REQUIREMENT: ADJUSTING ENTRIES WITH COMPUTATIONS

MODULAR GENERATORS Working Balance Sheet December 31, 2022 Unadjusted Balances CURRENT ASSETS Cash 627,000 Marketable securities 91,500 Allowance to reduce securities to market (21,500) Accounts Receivable 564,500 Allowance for doubtful accts. (7,500) Notes Receivable 160,000 Interest Receivable Inventories 821,000 Prepayments 363,000 Total 2,598,000 INVESTMENT AND FUNDS 350,000 PROPERTY, PLANT AND EQUIPMENT 2,900,000 Accumulated depredation (1,060,000) Net 1,840,000 OTHER ASSETS TOTAL Total 4788,000 CURRENT LIABILITIES Accounts Payable 860,125 Notes Payable 120,000 Discount on Notes Payable (4,800) Accrued Expenses Income Tax Payable 298,375 Interest Payable Estimated Liabilities on Warranties Unearned Service Revenue Total 1,273,700 LONGTERM LIABILITIES Bonds Payable 500,000 Premium on Bonds Payable 15,000 Total 515,000 STOCKHOLDERS' EQUITY Paid up Capital 1,700,000 Retained Earnings 1,149,300 Appropriated for Plant Expansion 150,000 Total 2,999,300 TOTAL 4.788,000MODULAR GENERATORS Working Statement of Comprehensive Income Year Ended December 31, 2022 Unadjusted Balances Sales 6,375,000 Cost of Goods Sold (3,825, 000) Gross Profit 2,550,000 Operating Expenses (740,000) Income from Operations 1,810,000 Other Income 500,000 Other Charges (100,000) Income Before Taxes 2,210,000 Provision for Income Tax (773,500) Income before Other Items 1,436,500 Other Items 50,000 Net Income 1,486,500 Retained Earnings, Beg 162,800 Correction of Prior Year's Income Dividends Declared (500,000) Retained Earnings, End 1,149,3002 3 You are given by the Controller, JVC Humabol, of Modular Generators the trial balance before adjustments dated December 31, 2022 only in the month of January, 2023. The company, organized under the provisions of the Corporation Law of the Philippines three years ago in the month of January, 2020, during the height of the power shutdown, is still experiencing brisk sales of generators and now concentrates marketing of the same in the outskirts of the main cities in the Philippines. The generators are better known in the market as "Light It." In addition to giving warranties to cover against defects for every generator sold, the company also offers maintenance contract for the same after the warranty period has expired. It also accepts repairs of other brands of generators as well. You noted the following information necessary to be able to prepare adjustments during the course of your examination. The notes receivable in the amount of Php 160,000 was received from Adventure Isla, a resort hotel. It was a 90-day, 15% note dated November 2. 2022. No interest has been accrued on the note as of December 31, 2022 Prepayments in the amount of Php 363.000 is broken down into Prepaid Insurance of Php 120.000. Office Supplies Unused of Php 18,000 and Advance Rental and Deposit on Lease of Php 225.000 In the year 2022 Modular Generators purchased two insurance coverages, one for four (4) motor vehicles and the other one to cover the cost of the inventory of generatorsagainst fire, The face value of the motor policy is P2M while that of the inventory is P4M. The coverage for both is a period of one year counting from the date the policy premium was paid for. The motor policy coverage was taken August 31, 2022 for a premium of P90,000, while that of the inventory was taken last October 1, 2022 for a premium of P30.000. To be able to save on transportation costs, the purchasing manager sees. to it that office supplies are bought not from the regular bookstores but from the retailers of the same located in the Binondo areas of the City of Manila. They realized that this arrangement could lead to savings of around 25% to 30%. You asked for an inventory of the supplies as of December 31, 2022 and found out that P11,600 were still unused at year-end