Michael Corporation is on a calendar year basis. The following data were found during your audit:

1) An excerpt from the client’s trial balance revealed the following account balances:
Accounts receivable P 80,000
Inventory, per count 1,200,000
Accounts payable 790,000
Net sales 6,050,000
Net purchases 3,300,000
Net income 610,000

2) The client conducted an inventory count on December 31, 2021. Michael Corporation normally sells at 30% gross profit based on selling price.

3) Goods were in transit FOB destination from a supplier in the amount of P120,000. Further testing revealed that the supplier's invoice pertaining to the delivery was received and recorded on December 28, 2021.

4) Good costing P70,000 had been received on December 31 and recorded as a purchase. However, upon your inspection, the goods were found to be defective and would be immediately returned.

5) Materials costing P224,000, sold and billed on December 30 under a “bill and hold” agreement, had been segregated in the warehouse awaiting pick-up by customer. Being on hand, the materials had been included in the count.

6) Goods costing P70,000 was out in consignment with Jan Company. Since the monthly statement from Jan listed those materials as on hand, the items had been excluded from the final inventory and invoiced on December 31 at a normal gross profit provision.

7) The sale of materials invoiced at P150,000 had been shipped FOB shipping point on December 31. However, this inventory was found to be included in the final inventory. The sale was properly recorded in 2021.

8) Goods costing P98,000 had been segregated but not shipped at December 31. A review of the customer’s purchase order related to the goods set forth terms as FOB Shipping point. The sale had not been recorded while the goods were excluded from the count.

9) Your client has an invoice from a supplier, terms FOB Shipping point but the goods had not arrived yet. While these materials costing P170,000 had been included in the inventory count, no entry had been made for their purchase.

10) Merchandise costing P200,000 had been recorded as a purchase but not included as inventory. Terms of sales are FOB shipping point according to the supplier’s invoice which had arrived on December 31.

Determine the adjusted balances of the following:
1) Inventory
2) Net purchases
3) Accounts payable
4) Net income
5) Net sales

Answer rating: 100% (QA)

1 Inventory 1200000 120000 70000 200000 1450000 2 Net purchases 3300000 120000 70000 200000 3550000 ... View the full answer