Reference no: EM132624602

Question - The following data were gathered in analyzing the accounts of Laurence Company at December 31, 2020, the end of its first year of operations.

a. Supplies of P25,000 were purchased during the year and were debited to Supplies account. On December 31, supplies of P8,500 are on hand.

b. The Prepaid Insurance account shows a balance of P24,000, representing the cost of a two-year insurance policy dated May 1, 2020.

c. On November 1, 2020, the company subleased a portion of its space and received P27,000, representing three-months' rent beginning on that date. The amount was credited to Rent Revenue.

d. The company purchased office equipment on March 1, 2020 costing P400,000. The assets have estimated useful life of 10 years and salvage value of P40,000.

e. It is estimated that 2% of the accounts receivable at the end of the year is uncollectible. Accounts Receivable balance at December 31, 2020 is P450,000.

f. On December 1, the company issued a 90-day, 12% note for P200,000. The interest on the note is payable on maturity (Use a 360-day year).

g. Merchandise Inventory at December 31, 2020 amounted to P480,000. At the end of the year, selected account balances were as follows: Purchases - P900,000; Freight-in - P20,000; Purchase Returns and Allowances - P25,000.

Required - For each letter transaction, prepare

a. Adjusting entries at December 31, 2020.

b. Closing entries at December 31, 2020

c. Appropriate reversing entries at January 1, 2021 (If there is) If none, write NA.