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Problem 50

Everest Company reported bad debt expense as 5% of quarterly sales for the first three quarters. However, for the full year bad debt expense should be P450,000. The question asks to calculate the bad debt expense for the fourth quarter. Davao Company normally reports a 5% warranty provision but found a design fault, increasing expected claims to 10% for the year. It provides the sales and warranty expense for the first two quarters and asks to calculate the warranty expense for each. Mount Company incurred advertising costs of P2,000,000 on March 1st. Year-end staff bonuses are expected to be P20,000,000. The question asks to calculate the total expenses for the

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281 views

Problem 50

Everest Company reported bad debt expense as 5% of quarterly sales for the first three quarters. However, for the full year bad debt expense should be P450,000. The question asks to calculate the bad debt expense for the fourth quarter. Davao Company normally reports a 5% warranty provision but found a design fault, increasing expected claims to 10% for the year. It provides the sales and warranty expense for the first two quarters and asks to calculate the warranty expense for each. Mount Company incurred advertising costs of P2,000,000 on March 1st. Year-end staff bonuses are expected to be P20,000,000. The question asks to calculate the total expenses for the

Uploaded by

Yukido
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Problem 50

Everest Company has historically reported bad debt expense of 5% of sales in each quarter. For
the current year, the entity followed the same procedure in the three quarters of the year.

However, in the fourth quarter, the entity determined that bad debt expense for the entire year
should be P450,000.

Sales in each quarter of the year were first quarter P2,000,000, second quarter P1,500,000, third
quarter P2,500,000 and fourth quarter P4,000,000.

What amount of bad debt expense should be recognized for the fourth quarter?

Problem 51

Davao Company prepares quarterly interim financial reports. The entity sells electrical goods
and normally 5% of customers claim on their warranty.

The provision in the first quarter was calculated at 5% of sales to date which amounted to
P10,000,000.

However, in the second quarter, a design fault was found and warranty claims were expected to
be 10% for the whole year. Sales for the second quarter amounted to P15,000,000.

1. What amount of warranty expense should be reported in the interim income


statement for first quarter?
2. What amount of warranty expenses should be reported in the interim income
statement for the second quarter?
Answer:
1. 500,000
2. 2,000,000

Total warranty (10% x 25,000,000) 2,500,000


(5% x 10,000,000) 500,000
2,000,000

Problem 52

Mount Company operates in the travel industry and incurs costs unevenly throughout the year.
Advertising costs of P2,000,000 were incurred on March 1, 2019 and staff bonuses are paid at
year-end base on sales.

Staff year-end bonuses are expected to be around P20,000,000 for the year.

What total amount of expenses should be included in the quarterly financial report
Ending March 31, 2019?

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