BACHELOR OF BUSINESS ADMINISTRATION

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BUSINESS ADMINISTRATION

FINANCIAL ACCOUNTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
G COMPANY reported accounts payable of P2, 200, 000 on December 31, Year 1 before considering the following data:· Goods shipped to the entity on December 31, Year 1 FOB shipping point were lost in transit. The invoice cost of P40, 000 was not recorded. On January 15, Year 2, the entity filed a P40, 000 claim against the common carrier.· On December 31, Year 1, a vendor authorized the entity to return for full credit goods shipped and billed at P70, 000 on December 15, Year 1. The returned goods were shipped by the entity on December 31, Year 1. A P70, 000 credit memo was received and recorded by the entity on January 15, Year 2.· On December 31, Year 1 the entity has a P500, 000 debit balance in accounts payable to a supplier resulting from an advance payment for goods to be manufactured to the entity’s specifications.What amount should be reported as accounts payable on December 31, Year 1?
A
A. 2, 170, 000
B
B. 2, 680, 000
C
2, 730, 000
D
2, 670, 000
Explanation: 

Detailed explanation-1: -Accounts payable is listed on a company’s balance sheet. Accounts payable is a liability since it is money owed to creditors and is listed under current liabilities on the balance sheet.

Detailed explanation-2: -Accounts payable is recorded on the balance sheet under current liabilities.

Detailed explanation-3: -Long Term Debt (LTD) is any amount of outstanding debt a company holds that has a maturity of 12 months or longer. It is classified as a non-current liability on the company’s balance sheet.

Detailed explanation-4: -Entity A’s long-term loan can be accelerated by the creditor if Entity A fails to maintain a current ratio of at least 2:1. At the reporting date, Entity A’s current ratio is 3:1. The loan should be classified as a current liability.

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