Reference no: EM132971937

Problem 1 - Montagne Company disclosed the following changes in account balances for the year:

Cash 450,000 increase

Accounts receivable 300,000 increase

Merchandise inventory 100,000 decrease

Accounts payable 200,000 increase

Prepaid expense 50,000 increase

Accrued expenses 50,000 decrease

Unearned income 10,000 increase

In the current year, the owner transferred financial assets to the business and these were sold for P500,000 to finance the purchase of merchandise. There was an increase in share capital and share premium by P100,000 and the corporation declared dividends during the year of P40,000.

Required - Compute the net income for the year.

Problem 2 - At the beginning of the current year, Basilio Company started a retail merchandise business. During the current year, the business paid trade creditors P2,000,000 in cash and achieved a net income of P150,000.

The ledger pre-closing balances at year-end included the following:

Accounts receivable P 600,000

Accounts payable 800,000

Capital contribution (in cash) 2,000,000

Expenses paid in cash 100,000

Merchandise (unadjusted debit balance) 800,000

There were no withdrawals. All sales and purchases were on credit. The merchandise account is debited for purchases and credited for sales.

Required - Compute the following:

1. Amount of purchases for the year.

2. Amount of sales for the year.

3. Cash balance at year-end.

4. Merchandise inventory at year-end.