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Comprehensive Problem

Dell Company selling sounds and light equipment. The company’s fiscal year ends on March 31. The following information relates to the obligations of the company as of March 31, 2021:

Trade payables

Accounts payable for suppliers, goods, and services purchases on open account amount to P1,670,000 as of March 31, 2021, before considering the following items:

On March 31, 2021, the company has a P50,000 debit balance in its accounts payable to a supplier, resulting from a P50,000 advance payment for goods ordered by the company.

The balance also includes an advance payment of P20,000 made by a customer to Dell in anticipation of a purchase to be made by the customer in April 2021.

Additional information:

Goods were in transit to the company from a vendor on March 31, 2021. The invoice cost was P35,000. The goods were shipped FOB seller on March 29, 2021 and were received on April 4, 2021.

Goods shipped FOB destination on March 21, 2021, from a vendor to the company were received on March 31, 2021. The invoice cost was P25,000.

Payroll

Wages and payroll expenses amounted to P890,000 for the last payroll period ending on March 31, 2021. Additional information are as follows:

Income tax withheld – P100,000

SSS, PhilHealth, and HDMF Contributions, employee’s share – P10,000

SSS, PhilHealth, and HDMF Contributions, employer’s share – P15,000

Notes Payable

Dell Company has signed several long-term notes with financial institutions. The maturities of these notes are given below. The total unpaid interest for all of these notes amounts to P408,000 on March 31, 2021.

Due date

Amount

April 30, 2021

P720,000

July 31, 2021

1,080,000

September 1, 2021

540,000

February 1, 2022*

540,000

April 1, 2022 to March 31, 2023

3,240,000

P6,120,000

*With respect to the note due on February 1, 2022, Dell Company has a present unconditional right to defer the payment of the note for another one (1) year from the original maturity date.

Estimated warranties

Dell Company has a one-year product warranty on some selected items. The estimated warranty liability on sales made during the 2019 – 2020 fiscal year and still outstanding as of March 31, 2020, amounted to P302,400. The warranty costs on sales made from April 1, 2020, to March 31, 2021, are estimated at P756,000. The actual warranty costs incurred during the 2020 to 2021 fiscal year are as follows:

Warranty claims honored on 2019-2020 sales

P300,000

Warranty claims honored on 2020-2021 sales

345,000

Total

645,000

Note: Unused warranties from the prior fiscal year expired on March 31, 2021.

Dividends

On March 10, 2021, the company’s board of directors declared a cash dividend of P0.20 per ordinary share and a 10% ordinary share dividend. Both dividends were to be distributed on April 5, 2021, to shareholders on record at the close of business on March 31, 2021. As of March 31, 2021, the company has 1 million, P2 par value, ordinary shares issued, and 500,000 ordinary shares in treasury.

Bonds payable

The company issued P6 million, 11% bonds, on March 31, 2020, when the prevailing rate was 10%. The bonds will mature on March 31, 2025. Interest is paid semiannually on March 31 and September 30. The company uses the effective interest rate method. (Round off present value factors to four decimal places and your final answer to the nearest peso.)

Based on the foregoing information, determine the adjusted balances of the following as of March 31, 2021 (Tip: solve and gather your answers first for the following requirement before jumping to the next questions:)

Adjusted accounts payable – trade

Wages and payroll liability

Trade and other payables

Warranty expense

Estimated warranty payable

Unamortized bond premium

Bond interest expense

Bond interest payable

Total current liabilities

Total non-current liabilities

Answer rating: 100% (QA)

Question a Adjusted account payable is P 1670000 as of March 31 st 2021 Wages and payable Liabilitie... View the full answer