1. The auditor KOPIKO CORP found out that the entity's accounting manual indicated that

recording of purchases should be recorded at net of purchase discounts. However, the

records shows gross method is being used. Discounts recorded from January 1 to December 31, 2020 totaled P40,000, of this amount, P4,000 is still available in the accounts payable balance. The balances in KOPIKO CORP's accounts as of and for the year ended December 31, 2020 before adjustments are: Purchases P2,000,000; Purchases Discounts P16,000 and Accounts Payable P600,000.

Required: auditor's adjusting journal entry.

2. The following are selected transactions of ABC Inc.:

a. The company, on February 2, purchased merchandise from Richard Corp. for P50,000

subject to cash discounts terms of 2/10, n/30. Purchases and accounts payable are

recorded at net amounts after cash discounts. The invoice was paid on February 26.

b. On April 1, the company bought an equipment for P40,000, paying P4,000 in cash and

signing a one-year 12% note for the balance of the purchase price.

c. The company borrowed P80,000 from BPI by signing a P92,000 non-interest bearing note

due one year from May 1.

d. The board of directors declared P300,000 cash dividend that was payable on

September 10 to shareholders of record on August 31.

Assuming that no adjusting entries relative to the transactions above have been recorded,

Required: adjusting journal entries concerning interest that are necessary to present fair

financial statements at December 31. Assume straight line amortization of discounts.