The Davao Company engaged you in 2021 to examine its books and records and to make...

  

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The Davao Company engaged you in 2021 to examine its books and records and to make whatever adjustments are necessary. Your examination disclosed following: a. Prior to any adjustments, the Retained Earnings account is reproduced below: Retained Earnings Date Particulars Debit Credit Balance 2019 Jan. 01 Balance 580,000 890,000 Dec. 31 Profit for the year 310,000 2020 Jan. 31 Dividends paid Apr. 03 Paid in capital in excess of par Aug. 30 140,000 90,000 64,500 750,000 ৪40,000 904,500 Gain on retirement of preferred stocks at less than issue price Dec. 31 Loss for the year 205,000 699,500 2021 Jan. 31 Dividends paid Dec. 31 Loss for the year 100,000 165,500 599,500 434,000 b. The company failed to properly recognized accruals and prepayments. Selected accounts revealed the following information: 1111 Particulars 2018 2019 2020 2021 1. Prepaid expenses 2. Accrued expenses 8,500 6,200 7,400 9,500 5,400 7,300 8,700 9,000 3. Unearned income 6,900 4,700 7,800 5,600 8,900 6,200 9,600 4. Accrued income 7,800 c. Dividends had been declared on December 31 in 2019 and 2020 but had not been entered in the books until paid. d. The company purchased a machine worth P270,000 on April 30, 2018. The company charged the purchase to expense. The machine has an estimated useful life of 3 years. The company uses the straight-line method and residual values are deemed immaterial. e. The company received a transportation equipment as donation from one of its shareholders on September 30, 2020. The equipment was used to deliver goods to customers. The equipment costs P750,000 and has a remaining life of 3 years on the date of donation. The equipment has a fair value of P240,000 and P30,000 was incurred for registering the transfer of ownership. The company did not record the donation on its books. The expenses paid related to the donated equipment were charged to expense. f. The physical inventory of merchandise had been understated by P64,000 and by P44,500 at the end of 2019 and 2021, respectively. g. The merchandise inventories at the end of 2020 and 2021 did not include merchandise that was then in transit shipped FOB shipping point. These shipments of P43,400 and P32,600 were recorded as purchases in January 2021 and 2022, respectively. Required: Prepare the necessary adjusting journal entries as of December 31, 2022. The Davao Company engaged you in 2021 to examine its books and records and to make whatever adjustments are necessary. Your examination disclosed following: a. Prior to any adjustments, the Retained Earnings account is reproduced below: Retained Earnings Date Particulars Debit Credit Balance 2019 Jan. 01 Balance 580,000 890,000 Dec. 31 Profit for the year 310,000 2020 Jan. 31 Dividends paid Apr. 03 Paid in capital in excess of par Aug. 30 140,000 90,000 64,500 750,000 ৪40,000 904,500 Gain on retirement of preferred stocks at less than issue price Dec. 31 Loss for the year 205,000 699,500 2021 Jan. 31 Dividends paid Dec. 31 Loss for the year 100,000 165,500 599,500 434,000 b. The company failed to properly recognized accruals and prepayments. Selected accounts revealed the following information: 1111 Particulars 2018 2019 2020 2021 1. Prepaid expenses 2. Accrued expenses 8,500 6,200 7,400 9,500 5,400 7,300 8,700 9,000 3. Unearned income 6,900 4,700 7,800 5,600 8,900 6,200 9,600 4. Accrued income 7,800 c. Dividends had been declared on December 31 in 2019 and 2020 but had not been entered in the books until paid. d. The company purchased a machine worth P270,000 on April 30, 2018. The company charged the purchase to expense. The machine has an estimated useful life of 3 years. The company uses the straight-line method and residual values are deemed immaterial. e. The company received a transportation equipment as donation from one of its shareholders on September 30, 2020. The equipment was used to deliver goods to customers. The equipment costs P750,000 and has a remaining life of 3 years on the date of donation. The equipment has a fair value of P240,000 and P30,000 was incurred for registering the transfer of ownership. The company did not record the donation on its books. The expenses paid related to the donated equipment were charged to expense. f. The physical inventory of merchandise had been understated by P64,000 and by P44,500 at the end of 2019 and 2021, respectively. g. The merchandise inventories at the end of 2020 and 2021 did not include merchandise that was then in transit shipped FOB shipping point. These shipments of P43,400 and P32,600 were recorded as purchases in January 2021 and 2022, respectively. Required: Prepare the necessary adjusting journal entries as of December 31, 2022.

Answer rating: 100% (QA)

Particulars Amount Amount a Retained earnings Income summary 1... View the full answer