Accounting 4 Module 1 3

Accounting 4 Trade and Other Payables
1. The balance in Ivan Co.’s accounts payable account at December 31, 2020 was P 400,000 before any
necessary year-end adjustments relating to the following:
 Goods were in transit to Ivan from a vendor on December 31, 2020. The invoice cost was
P 50,000. The goods were shipped FOB Shipping point on December 29, 2020 and were
received on January 4, 2021.
 Goods shipped FOB Destination on December 21, 2020 from a vendor to Ivan was
received on January 6, 2021. The invoice cost was P 25,000.
 On December 27, 2020 Ivan wrote and recorded checks to creditors totaling P 30,000 that
were mailed on January 10, 2021.
In Ivan’s December 31, 2020 statement of financial position, the accounts payable should be
a. P 430,000 c. P 475,000
b. P 450,000 d. P 480,000
2. Gerry Co.’s accounts payable balance at December 31, 2020 was P 1,100,000 before considering the
following transactions:
 Goods were in transit from a vendor to Gerry on December 31, 2020. The invoice price
was P 80,000, and the goods were shipped FOB Shipping point on December 29, 2020.
The goods were received on January 4, 2021.
 Goods shipped to Gerry FOB Shipping point on December 20, 2020, from a vendor were
lost in transit. The invoice price was P 50,000. On January 5, 2021, Gerry filed a P50,000
claim against the common carrier.
In its December 31, 2020 statement of financial position, Gerry should report accounts payable of
a. P 1,230,000 c. P 1,150,000
b. P 1,180,000 d. P 1,100,000
3. Donna Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next
biweekly period. Donny accrues salaries expense only at its December 31 year end. Data relating to
salaries earned in December 2020 are as follows:
 Last payroll was paid on 12/26/20 for the 2-week period ended 12/26/20
 Overtime pay earned in the 2 week period ended 12/26/20 was P 5,000.
 Remaining work days in 2020 were December 29, 30, 31, on which days there was no
overtime.
 The recurring biweekly salaries total P 90,000.
Assuming a five day work weekly, Donna should record a liability at December 31, 2020 for accrued
salaries of
a. P 27,000 c. P 32,000
b. P 54,000 d. P 59,000
4. Rosy Co. pays all salaried employees on a Monday for the five day workweek ended the previous
Friday. The last payroll recorded for the year ended December 31, Year 2 was for the week ended
December 25, Year 2. The payroll for the week ended, Friday, January 1, Year 3 included regular
weekly salaries of P 80,000 and vacation pay of P 25,000 for vacation time earned in Year 2 but not
taken by December 31, Year 2. Ross had accrued a liability of P 20,000 for vacation pay at December
31, Year 1. In its December 31, Year 2 statement of financial position, what amount should Ross report
as accrued salary and vacation pay?
a. P 64,000 c. P 84,000
b. P 69,000 d. P 89,000
5. Benny Corp.’s accounts payable at December 31, 2019, totaled P1,700,000 before any necessary year-
end adjustments relating to the following transactions:
 On December 27. 2019, Benny wrote and recorded checks to creditors totaling P400,000.
The checks were mailed out on January 10, 2020.
 On December 21, 2019, Benny purchased and received goods for P300,000, terms 2/10, n/30.
The invoice was recorded on January 2, 2020. The company using the gross method.
 Goods shipped FOB Destination on December 20, 2019 from a vendor to Benny were lost in
transit. The invoice cost of P35,000 was not recorded as of the balance sheet date
 Goods shipped FOB Destination on December 26, 2019 from a vendor were received
December 29, 2019. The invoice cost of P150,000 was recorded on December 30, 2019.
 Goods shipped FOB Supplier on December 22, 2019, from a supplier, were still in transit on
December 31, 2019. The invoice cost of P47, 500 was not recorded as of balance sheet date.
At December 31, 2019, what amount should Berlin report as total accounts payable?
a. 2,482,500 b. 2,400,000 c. 2,447,500 d. 2,435,000
6 and 7 are based on the following information
An entity provided the following data on December 31, 2019.
Cash 400,000 Accounts payable 500,000

Accounts receivable 800,000 Note payable 550,000
Inventories 550,000 Bonds Payable 1,100,000
 Cash included a P200,000 sinking fund to be used to settle the bonds in 2023.
 Accounts receivable included a P200,000 note receivable from a customer due in 2022.
 The note payable is due on February 14, 2020. On December 31, 2019, the entity intended to
refinance the note payable on a long-term basis, On January 19, 2020, the entity executed the
refinancing. The 2019 financial statements are issued on March 15, 2020.
 Inventories included equity investments of P250,000. The entity is expected to sell 40% of this
investment next year, while the remaining 60% is to be held indefinitely.
6. What total amount of current assets should be reported on December 31, 2019?
a. 1,200,000 c. 1,550,000
b. 1,350,000 d. 1,150,000
7. What total amount of current liabilities should be reported on December 31, 2019?
a. 500,000 c. 1,100,000
b. 550,000 d. 1,050,000
8 and 9 are based on the following information
An entity recognized the following transactions during 2019:
The entity estimated its annual warranty expense at 2% annual net sales:
Net sales 4,000,000

Warranty liability:
December 31, 2018 60,000 credit
Warranty payment during 2019 50,000
The entity was sued by a competitor for P1,500,000 for infringement of a trademark. Based on the
advice of the company’s legal counsel, the entity accrued the sum of P1,000,000 as a provision in its
financial statements for the year ended December 31, 2019. On February 15, 2020, the court decided
in favor of the plaintiff and ordered the entity to pay a sum of P1,400,000. The financial statements
were prepared by the entity’s management on January 31, 2020 and authorized for issue on
March 1, 2020.
8. What total amount of expenses should be recognized for the year ended December 31, 2019?
a. 1,480,000 c. 1,450,000
b. 1,080,000 d. 1,050,000
9. What total amount of liabilities should be recognized on December 31, 2019?

a. 1,090,000 c. 1,450,000
b. 1,490,000 d. 1,050,000

Accounting 4 Module 1 3

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Accounting 4 Trade and Other Payables

6 and 7 are based on the following information

An entity provided the following data on December 31, 2019.

Cash 400,000 Accounts payable 500,000

8 and 9 are based on the following information

An entity recognized the following transactions during 2019:

Net sales 4,000,000

9. What total amount of liabilities should be recognized on December 31, 2019?

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