December 31 20x8 200,000 420,000 20x7 115,000 310,000 Assets Cash Installment accounts receivable Inventory Equipment – net of accumulated depreciation 180,000 125,000 480,000 360,000 Liabilities and Stockholders' Equity Accounts payable Unearned Rent 150,000 70,000 200,000 40,000 Estimated Warranties Obligation Other liabilities (including Deferred tax liability) Stockholders' equity You have satisfied yourself as to the accuracy of the balances shown above. In addition, the following information was 120,000 60,000 150,000 670,000 145,000 585,000 obtained: The Company's installment sales are taxable when cash is collected. • Spotify Company uses the straight-line method of depreciation for financial reporting purposes and sum of the years digit method for tax purposes. The equipment was acquired in January 20x7 and was estimated to have 5 year life. Rental income is taxable when cash is received. Warranty expense is deductible only when actual expenditure is made. Spotify Company reported a taxable income of P1,000,000 for 20x8.

December 31 20x8 200,000 420,000 20x7 115,000 310,000 Assets Cash Installment accounts receivable Inventory Equipment – net of accumulated depreciation 180,000 125,000 480,000 360,000 Liabilities and Stockholders' Equity Accounts payable Unearned Rent 150,000 70,000 200,000 40,000 Estimated Warranties Obligation Other liabilities (including Deferred tax liability) Stockholders' equity You have satisfied yourself as to the accuracy of the balances shown above. In addition, the following information was 120,000 60,000 150,000 670,000 145,000 585,000 obtained: The Company's installment sales are taxable when cash is collected. • Spotify Company uses the straight-line method of depreciation for financial reporting purposes and sum of the years digit method for tax purposes. The equipment was acquired in January 20x7 and was estimated to have 5 year life. Rental income is taxable when cash is received. Warranty expense is deductible only when actual expenditure is made. Spotify Company reported a taxable income of P1,000,000 for 20x8.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter9: Metric-analysis Of Financial Statements

Section: Chapter Questions

Problem 9.23E: Unusual income statement items Assume that the amount of each of the following items is material to...

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Unusual income statement items Assume that the amount of each of the following items is material to the financial statements. Classify each item as either normally recurring (NR) or unusual (U) items. If unusual item, then specify if it is a discontinued operations item (DO). a. Interest revenue on notes receivable. b. Gain on sale of segment of the company's operations that manufactures bottling equipment. c.Loss on sale of investments in stocks and bonds. d. Uncollectible accounts expense. e. Uninsured flood loss. (Hood insurance is unavailable because of periodic Hooding in the area.)
You are engaged to audit the financial statements of Sailor Co. The balance sheet below is provided to you:Sailor Co.Balance SheetDecember 31, 2021ASSETS LIABILITIES AND CAPITALCash 290,000.00 Accounts payable 190,000.00 Accounts receivable 139,000.00 Notes payable 83,500.00 Notes receivable 200,000.00 Ordinary share capital 300,000.00 Inventory 357,000.00 Retained earnings 412,500.00 Total 986,000.00 Total 986,000.00 The records of Sailor Co. were reviewed. The following errors were discovered. These errors were not corrected until the current year under audit.a. On July 1, 2019, Sailor paid P150,000 for a 5-year insurance policy. The amount was debited to Insurance Expense when paid.b. Sailor Co. failed to record unearned rent revenue of P16,000 and P9,000 in 2018 and 2020, respectively.c. Sailor Co. also failed to recognize accrued expenses of P23,000, P18,000 and P7,000 for 2018, 2019 and 2020, respectively.d. On December 31, 2019, Sailor Co. bought equipment worth P150,000 and…
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