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  • Audit Liability 04 Chapter 7

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    Ma Teresa B. Cerezo
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    Anglin Corporation received a bill for advertising in January 2011 that included costs for advertisements in December 2010 issues. They also have a store lease that charges a fixed monthly rent plus 5% of annual net sales over $6,000,000, which is payable the following year. To determine the accrued expenses for the year ending December 31, 2010, the company must account for advertising costs in December 2010, 16 days of fixed rent for December, and 5% of net sales over the annual threshold.

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    Anglin Corporation received a bill for advertising in January 2011 that included costs for advertisements in December 2010 issues. They also have a store lease that charges a fixed monthly rent plus 5% of annual net sales over $6,000,000, which is payable the following year. To determine the accrued expenses for the year ending December 31, 2010, the company must account for advertising costs in December 2010, 16 days of fixed rent for December, and 5% of net sales over the annual threshold.

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    501 views1 page

    Audit Liability 04 Chapter 7

    Uploaded by

    Ma Teresa B. Cerezo
    Anglin Corporation received a bill for advertising in January 2011 that included costs for advertisements in December 2010 issues. They also have a store lease that charges a fixed monthly rent plus 5% of annual net sales over $6,000,000, which is payable the following year. To determine the accrued expenses for the year ending December 31, 2010, the company must account for advertising costs in December 2010, 16 days of fixed rent for December, and 5% of net sales over the annual threshold.

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    PROBLEM 7-3

    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

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