(A story of love, hopes, and tragedy)
HerRamel Hidden Pinefields Inc. was established long ago in the kingdom by the sea. This company is a well-known trading company owned by Admiral Restitutu who fought with Vicomte de Chagny in Islandshire on June 18, 1815. This corporation engages in distribution of hardware, software, melaware, and Tupperware anywhere.
Now, imagine that you (yes you!) were given the chance to audit the books of this well-known corporation in the kingdom by the sea. You were excited to take this challenge.
Once upon a midnight dreary, a wind that blew out from the sea coveted some parts of the books (hard copy without any back-ups) and scattered some into bits of unfathomable restless hopes.
“You are the only hope of the Company”, said the manager.
“Indeed, I know right? I will do my best to fix this”, you replied.
So on and so forth!
Day 1
Stopping by the woods in a windy evening, you noticed that the woods were lovely, dark and deep… Then suddenly there came a tapping as of someone gently rapping, rapping at your couch’s door. You did not mind. Distinctly, you found a piece of paper outside blab blab bla so and so…
Debit
|
Credit
|
|
Accounts receivable
|
2,563,700
|
|
Allowance for Doubtful Accounts
|
10,200
|
|
Sales
|
4,820,000
|
Because you were so smart, you knew that the paper was one of the fragments. Your review of the accounts receivable schedule disclosed that various collections totaling P28,460 were not recorded in the books. But, it has been reflected in the subsidiary ledgers said the manager when he passionately replied to your telegraph. You noted some information:
----Bad debts are provided based on 2% of outstanding accounts receivable at the end of the year.
----Collection of P26,386 on October 31, 2012 from High Run Traders was credited to account of High Rain Traders.
----A cash advance to an officer of P86,000 was included as part of accounts receivable.
----A customer’s deposit of P49,000 for goods to be delivered in January 2013 was deducted from accounts receivable.
----Goods sold on account and delivered on December 21, 2012 amounting to P42,920 were not recorded.
----A promissory note was issued by a customer to HerRamel Hidden Pinefields Inc. for goods purchased worth P279,000. The promissory note carries an interest of 12% per annum with a term of 60 days, value dated November 15, 2012. This was reflected as part of accounts receivable. No interest was accrued as of year-end.
You spent your time in a cabin near Chateau d’If.
Day 2
Strolling along country roads, it started to rain- it began to pour. Without an umbrella you’re soaked to the skin. You felt the shiver run down your spine. After a while you ran under the tree. Then you noticed a crumpled paper tucked between the branches like a leaf that leaned to the bow. It says:
Value
Dated
|
Due Date
|
Principal
|
Interest
|
Maturity
value
|
July 1,
2012
|
Feb. 1,
2013
|
500,000
|
13 1/8%
|
539,193
|
Sept.
15, 2012
|
Mar. 16,
2013
|
2,300,000
|
14 3/8%
|
2,467,149
|
Dec. 5,
2012
|
April 4,
2013
|
1,800,000
|
15 ½%
|
1,893,000
|
4,600,000
|
4,899,342
|
Interests are paid on schedule maturity dates. Now accrual was made as of year-end.
The company issued P2,300,000 face value 12% bonds at par on July 1, 2012 maturing on July 1, 2017 and paying interest semi-annually on January 1 and July 1.
Day 3
Two roads diverge in a yellow wood, and you were so sorry you could not travel both. And be one accountant long you stood and looked down one as far as you could. After 12 hours you took the road less traveled by, well, for a change…. You arrived at a chocolate house. To make the story short, here you found a paper …
Including in the company’s unadjusted trial balance on December 31, 2012 are accounts payable and Accrued expenses of P634,200 and P74,200, respectively. Upon verification, the following information was discovered:
1. Your review of subsequent payments from January 2-15, 2011 revealed that no accrual was made on December 31, 2012 for the following:
Neon Light and mineral water for Nov
and Dec 2012
|
P32,300
|
Cellphone bills for Dec 2012
|
29,260
|
Representation expenses for Dec 2012
|
23,100
|
Minor repairs for major injuries on
Dec 26, 2012
|
4,290
|
Teleportation expenses for 2013
|
3,670
|
Total
|
P92,620
|
2. The following items were erroneously included in accounts payable:
---------a. A debit balance of P98,360 representing advance payment for goods ordered to be supplied by the supplier on January 12, 2013
---------b. Accrued expense totaling P48,560
---------c. A cash advance from the President of HerRamel Hidden Pinefields Inc. amounting to P460,000 to be used as working capital. This will be repaid within 6 months without interest.
3. On December 26, 2012, the company purchased on account goods worth P326,000, but no entry was made in the books. The goods were already included in the year-end physical count.
Day 4
You were almost done…
The company books purchased office supplies as inventory. The expense is normally taken up after the physical count is made at year-end. On July 9, 2012, a total of P49,560 worth of supplies was bought and included in the inventory. As of year-end, unused supplies inventory per physical count amounted to P64,300. No entry to set up expense was recorded.
HerRamel Hidden Pinefields Inc. renewed its 5-year lease contract on the office building which expired on October 31, 2012. Total advance rental for 3 months was made amounting to P276,000 was booked as prepaid rent.
Prepayments consist of:
|
|
Prepaid advertising
|
255,000
|
Prepaid rent
|
276,000
|
Unused office and store
supplies
|
240,000
|
Total
|
771,000
|
Prepaid advertising consists of payment to an advertising agency for the design of newspaper ad which will run for a period of one year from July 31, 2012.
Day 5
The company maintains its bank account with Julie Bank. Your review of the bank reconciliation statement disclosed the following information:
-----------The cash in bank balance per book on December 31, 2012 is P792,300.
-----------Deposits in transit and outstanding checks at December 31, 2012 amounted to P100,300 and P243,000, respectively.
-----------Transfer of fund of P70,400 to Julie Bank current account of DBS Securities was not recorded. This pertains to purchase of P6,000 shares of J-nine Lines to be held as trading securities. Based on quoted price as of December 31, 2012, the market value per share is P9.30
-----------A check for P5,860 in payment of minor repair of office equipment was not recorded on the company books.
-----------A check dated December 12, 2012 in payment of accounts payable was recorded as P23,000. Upon examination of the checks returned by the bank, the actual amount was P32,000
-----------On December 20, 2012, the company issued checks to creditors totaling P226,000. These checks were released on January 2, 2013.
-----------Postdated checks totaling P49,000 were included in the deposits in transit. These represent collections of accounts receivable from customers. The check was actually deposited on January 5,2013.
-----------On December 22, 2012, the bank erroneously credited the account of HerRamel Hidden Pinefields Inc. for P306,000 representing deposit for the account of another company.
Petty cash fund of P46,000 maintained on an imprest basis was counted on January 2, 2013. Unreplenished expense include petty cash vouchers for various expenses totaling P30,400 and employees’ advances for P6,900 all dated December 2012.
At last you found all the pieces. Now it’s time to take a harder challenge… Should you give up, or should you just keep chasing pavements?
Requirements:
1. What went wrong?
2. What are the correct balances of all the accounts indicated therein?
3. What are the titles of the artistic oeuvres(övrǝs) inserted therein?
4. Which do you prefer: An easy long fancy problem or a short but complicated problem? Why? Explain in not less than 500 words not including the nouns and connectors.
5. React: “A problem well stated is a problem half answered”. Explain in not less than 600 words not including the nouns and connectors.
6. Do you believe answering numerical accounting problems will make you a better student? If yes, explain in not less than 300 words not including the nouns and connectors. If no, state 10 points (with 3 sentences each) why no.
(Adapted)
