TIGER CORPORATION

(Contributed by Oliver C. Bucao)

You were engaged to audit the financial statements of the Tiger Corp. (and enterprise belonging to the
category of SMEs) for the year 2018. Upon completion of the audit, the only unresolved issues are those
that relate to the following information:

A count of cash and cash items on hand on January 5, 2019 reveals the following:

Coins and currencies P 4,700

Checks 4,200
Petty Cash Vouchers-Expenses 2,400
Advances to Officers and Employees 1,200

Petty Cash fund has and imprest balance of P 10,000. The cashier handles the petty cash fund and also
receives collection from customers, which are to be deposited to the bank the next banking day.
Checks of P 4,200 represent undeposited and unrecorded collections from customers made on the
following dates:

Customer Date of Collection Amount

Ernie Els December 31, 2018 1,500
David Duval December 31, 2018 1,900
Davis Toms January 3, 2019 800
The checks were all dated as of the date of collection except for the check from David Duval, which is
dated January 4, 2019.
Examination of petty cash voucher reveals that P 500 worth of expenses and P 300 advances were made
during January 2019 and relate to 2019 transactions. All other disbursements were made in 2018.
Any shortage is charged as receivable from the cashier.
A review of the bank statements and cash records show:
Balance per bank statement, Dec. 31, 2018 P 252,742
Deposits in transit 10,700
Outstanding Checks 22,630
Note collected by bank 5,200
Returned check 2,850
Bank service charges 450
Verification of reconciling items shows that:
a. Unreleased checks totalling P 5,750 were recorded and included in the outstanding checks.
b. Also included in the outstanding checks were checks outstanding for more than six months amounting
to P 4,280.
c. There were two notes given to the bank for collection. These notes, including interest, were recorded as
collected when they were submitted to the bank for collection. Interest is computed on a 360-day basis.
Maker Due Date Terms Face Value
Sergio Garcia 12.23.2018 60 days, 18% 3,600
Thomas Bjorn 12.28.2018 60 days, 24% 5,000
As reported by the bank, note form Sergio Garcia was dishonoured upon maturity while the note from
Thomas Bjorn was collected. Any dishonoured note and accrued interest thereon are charged to accounts
receivable.

d. A customer`s check of P 2,850 was returned by the bank marked DAIF (Drawn Against Insufficient
Funds). The return of the check is not yet recorded.
e. Service charges of P450 for the month of December were still unrecorded.
f. Deposits in transit of P10,700 were verified from the cut-off bank statement as credited by the bank on
January 3, 2019.

A cut-off test of sales made a week before and a week after balance sheet date resulted in the following
information:

Selling Price Cost Terms Date of Shipment

December Sales P14,000 P12,500 FOB shipping point 12/19/18
8,000 7,500 FOB destination 12/30/18
10,000 8,000 Shipped to consignee 12/31/18
January Sales P12,000 P10,200 FOB shipping point 12/31/18
15,000 13,500 FOB destination 12/31/18
7,500 6,000 FOB shipping point 01/02/19

It normally takes at least 4 days for shipments to reach destination.

Inventory count was made on December 31 before any shipment was made.
Inventory recorded as of December 31 is based on the count.
Allowance for doubtful accounts is computed as 5% of the outstanding accounts receivable. Doubtful
accounts expense of P12,600 were recognized during the year 2018.
Notes receivable as of December 31 is composed of the following:

Maker Date of Note Terms Face Value

Loren Roberts Oct. 15, 2018 180 days, 18% P 20,000
Tom Lehman Nov. 2, 2018 90 days, 20% 15,000
Fred Couples Nov. 15, 2018 60 days, 15% 8,000
P 43,000
Less: Bank Loan 10,000
P 33,000

The note from Tom Lehman was pledged as collateral for a short-term load taken on December 1, 2018
(60-day, 22% promissory note) from the bank. The proceeds of the loan were recorded as a credit to notes
receivable.
Following are the statement of financial position and statement of income and retained earnings of Tiger
before any adjustments:

TIGER CORPORATION
STATEMENT OF FINANCIAL POSITION
December 31, 2018

CURRENT ASSETS:
Petty cash fund P 10,000
Cash in bank 247,820
Accounts Receivable 328,300
Allowance for doubtful accounts 16,415 311,885
Notes Receivable 33,000
Interest Receivable 0
Receivable from Officers and Employees 10,240
Merchandise inventory 224,000
Other current assets 12,350
Total Current Assets P 849,295
NON-CURRENT ASSETS:
Property, Plant, and Equipment, net 754,200
Other Non-current Assets 610,493
TOTAL ASSETS P 2,213,988
CURRENT LIABILITIES:
Accounts Payable P 387,000
Notes Payable 63,070
Interest Payable 11,180
Income taxes payable 13,092
Accrued expenses and other current liabilities 10,200
Total Current Liabilities P 484,542
NON-CURRENT LIABILITIES P 534,680
SHAREHOLDER`S EQUITY:
Share capital P 800,000
Additional paid in capital 120,000
Retained Earnings 274,766
TOTAL SHAREHOLDER`S EQUITY P 1,194,766
TOTAL LIABILITIES AND SHAREHOLDER`S EQUITY P 2,213,988
 TIGER CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Year Ended December 31, 2018

Sales P 1,875,000
Cost of Sales 1,182,000
Gross Profit 693,000
Other Operating Income:
Interest Income 8,405
Total 701,405
Selling and Administrative Expenses 528,000
Profit before interest and taxes 173,405
Interest Expense and finance costs 56,520
Profit before income tax 116,885
Income Tax Expense (30%) 35,065
Profit 81,820
Retained Earnings, January 1, 2018 192,946
Retained Earnings, December 31, 2018 P 274,766

Prepare all audit-adjusting entries and compute the audited balances of the following:

1. Petty Cash
2. Cash in bank
3. Accounts receivable
4. Allowance for doubtful accounts
5. Notes receivable
6. Interest receivable
7. Merchandise Inventory
8. Receivables from Officers and Employees
9. Accounts Payable
10. Notes Payable
11. Interest Payable
12. Income tax payable
13. Sales
14. Cost of sales
15. Selling and administrative expenses
16. Bad debts expense
17. Interest Income
18. Interest expense and finance costs
19. Profit
20. Total assets