Reference no: EM133169474

Question - Libra Company showed income before tax of P6,500,000 on December 31, 2021.

The year-end verification of the transactions revealed the following errors: P1,000,000 worth of merchandise was purchased in 2021 and included in the ending inventory. However, the purchase was recorded only in 2022.

A merchandise shipment valued at P1,500,000 was properly recorded as purchase at year-end.

Since the merchandise was still at the port area, it was inadvertently omitted from the inventory on December 31, 2021.

Advertising for December 2021, amounting to P500,000, was recorded when payment was made in January 2022.

Rent of P300,000 on an equipment applicable for six months was received on November 1, 2021. The entire amount was reported as income upon receipt.

Insurance premium covering the period from July 1, 2021 to July 1, 2022 amount to P200,000 was paid and recorded as expense on July 31, 2021. The entity did not make any adjustment at the end of the year.

Required -

1. Determine the correct net income for 2021.

2. What are the adjusting entries on December 31, 2021?