PROBLEM 6-7 Bravden, Inc. is a manufacturer of high-tech industrial parts that was started in 2019 by two talented engineers with little business training. As part of an internal audit, the following facts were discovered. The audit occurred during 2021 before any adjusting entries or closing entries were prepared. a Afive-year casualty insurance policy was purchased at the beginning of 2019 for P35,000. The full amount was debited to insurance expense at the time. b. On December 31, 2020, merchandise inventory was overstated by P25,000 due to a mistake in the physical inventory count using the periodic inventory system. C. At the end of 2020, the company failed to accrue P15,500 of sales commissions earned by employees during 2020. The expense was recorded when the commissions were paid in early 2021. d. Bad debts expense is determined each year as 1% of credit sales. Actual collection experience of recent years indicates that 0.75% is a better indication of uncollectible accounts. Management effects the change in 2021. Credit sales for 2021 are P4,000,000; in 2020 they were P3,700,000. e. Additional industrial robots were acquired at the beginning of 2019 and added to the company's assembly process. The P100,000 cost of the equipment was inadvertently recorded as repair expense. Robots have 10- year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method. с.
PROBLEM 6-7 Bravden, Inc. is a manufacturer of high-tech industrial parts that was started in 2019 by two talented engineers with little business training. As part of an internal audit, the following facts were discovered. The audit occurred during 2021 before any adjusting entries or closing entries were prepared. a Afive-year casualty insurance policy was purchased at the beginning of 2019 for P35,000. The full amount was debited to insurance expense at the time. b. On December 31, 2020, merchandise inventory was overstated by P25,000 due to a mistake in the physical inventory count using the periodic inventory system. C. At the end of 2020, the company failed to accrue P15,500 of sales commissions earned by employees during 2020. The expense was recorded when the commissions were paid in early 2021. d. Bad debts expense is determined each year as 1% of credit sales. Actual collection experience of recent years indicates that 0.75% is a better indication of uncollectible accounts. Management effects the change in 2021. Credit sales for 2021 are P4,000,000; in 2020 they were P3,700,000. e. Additional industrial robots were acquired at the beginning of 2019 and added to the company's assembly process. The P100,000 cost of the equipment was inadvertently recorded as repair expense. Robots have 10- year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method. с.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Based on the given data, answer the two questions. Show your solutions.
Transcribed Image Text:PROBLEM 6-7
Bravden, Inc. is a manufacturer of high-tech industrial parts that was started in
2019 by two talented engineers with little business training. As part of an internal
audit, the following facts were discovered. The audit occurred during 2021
before any adjusting entries or closing entries were prepared.
a Afive-year casualty insurance policy was purchased at the beginning of 2019
for P35,000. The full amount was debited to insurance expense at the time.
h On December 31, 2020, merchandise inventory was overstated by P25,000
due to a mistake in the physical inventory count using the periodic inventory
system.
. At the end of 2020, the company failed to accrue P15,500 of sales
commissions earned by employees during 2020. The expense was recorded
when the commissions were paid in early 2021.
d. Bad debts expense is determined each year as 1% of credit sales. Actual
collection experience of recent years indicates that 0.75% is a better
indication of uncollectible accounts. Management effects the change in 2021.
Credit sales for 2021 are P4,000,000; in 2020 they were P3,700,000.
e. Additional industrial robots were acquired at the beginning of 2019 and
added to the company's assembly process. The P100,000 cost of the
equipment was inadvertently recorded as repair expense. Robots have 10-
year useful lives and no material salvage value. This class of equipment is
depreciated by the straight-line method.
Transcribed Image Text:. The entry to correct the error described in item a should include a
a. Credit to prepaid insurance-P21,000.
b. Credit to retained earnings-P21,000.
Debit to insurance expense-P14,000.
d. Credit to insurance expense-P7,000.
** The entry to correct the error described in item b should include a
a. Debit to inventory-P25,000.
b. Debit to retained earnings-P25,000.
C. Credit to purchases-P25,000.
d. No adjusting entry is needed
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education