Lucille Lascano Incorporated is under your audit of the year ended December 31, 2021.

The
company's accountant prepared the following statement of comprehensive income at the end of
the company's first year of operation:

Lucille Lascano Incorporated

Statement of Comprehensive Income
For the period ending December 31, 2021

Sales ₱ 1,260,000

Selling and Administrative Expenses:

Salaries ₱ 390,000
Rent 225,000
Utilities 145,000
Equipment 150,000
Commission 189,000
Insurance 30,000
Interest 15,000 (1,144,000)

Net Income Before Tax ₱ 116,000

During the course of your audit, the following information was gathered. You were asked by the senior
auditor to perform analytical procedure and present your findings:

a.

Amounts due from customers at year-end were P140,000. Of this amount, P15,000 will probably not be
collected based on the company's policy of estimating bad debts. The company does not provide any
allowance yet for this transaction because it's not yet recorded in the book as the sales invoice is missing.

b. Salaries of P55,000 for December 2021 were paid on January 10, 2022. Record shows that payment is
debited to salaries expense when paid and no accrual is made at year end.

c. Lucille rent its building for P15,000 a month, payable quarterly in advance. The contract was signed on
January 1, 2021. Adjustments are yet to be made.

d. The bill for December's utility costs of P13,500 was recorded when paid in January 10, 2022.

e.
Equipment of P150,000 was purchased on January 1, 2021. The expected life is 5 years, no salvage value.
Lucille Incorporated uses straight-line depreciation. Upon inspecrion of record, the entire cost of
equipment is charged to expense on the date of purchase.
f. Commissions of 15% for unrecorded sales net of doubtful account is paid on January 15, 2022 when the
customer paid the account.

g. A 1-year insurance policy was issued in company assets on July 1, 2021. Premiums are paid annually in
advance in the amount of P30,000.

h. Lucille borrowed P250,000 for one year on May 1, 2021. Interest payments based on an annual rate of
12% are made quarterly, beginning with the first payment on August 1, 2021.
 a. Accounts receivable
Doubtful accounts expense
Sales
Allowance for doubtful accounts

b. Salaries expense
Salaries payable

c. Prepaid rent (January to March 2022 = 15,000 x 3)

Rent expense

d. Utilities expense
Utilities payable

e. Equipment
Depreciation expense (150,000/5 years)
Accumulated depreciation
Equipment expense

f. Commission expense (140,000 - 15,000 = 125,000 *15%)

d by the senior Commission payable

g. Prepaid insurance (prepayments from January 1, 2022 to Ju

Insurance expense
will probably not be
s not provide any
les invoice is missing.
h. Interest expense
s that payment is Interest payable

Paid in August 1, 2021

ract was signed on May 2021 2,500.00
June 2021 2,500.00
July 2021 2,500.00 7,500.00

Paid in November 1, 2021

August 2021 2,500.00
ars, no salvage value.
ntire cost of September 2021 2,500.00
October 2021 2,500.00 7,500.00
 15, 2022 when the Next payment will be on February 1, 2022 covering the following months:
November 2021 2,500.00
December 2021 2,500.00 Php5,000 should be accrued s
expense. No accruals were ma
re paid annually in Php15,000 was recorded and
Comprehensive Income.

n an annual rate of January 2022 2,500.00

 140,000 Net income before income ta
15,000 Add (deduct) adjustments:
140,000 PAJE (a)
15,000

PAJE (b)
55,000
55,000 PAJE (c)

PAJE (d)
= 15,000 x 3) 45,000
45,000 PAJE (e)

13,500 PAJE (f)

13,500
PAJE (g)

150,000 PAJE (h)

30,000
30,000 Net income before income ta
150,000

***If you have further questio

5,000 = 125,000 *15%) 18,750
18,750

ts from January 1, 2022 to June 30, 2022) 15,000

15,000

5,000
5,000
ng the following months:

hp5,000 should be accrued since this pertains to 2021 interest

xpense. No accruals were made in the 2021 books given that only
hp15,000 was recorded and reported in the Statement of
omprehensive Income.
Net income before income tax - per book ₱ 116,000
Add (deduct) adjustments:
Sales 140,000
Doubtful accounts expense (15,000)

Salaries expense (55,000)

Rent expense 45,000

Utilities expense (13,500)

Depreciation expense (30,000)

Equipment expense 150,000

Commission expense (18,750)

Insurance expense 15,000

Interest expense (5,000)

Net income before income tax ₱ 328,750

***If you have further questions/clarifications, please don't be shy to email me.