5 Items Financial Accounting And Reporting Problems

Explanation
The correct answer is P200,000. This can be determined by calculating the change in the Retained Earnings account. The increase in Share Capital and Share Premium accounts indicates that the company raised additional capital through issuing shares. The decrease in Bonds Payable suggests that the company repaid some of its long-term debt. The increase in Cash, Accounts Receivable, and Inventory indicates that the company generated more revenue and increased its assets. The decrease in Accounts Payable suggests that the company paid off some of its short-term liabilities. Therefore, the net income for 2018 should be P200,000.

Explanation
When Oliver Company uses the net method of recording purchases, it means that they take advantage of any available purchase discounts. In this case, both suppliers offer a discount of 3% if payment is made within a certain period. Since Oliver paid both suppliers on December 16, which is within the discount period, they are eligible to receive the discount. However, the journal entry to record the payment will include a debit to Purchase Discounts Lost of P258. This is because Oliver did not take advantage of the discount and therefore lost it. The debit to Purchase Discounts Lost represents the amount of the discount that was not taken.

Explanation
The estimated cost of missing inventory can be calculated by using the gross profit method. According to the information given, the cost of goods sold can be calculated as follows:

Cost of Goods Sold = Cash Sales + Collections on Accounts Receivable - Accounts Receivable (Jan 1, 2018) + Accounts Receivable (Dec 31, 2018)
Cost of Goods Sold = 1,400,000 + 7,200,000 - 1,000,000 + 1,200,000
Cost of Goods Sold = 8,800,000

The estimated missing inventory can be calculated by multiplying the cost of goods sold by the gross profit percentage:

Estimated Missing Inventory = Cost of Goods Sold * Gross Profit Percentage
Estimated Missing Inventory = 8,800,000 * 40%
Estimated Missing Inventory = 3,520,000

However, we need to adjust this amount by considering the purchases and shipment received but not recorded as purchases. Therefore, the estimated cost of missing inventory is:

Estimated Cost of Missing Inventory = Estimated Missing Inventory - Purchased during 2018 - Shipment received on Dec 26, 2018
Estimated Cost of Missing Inventory = 3,520,000 - 5,640,000 - 40,000
Estimated Cost of Missing Inventory = -2,160,000

Since the result is negative, it means that there is an overstatement of inventory. Therefore, the estimated cost of missing inventory is P 160,000.

Explanation
The estimated inventory shortage can be calculated by multiplying the estimated normal shrinkage (4% of sales) by the average retail inventory. Since the question mentions that the company uses the average retail inventory method, we can assume that the average retail inventory is the total sales. Therefore, the estimated inventory shortage would be 4% of the total sales, which is P 104,000.

Explanation
The correct answer is P 81,125. X Factor Corporation recorded the transaction by debiting Note receivable for P800,000 and crediting Machinery for P640,000 and Gain on sale for the difference. However, the carrying amount of the machine was P640,000, which means that there was no gain on the sale. As a result, the gain of P81,125 was incorrectly recorded, causing X Factor's profit for the year ended December 31, 2018 to be overstated by that amount.