Reference no: EM132727302

Siette provided the following information:

• On Jan.1, 2019, Siette Corp, signed a three-year non-cancellable purchase contract, which allows Siette to purchase up to 500,000 units of a computer part annually from Ochoco Co. at P.10 per unit and guarantees a minimum annual purchase of 200,000 units. During 2019, the part unexpectedly became obsolete. Siette had 250,000 units of this inventory at Dec. 31, 2019, and believes these parts can be sold as scrap for P.05 per unit.

• Siette estimates its doubtful accounts using percentage of Accounts Receivable at 2%. The ending accounts receivable has an ending balance of 2,500,000. Beginning Allowance for Doubtful Accounts is 20,000 debit, 30,000 Accounts Receivable we're written off during the year and 5,000 of these previously written off accounts are recovered.

• Siette established a Petty cash fund at a balance of 30,000, which disclosed the following composition of the fund on December 31, 2019, although it was not replenished on this date: Currency - bills and coins - 9,580; Check of office manager, dated January 5, 2020 - 10,000; Vouchers showing expenditures for: Office supplies - 1,260; Miscellaneous expenses - 900; Accounts payable - 8,000.

• On Jan. 1, 2019, Siette Corp. received a 3,000,000 non-interest bearing note in exchange for a property sold. The property has a cost of 5,000,000 and accumulated depreciation of 2,750,000. The note is to be repaid in 3 equal annual installment payment starting December 31, 2019. The market interest rate on similar notes is 12%.

• Siette purchased computer parts at a total cost of 1,000,000. The computer parts purchased is composed of 100 CPUs, 2,000 Keyboard, and 2,500 Mouse. Mouse is sold at 120 per piece, CPUs at 10,000 per piece and Keyboard at 850 per piece.

Problem 1: What amount of probable loss from the purchase commitment should Siette report in 2019 income statement?

Group of answer choices

a. P20,000

b. P24,000

c. P8,000

d. P16,000