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Cash and Accrual Basis Problems

1) ABC Company should report P3,800,000 in sales revenue for 2020 under the cash basis. 2) DEF Company should report P9,000,000 in sales revenue for 2020 under the cash basis. 3) GHI Corp should report P15,000,000 in income before tax for 2020 under the accrual basis after adjusting for changes in receivables and payables between years.

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727 views1 page

Cash and Accrual Basis Problems

1) ABC Company should report P3,800,000 in sales revenue for 2020 under the cash basis. 2) DEF Company should report P9,000,000 in sales revenue for 2020 under the cash basis. 3) GHI Corp should report P15,000,000 in income before tax for 2020 under the accrual basis after adjusting for changes in receivables and payables between years.

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Cash and Accrual Basis

1. ABC Company provided the following information for the year 2020:
Cash Sales
Gross P4,000,000
Returns and allowances 200,000
Credit Sales
Gross P6,000,000
Discounts 300,000

Customers owed P2,000,000 on January 1 and P1,500,000 on December 31. The entity used
direct write-off method of doubtful accounts. No doubtful accounts were recorded for the
current year. Under the cash basis of accounting, what amount of sales revenue should be
reported for the year 2020?

2. DEF Company reported sales revenue of P9,200,000 in the income statement for the year 2020.

January 1 December 31
Accounts Receivable P2,000,000 P2,600,000
Allowance for uncollectible accounts 120,000 220,000
Advances from customers 400,000 600,000

The entity wrote off uncollectible accounts P100,000 during the current year. Under cash basis
of accounting, what amount should be reported as sales revenue for the year 2020?

3. GHI Corp. maintained the accounting record on the cash basis but restated the financial
statements to the accrual method of accounting. The entity has P12,000,000 in cash basis pretax
income for 2020.

The entity provided the following information at year end:

2020 2019
Accounts Receivable 8,000,000 4,000,000
Accounts Payable 3,000,000 6,000,000

Under accrual basis, what amount of income before tax should be reported in the income
statement for the year 2020?

4. JKL Company reported the following balances:


December 31 January 1
Inventory 5,200,000 5,800,000
Accounts Payable 1,500,000 1,000,000

The entity paid suppliers P9,800,000 during the current year.

a. What is the amount of purchases under accrual basis of accounting?


b. Under accrual basis, what amount should be reported for cost of goods sold in the current
year?

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