Reference no: EM132697486

JNLS Company began business operations on January 1, 2020. During 2020, the accounting records are kept on a double entry system but on the cash basis of accounting.

On December 31, 2020, the trial balance prepared from these records appeared as follows:

Cash P 840,000
Purchase 4,200,000
Expenses 560,000
Notes Payable P 200,000
Sales 4,400,000
Share Capital 1,000,000
P5,600,000 P5,600,000

The management decided to use the accrual basis. The following data on December 31, 2020 are available:

1. Merchandise inventory on December 31, at cost, P500,000.
2. On December 31, accounts receivable amounted to P100,000 and accounts payable totaled P80,000.
3. Accrued expenses on December 31, P 20,000.
4. The purchases included merchandise in the amount of P10,000 bought for the president. The president had not reimbursed the company.
5. The sales included P25,000 deposit given by a customer for merchandise to be delivered in 2021.
6. It is estimated that 5% of the outstanding accounts receivable on December 31, may turn out to be uncollectible.
7. Expenses include the following:
a. P 25,000 for office supplies of which P5,000 is used as of December 31.
b. P100,000 for the purchase of equipment on July 1, 2020. It was estimated that this property would have an estimated useful life of 10 years without residual value.
c. P20,000 for one-year insurance premium on a fire insurance policy dated October 1, 2020.
8. The notes payable comprise a noninterest-bearing note of P100,000, dated August 1, 2020, due on February 1, 2021 and a one-year note Of P100,000, dated September 1, 2020, bearing an interest of 12% payable at maturity.

Required:

Question 1. Adjusting entries on December 31, 2020

Question 2. Income statement

Question 3. Statement of financial position