Prepare journal entry for the following: You were hired by Sunshine Textile, Inc for the fiscal year

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Question:

Prepare journal entry for the following:

You were hired by Sunshine Textile, Inc for the fiscal year ended June 30, 2021. The company was newly incorporated on June 1, 2020 as a distributor and retailer of textiles and other related accessories. It started its commercial operation on July 1, 2020 in a small rented building which is being used as office and store space located in Balanga City.

You were provided with the documents pertaining to the organization of the company which includes articles, by laws, list of directors and officers and other related documents. You are now reviewing the working papers prepared by your audit staff. These contain drafts of financial statements, analysis and schedules as well as audit findings which may require audit adjustments to arrive at the final financial statements as of June 30, 2021.

A surprise count of cash and cash items was conducted by your audit staff in the morning of July 1, 2021. The company has petty cash fund of P 35,000 which is maintained on an imprest basis. No replenishment was made on June 30, 2021. The cash count sheet disclosed the following;

Currencies

18,095.00

Coins

325.00

Paid Petty cash vouchers

Overtime of some employees

5,500.00

Repair of computer

4,250.00

Representation & advertising

3,970.00

Postage stamps & office supplies

2,860.00

Sunshine Textile maintains saving and current accounts with East West Bank and Banco De Oro and prepares reconciliation of the bank and book balances on monthly basis. The yea-end reconciliation statement provided to you by the Chief Accountant revealed the following information:

A debit memo dated June 29, 2021 for P 412,500 was included in the bank statement for the month of June. This represents payment of a short-term note granted by East West bank inclusive of interest P 12,500. This was not recorded as of year-end.

Banco De Oro returned a customer’s check for P 11,550 on June 28 for insufficiency of funds. This was subsequently redeposited and cleared by the bank on July 4, 2021.

A transfer of funds from Banco de Oro to East West Bank amounting to P 120,000 on June 30 was not recorded.

A stale check of P 6,830 which has been outstanding for more than six months was included in the list of outstanding checks. This was in payment of accounts payable.

Several deposits made in June, 2021 covered by bank validated deposited slips totaling P 33,400 were not recorded. These represent collections from customers whose accounts are current.

Unreleased checks totaling P 28,950 payable to suppliers were included among outstanding checks. These were delivered on July 6, 2021.

Interest collection from a maturing treasury bill amounting to P 13,260 which was delivered in the afternoon of June 30 was not deposited on the same day and neither recorded.