You are engaged in the audit of Kaya Co., a new client, on December 31,2018. Youreview the following accounts in the general ledger:Accounts ReceivableBeg.Bal.,P200,000Sales4,000,000TotalP4,200,000Loan ReceivableLoan granted to a customer, 1/1/2018 P3,600,000P4,000,000400,000TotalP4,000,000P4,000,000Unearned Interest Incomeorig.FeesDirectP11,520Balance288,480TotalP300,000in1/1/2018 P2,596,0001,484,000120,000Accounts receivableRetained earningsb. Sales discount2018Loan receivableb. Loan receivablepaidenduncollectibleP4,200,000Unearned interest incomea. P2,720,000b. P2,750,000P300,000Additional information:A. The beginning balance of the accounts receivable on January 1,2018 was netof the allowance for doubtful accounts in 2017 amounting to P20,000.One of the credits in the accounts receivable was made as a result of cashcollections. When receivables were collected, the bookkeeper creditedaccounts receivable for the cash collected. Collections of P700,000 accountsreceivable did not avail of the cash discount while the rest took advantage ofthe 2% cash discount. The other credit was an adjustment for estimateduncollectible in 2018. In 2018, Kaya Co. Recorded credit sales of P4,000,000and interim provision fpor doubtful accounts at 3% of credit sales. You haveagreed that this provision for bad debts is correct. During the year, accountsof P300,000 were subsequently recovered. This amount was credited tomiscellaneous income.P300,000received JanuaryB. On January 1,2018, Kaya Co. Granted a loan to a borrower, in the amountof P4,000,000. The interest rate on the loan is 10% payable annually startingDecember 31,2018. The loan matures in 5 years. Kaya Co. Incurred and paidP11,520 of direct origination cost which was debited to unearned ineterestincome. Kaya Co. Charged P300,000 nonrefundable origination fees whichwere credited to unearned intyerest income.Questions:Based on the above data, answer the following: (Round off present value factors tofour decimal places)1. Which one of the following is a correct adjusting entry for the accountsreceivable at the end of 2018?c. P4,390, 195d. P4,070,000P20,000P20,000P16,000P16,000Balance endcollectionsAccounts receivablec. Bad debts expense P100,000Allowance for bad debtsd. Miscellaneous incomeAllowance for bad debts2. Which one of the following is a correct adjusting entry for the loan receivableat the end of 2018?a. Unearned interest income P11,520P100,000P20,000P20,000c. Loan receivableInterest incomed. Unearned interest income P470,000e. Interest incomeBalance endCollections in 2018c. P2,520,000d. P2,550,0004. The adjusted interest income in 2018 isa. P400,000b. P470,0001,2018P300,000P300,000P400,000EstimatedDirect orig.feesP11,520P400,000P470,0003. The adjusted net realizable value of the accounts receivable in 2018 isc. P513,235d. P445,3825. The carrying amount of the loan receivable at the end of 2018 isa. P3,756,902b. P3,807,731

Answered: Questions: Based on the above data,…

Questions: Based on the above data, answer the following: (Round off present value factors to four decimal places) 1. Which one of the following is a correct adjusting entry for the accounts

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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