Reference no: EM132827989

Problem 1 - Receipts from contract sales for the two years ended December 31, 2020, are as follows:

Brave Company sells appliance service contracts, agreeing to repair appliances for a two-year period. Brave's past experience is that, of the total pesos spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% during the second contract year.

2020 500,000

2021 600,000

Receipts from service contracts are credited to unearned service revenue. Assume that all service contracts are made evenly during the year.

1. How much is the contract revenue for 2021?

2. What amount of unearned service contract revenue should be reported at December 31, 2021?

Problem 2 - The balance in Josephine Company's accounts payable at December 31, 2020 was P1,210,000 before any year-end adjustment relating to the following:

1. Goods were in transit from a vendor to Josephine on December 31, 2020. The invoice cost was P87,000. The goods were received on January 3, 2021. Terms were FOB Shipping

2. Goods shipped FOB Shipping point on December 23, 2020 from a vendor to Josephine, were lost in transit. The invoice cost was P67,000. On January 4,2021, Josephine filed a

3. Goods shipped FOB Destination with invoice price of P19,500 were received and paid on January 3, 2020.

1. What amount of accounts payable should be reported in the statement of financial position as of December 31, 2020?