Ecleo Company
TRIAL BALANCE
December 31, 2020
Debit Credit
Petty Cash Fund P 3,000
Cash in Bank 38,700
Marketable Securities 300,000
Accounts Receivable 698,000
Allowance for Bad Debts P108,500
Accounts Receivable – Employees 14,200
Notes Receivable 45,000
Interest Receivable 5,100
Merchandise Inventory, 12/31/2020 365,000
Office Supplies on Hand 15,000
Prepaid Insurance 90,000
Investment in Stock 1,500,000
Leasehold Improvements 180,000
Accumulated Depreciation – Leasehold
Improvements 72,000
Equipment 300,000
Accumulated Depreciation – Equipment 27,000
Delivery Van 510,000
Accumulated Depreciation – Delivery Van 170,000
Accounts Payable 864,000
Notes Payable 340,000
Interest Payable 5,000
Common Stock 3,000,000
Retained Earnings 1,128,500
Sales 6,000,000
Interest Income 13,000
Dividend Income 120,000
Repairs Expense 123,000
Postage Expense 15,200
Cost of Goods Sold 3,900,000
Rent Expense 96,000
Advertising Expense 55,000
Taxes and licenses 45,000
Salaries Expense 1,700,000
Utilities Expense 413,500
Commission Expense 264,000
Interest Expense 34,000
Miscellaneous Selling Expense 148,000
Miscellaneous General Expense 132,000
Cash Over or Short 8,300
Loss on Damages 850,000 ___________
P11,848,000 P11,848,000
Additional information:
1. An examination of the petty cash fund on the morning of January 2, 2021, discloses the
following items in the petty cash drawer.
Coins and currency P 152.00
Postage stamps 29.00
An I.O.U. from Favila, an employee
for cash advance 400.00
Check payable to Ecleo from Yongco,
an employee, marked NSF 340.00
Vouchers for the following:
Stamps P 200.00
Computer repairs 1,843.50 2,043.50
P2,964.50
2. The correct balance of the Cash in Bank account on November 1, 2020, was P40,000.
Subsequent transactions during November and December relating to the records of
Ecleo and Econg Bank are summarized below.
Ecleo Books Econg Bank Books
November deposits P73,600 P71,100
November checks 62,900 61,300
November service charge - 100
November 30 balance 50,700 49,700
December deposits 82,200 82,800
December checks 94,100 92,200
December service charge - 150
Note collected by bank
in December - 10,150
November service charge
recorded in December 100 -
December 31 balance 38,700 50,300
3. An examination of the company’s allowance for bad debts reveals the following:
Estimated Bad Debts Actual Bad Debts
2017 P111,000 P45,000
2018 130,000 68,000
2019 165,000 89,500
2020 No adjustment yet 95,000
In the past, the company has estimated that 3% of sales will be uncollectible. The
company’s accountant has determined that the percentage used in estimating bad debts
has been inappropriate. He would like to revise the estimate downward to 1.5%. The
president of the company has stated that if the previous estimates of bad debt expense
were incorrect, the financial statements should be restated using the more accurate
estimate.
4. An examination of the company’s December 31, 2020, inventory revealed errors in its
inventory-taking procedures that have caused inventories for the last 3 years to be
incorrect, as follows:
December 31, 2018 Understated P160,000
December 31, 2019 Understated 210,000
December 31, 2020 Overstated 67,000
QUESTIONS:
1. What is the correct amount of petty cash for the balance sheet?
2. How much is the petty cash (shortage) overage?
3. What is the total bank receipts (credits) in December?
4. What is the total bank disbursements (debits) in December?
5. What is the total book disbursements (credits) in December?
6. What is the total deposits in transit at November 30?
7. What is the total deposits in transit at December 31?
8. What is the total outstanding checks at November 30?
9. What is the total outstanding checks at December 31?
10. What is the correct cash in bank balance at November 30?
11. What is the correct cash in bank balance at December 31?
12. What is the correct book receipts in December?
13. What is the correct bank disbursements in December?
14. What is the entry to record the bad debt expense for the year?
15. What catch-up entry would be made to correct the inaccurate estimates for previous
years?
16. What is the adjusted balance of the allowance for bad debts at December 31, 2003?
17. What is the effect of the inventory errors on the company’s income in 2001?
18. What is the effect of the inventory errors on the company’s income in 2002?
19. What is the effect of the inventory errors on the company’s income in 2003?
20. What is the adjusting entry at December 31, 2003, to correct the inventory errors?
