Reference no: EM132680448

Question - During the course of the audit of the financial statements of Kyut Me, Inc., for the year ended December 31, 2019, you examined the notes receivable represented by the following items:

1. A four-month note dated November 30, 2019, from the Bebe Company, P10,000; interest rate, 16 percent; discounted on November 30, 2019, at 16 percent.

2. A draft drawn payable 30 days after date for P45,000 by the Love Company on the Happy Company in favor of Calm Company, endorsed to Kyut Me, Inc., on December 2, 2019, and accepted on December 4, 2019.

3. A 90-day note dated November 1, 2019, from J.C. Cruz of P25,000; interest at 16 percent; the note is for subscription to 250 preference shares of Kyut Me, Inc., at P100 per share.

4. A 60-day note dated May 3, 2019, from the National Investment Company, P30,000; interest rate, 16 percent; dishonored at maturity; judgment obtained on October 10, 2019. Collection doubtful. (No interest after maturity)

5. A 90-day note dated January 4, 2019, from Ganda Paz, president of Kyut Me, P8,000; no interest; not renewed; president confirmed.

6. A 120-day note dated September 14, 2019, from the Pogi Company, P6,000; interest rate, 16 percent; note is held by bank as collateral.

When the company discounted a note, Interest Expense was debited for the discount cost and interest income was credited for the revenue.

Required - Answer the following question(s) and show your solution.

1. Working paper for the Notes Receivable as of December 31, 2019.

2. Make all necessary audit adjustments, including entries for interest accrued and prepaid.