Reference no: EM133125927

Question - You are a member of the staff of the accounting firm of JENNIE & Co, CPA's and have completed the fieldwork relative to the audit of the financial statements of LISA Inc. for the fiscal year ended July 31, 2021. The following accounts were taken from your adjusted trial balance:

DEBITS	DEBITS
Philtrust Bank, current account	PHP 129,430
Interest expense	4,200
Cost of sales	3,052,000
Treasury shares (Cost of 50 shares)	5,000
Advertising	15,790
Cash	31,750
Office salaries	249,200
Land	130,000
Depreciation - building	25,600
Life insurance expense	7,200
Petty cash	1,500
Loss on sale of equipment	31,600
Bad debts	33,224
Store equipment	148,000
Financial asset at fair value through profit or loss	78,000
Trade receivables	313,200
General administrative expenses	44,480
Building	520,000
Notes receivable	53,200
Depreciation - store equipment	14,000
Merchandise inventory	755,720
Sales salaries	324,800
Accrued interest receivable	1,800
Stationery and office supplies	4,200
Taxes and licenses	45,000
Prepaid insurance	8,680
Cash surrender value of life insurance	141,600
TOTAL	PHP 6,169,174
CREDITS		CREDITS
Accrued office salaries		PHP 8,000
Allowance for doubtful accounts		36,624
Sales		3,662,400
Accummulated depreciation - store equipment		47,600
Interest income		4,400
Accumulated depreciation - building		136,000
Commission income		21,800
Retained earnings		670,270
Trade payable		243,600
Share capital   (PHP 100 par value per share, 12,000 shares
authorized 20,000 shares)		1,200,000
SSS premiums payable		12,120
Liabilities under trust receipts		126,360
TOTAL		PHP 6,169,174

Additional information:

The company provides allowance for doubtful receivables equal to the estimated losses that will be incurred in the collection of the receivables. The estimated losses are based on a review of the current status of existing receivables.

As at July 31, 2021, the allowance for doubtful accounts amounted to P36,624. However, based on your examination of the accounts receivable as at that date, that an additional amount of P71,000 must be needed to cover possible losses in the collection of the receivables.

Financial asset at fair value through profit or loss consists of marketable securities carried in the books at cost. The market value of these securities was P78,612 at July 31, 2021.

The merchandise inventory is stated at cost, determined on the first-in, first-out method. However, this includes slow, non-moving and obsolescent items with an aggregate cost of approximately P400,000 and estimated net realizable value of P350,000. No allowance or provision for stock obsolescence was provided on these inventory items. Write-down is charged to cost of sales.

The land, building and store equipment are stated at cost. Depreciation is computed on the straight-line method based on the estimated useful lives of the assets.

As at July 31, 2021, the Company had authorized expenditures of approximately P700,000 for additions and improvements to its building.

The BIR has assessed the Company for additional income taxes aggregating P84,000 for the fiscal years ended July 31, 2018 and 2019. Protest has been filed and the assessments are being contested by the Company's legal counsel who is of opinion that there is no adequate legal basis for the additional assessments. Accordingly, no provision was made for the amount assessed.

Under the terms of the agreements covering the Company's liabilities under trust receipts, certain merchandise have been released to the Company in trust for the bank. The Company is accountable to the bank for the trusteed merchandise or its sales proceeds.

Required -

A. Compute for the corrected balances of the following accounts:

1. Petty Cash

2. Cash on hand and in bank

3. Financial asset at fair value through profit or loss

4. Trade receivables

5. Allowance for Doubtful accounts

6. Notes receivable

7. Accrued interest receivable

8. Merchandise inventory

9. Prepaid insurance

10. Stationery and office supplies

11. Cash surrender value of life insurance

12. Land

13. Building

14. Accumulated depreciation - building

15. Store equipment

16. Accumulated depreciation - store equipment

17. Accounts payable

18. Accrued office salaries

19. SSS premiums payable

20. Liabilities under trust receipts

21. Share capital

22. Retained earnings

23. Treasury Shares

24. Sales

25. Cost of sales

26. Sales salaries

27. Office salaries

28. General administrative expenses

29. Bad debts

30. Taxes and licenses

31. Depreciation - building

32. Depreciation - store equipment

33. Life insurance expense

34. Advertising

35. Gain on FVPL securities

36. Commission income

37. Interest income

38. Loss on sale of equipment

39. Interest expense

B. Prepare Statement of Financial Position as at July 31, 2021.

C. Prepare income statement for the fiscal year ended July 31, 2021.