues, and P12,500 for
advertisements in January 2011 issues of the newspaper.
A store lease, effective December 16,2009, calls for fixed rent
of P120,000 per month from the effective date and monthly
thereafter. In addition, rent equal to 5% of net sales over
P6,000,000 per calendar year is payable on January 31 of the
following year. Net sales for 2010 were P7,500,000.
What is the total accrued liabilities that should be reported by
Anglin Corporation on its statement of financial position as at
December 31,2010?
A. P185,000 C. P97,500
B. P172,500 D. P110,000
SOLUTION 7-3
Advertising P 37,500
Fixed rent, Dec. 16-31(P120,000x1/2) 60,000
Variable rent
(P7,500,000-P6,000,000= P1,500,000x5%) 75,000
Total P172,500
Answer: B