Reference no: EM133043277

Questions -

Q1) The Retained Earnings of Honesty Corporation as at January 1, 2018 shows a credit balance of P 400,000. During the year, it was discovered that the depreciation of one unit of machinery is overstated by P 200,000 in 2016. Also during the year, cash dividends of P 1.00 per share were paid to shareholders with 1,000,000 outstanding shares. In addition, due to approval by the Board of Directors through a Board Resolution, the Retained Earnings Ledger account shows a credit entry of P 300,000 about change from FIFO to weighted average in costing inventories. The following retained earnings appropriation are presented to you:a. Appropriated for treasury shares, P 600,000, in which the original balance is P 1,000,000 and then reduced by P 400,000 because of treasury shares reissuance during the year. b. Appropriated for contingencies, P 1,600,000, in which the original balance is P 1,400,000 and then increased by P 200,000 because of current appropriation during the year. The statement of comprehensive income during 2018 is presented below: Net Sales P 20,000,000 Cost of Goods Sold (12,000,000) Gross Profit P 8,000,0000 Operating Expenses (4,285,000) Profit before income tax P 3,715,000 Provision for income tax (1,115,000) Profit after tax P 2,600,000

What is the corrected retained earnings balance as at January 1, 2018?

Q2) January 1, 2019, Ben&Ben Corporation signed a lease contract with SB19 Corporation to lease a machinery for a fixed rental payment of P 2,000,000 every December 31 for 10 years. The leased asset has an estimated useful life of 12 years with P 1,200,000 salvage value. The lease contract provides Ben&Ben to purchase the machine upon expiration of the lease contract on January 1, 2029 by paying P 1,000,000. In this regard, Ben&Ben is reasonably certain to exercise the purchase option at the commencement of the lease. Related information are as follows: Incremental borrowing rate 14% Implicit borrowing rate 12% PV of an ordinary annuity of 1 for 10 periods: At 14% 5.216 At 12% 5.650 PV of 1 for 10 periods at; At 14% 0.270 At 12% 0.322 What is the total lease liability as at January 1, 2019?

Q3) What is the effect in proof of cash for the month of December of a customer's check deposited and returned in December but re-deposited in January next year?

a. Book disbursements are understated while book ending balance is overstated.

b. Book disbursements are overstated while book ending balance is understated.

c. Book and bank receipts are reconciled while book disbursements are overstated.

d. Both receipts and disbursements are reconciled.