Problem 2
Below are the account balances prepared by the bookkeeper for ABC Co. as of December 31, 20x1:
Assets Liabilities
Cash 15,000.00 Accounts payable 20,000.00
Accounts Receivable, net 44,000.00 Notes payable 100,000.00
Inventory 40,000.00
Prepaid Income tax 8,000.00
Prepaid Assets 5,000.00
Investment in Subsidiary 10,000.00
Land Held for Sale 28,000.00
Property, Plant and equipment 50,000.00
TOTALS 200,000.00 TOTALS 120,000.00
Additional Information:
1. Cash consists of the following:
Petty cash fund (unreplenished petty cash expenses, P 1,500) 2,000.00
Cash in bank -10,000.00
Payroll Fund 14,000.00
Tax fund 7,000.00
Cash to be contributed to a sinking funds established for
the retirement of bonds maturing on December 31, 20x3 2,000.00
Total Cash 15,000.00
2. Checks amounting to P 30,500 were written to suppliers and recorded on December 31,
20x1, resulting to a bank overdraft of P 10,000. The checks were mailed on January 5, 20x2.
3. Accounts receivable consists of the following:
Accounts receivable 40,000.00
Allowance for uncollectability -5,000.00
Credit balance in customers' accounts -3,000.00
Sale price of unsold goods sent on consignment to XYZ, Inc.
at 120% of cost and excluded from ABC Co.'s inventory 12,000.00
Accounts receivable, net 44,000.00
4. The inventory includes cost of goods amounting to P 10,000 that are expected to be sold
beyond 12 months but within the ordinary course of business. Also, the inventory includes
cost of consigned goods received on consignment from Alpha-Numerix Co. amounting to
P 5,000.
5. Prepaid income tax represents excess of payments for quarterly corporate income taxes
duirng 20x1 over the actual annual corporate income tax as of December 31m 20x1.
6. Prepaid assets includes a P 2,000 security deposit on an operating lease which is expected
to expire on March 31, 20x3. The security deposit will be received on lease expiration.
7. The land qualified for classification as "asset held for sale" under PFRS 5 Non-current Assets
Held for Sale and Discontinued Operations as of December 31, 20x1.
8. Accounts payable is net of P 6,000 debit balance in suppliers' accounts. Accounts payable
includes the cost of goods held on consignment from Alpha-Numerix Co. which were included in
inventory.
9. The notes payable are dated July 1, 20x1 and are due on July 1, 20x4. The notes payable
bears an annual interest rate of 10%. Interest is payable annually.
Required: Compute for the adjusted working capital
Cash 60,000.00 15+3.5-10+14+7+30.5+10
Accounts Receivable, net 76,000.00 32,000.00 32
Inventory 55,000.00 40+10-5 45
Prepaid Income tax 8,000.00
Prepaid Assets 3,000.00
Accounts payable 21,000.00
Bank overdraft 10,000.00
Notes payable 5,000.00
Current Assets 202,000.00 158,000.00
Current Liabilities 36,000.00 36,000.00
Adjusted working capital 166,000.00 132,000.00
