Company is a retail company that began operations on January 1,2018. Company is authorized to issue 1,000,000 shares of P10 par value ordinary share and 500,000 shares of 3%, P50 par value preferred share. The company sells a product that includes a one-year warranty and records estimated warranty payable each month. The company uses a perpetual inventory system, FIFO method.

The following is the trial balance Company as of September 30, 2022:

(1) 0001 Property, Plant and Equipment, net 5,640,000

(2) 0002 Investment in bonds 3,766,720

0003 Cash in Bank 3,653,240

0004 Cost of Goods Sold 3,543,600

0005 Accounts Receivables 1,960,000

(3) 0006 Investment property 1,800,000

(4) 0007 Investment in Associate, at equity 1,200,000

0008 Sales Salaries 830,700

0009 Warranty Expense 720,000

0010 Merchandise Inventory 560,000

0011 Office Salaries 439,920

(5) 0012 Financial assets at Fair Value 408,000

0013 Utilities Expense - Store 121,875

(6) 0014 Prepaid Expenses - Store Insurance 90,000

0015 Utilities Expense - Admin 65,625

0016 Store Supplies Expenses 51,000

0017 Sales - Employer SSS, PHIC, & HDMF Expense 21,600

0018 Taxes and licences 20,000

0019 Office Supplies Expenses 20,000

0020 Life Insurance Expense 15,000

(7) 0021 Cash Surrender value 15,000

0022 Office - Employer SSS, PHIC, & HDMF Expense 10,800

0023 Advertising Expenses 10,000

0024 Interest Expense 9,600

0025 Sales 5,906,000

0026 Prefence Share Capital, 3%, P50 par 5,000,000

0027 Ordinary Share Capital, P10 par 5,000,000

0033 Retained Earnings 2,810,800

0029 Share premium - ordinary 2,000,000

(8) 0030 Bonds Payable 1,200,000

0057 Retained Earnings appropriated for contingencies 1,000,000

(9) 0032 Note payable, 8% due July 1, 2024 720,000

0031 Share premium - preference 500,000

0034 Accounts Payable 420,000

(10) 0035 Notes payable, 12%, due Dec 15, 2022 180,000

0036 Warranty liability 144,000

0030 Premium on Bonds Payable 42,240

0005 Allowance for doubtful accounts 39,200

(11) 0039 Employer SSS, PHIC, & HDMF Payable 3,600

(11) 0040 Employee SSS, PHIC, & HDMF Payable 3,600

(11) 0041 Employee Income Tax Payable 3,240

0042 Accrued Interest Payable

0043 Accrued Interest Receivable

0044 Bank Charges

0045 Cash Dividend Payable

0046 Depreciation Expense - Admin

0047 Depreciation Expense - Store

0048 Dividend Income

0049 Doubtful accounts expense

0050 Financial assets at Fair Value - OCI

0051 Interest Income

0052 Investment Income

0053 Miscellaneous Expense

0054 Miscellaneous Income

0055 Mortgage Payable

0056 Notes payable, 10% due Oct 1, 2023

0058 Retained Earnings appropriated for treasury shares

0028 Share Dividend Distributable

0059 Store Insurance Expense

0060 Treasury Shares, at cost

0061 Unrealized Gain - OCI

0062 Unrealized Gain - PL

0063 Unrealized Loss - OCI

0064 Unrealized Loss - PL

Total Dr. 24,972,680 Cr. 24,972,680

(1) Schedule of Property, Plant and Equipment:

Property, plant and equipment	01.01.2022 cost	01.01.2022 Accumulated Depreciation	01.01.2022 Carrying Amount
Land
Office Building	2,400,000	480,000	1,920,000
Office Furniture and Fixtures	400,000	160,000	240,000
Store Building	3,600,000	720,000	2,880,000
Store equipment	1,200,000	600,000	600,000

(2) The investment in the bonds of Manda Company was acquired on April 1, 2022 with a face amount of P4,000,000, for P3,766,720. The bonds mature on April 1, 2026 and pays 12% interest annually on April 1 with a 14% effective yield. The investment is to be held as financial asset at amortized cost.

(3) The investment property is a vacant land that was acquired during 2020 and currently has undetermined use.

(4) On January 1, 2022, purchased 20,000 shares of Horizon Company, P30 par at P60 per share, representing 20% equity interest. At the time of acquisition, the net assets of the investee are fairly stated.

(5) purchased 10,000 shares of marketable equity securities of Lagoon Company on June 1, 2022, for P 408,000 and held these as financial assets for trading.

(6) The one-year store insurance policy was purchased last October 1, 2021 for an annual premium of P120,000.

(7) insured the life of its president for P1,000,000, with annual premium of P15,000, the entity being the beneficiary of the ordinary life policy. The policy date was January 1, 2020 and carried the following cash surrender Value:

End of policy year value CSV

2020 -

2021 -

2022 15,000

2023 21,000

2024 29,000

(8) The 3-year, P1,200,000 face amount, 10% bonds was issued by company on January 1, 2022 for P1,242,240, with an effective yield of 8%. The principal and interest are payable annually starting on December 31, 2022.

(9) The P720,000 note payable was a 2-year, 8% promissory note, issued on July 1, 2022. Principal payment is due on maturity date but interest is payable every first of the month, beginning August 1, 2022.

(10) The 12%, P180,000 note payable was a 6-month promissory note, issued on June 15, 2022. Interest was payable at maturity date.

(11) has the following payroll information. All employees worked January 1 through December 31:

Employee	Designation	Monthly salary	Monthly income tax withheld	Employee share	Employer share
	sales	22100	255	600	600
	sales	23920	620	600	600
	sales	22880	410	600	600
	office	24180	670	600	600
	sales	23400	515	600	600
	office	24700	770	600	600

(12) 65% of the utilities expense is attributable to store expenses.

OCTOBER 2022

1 Issued 100,000 shares of P10 par value ordinary share for cash of P15 per share.

2 Issued 30,000 preference shares for cash of P60 per share.

3 Issued a P2,400,000, 10-year, 9% mortgage payable for land with an existing store building. Mortgage payments

of P20,000 plus interest based on the outstanding balance of mortgage are due on the first day of each month,

beginning November 1. The assets had the following market values: Land, P200,000; Building, P800,000.

4 Issued a one-year, 10% note payable for P100,000 for office fixtures. The principal and interest are due October 1, 2023.

5 Paid the renewal of annual store insurance premium of P120,000.

6 Paid interest due on the 8% note payable issued last July 1, 2022.

7 Purchased merchandise inventory on account for P1,250,000, terms n/30.

8 Paid P400,000 of accounts payable

9 Collected 80% of accounts receivables.

10 Paid P16,000 for utilities.

11 Paid all liabilities associated with the September 30 payroll.

12 Received a cash dividend of P1.60 per share from Lagoon Company.

13 Recorded cash sales for the month of P560,000 and credit sales of P1,290,000. The cost of the goods sold was

P1,100,000 and estimated warranty payable was 8%.

14 Recorded October payroll and paid employees.

15 Accrued employer additional payroll contributions for October.

NOVEMBER 2022

1 Paid the first mortgage payment.

2 Purchased 6,000 ordinary shares at P110 per share of Jack Source Co. as a long-term investment, representing 4% ownership. company irrevocably designate this investment at fair value through other comprehensive income.

3 Paid interest due on the 8% note payable issued last July 1, 2022.

4 Paid suppliers for merchandise inventory purchased on October transaction # 7.

5 Purchased merchandise inventory on account for P1,500,000, terms n/30.

6 Collected 80% of accounts receivable.

7 Purchased 50,000 ordinary shares as treasury for P16 per share. These shares were originally issued for P14 per share.

8 Paid all liabilities associated with the October 31 payroll.

9 Paid P60,000 to satisfy warranty claims.

10 Declared cash dividends of P2 per outstanding share to ordinary shareholders and the preference dividends at the preference rate.

11 Paid P24,500 for utilities.

12 Received a cash dividend of P6.6 per share on the Jack investment.

13 Paid the cash dividends declared on November transaction #10.

14 Recorded cash sales for the month of P420,000 and credit sales of P980,000 The cost of the goods sold was

P840,000 and estimated warranty payable was 8%.

15 Recorded November payroll and paid employees.

16 Accrued employer additional payroll contributions for November.

DECEMBER 2022

1 Paid the second mortgage payment.

2 Paid interest due on the 8% note payable issued last July 1, 2022.

3 Received a cash dividend of P4.80 per share from Horizon Company.

4 Paid suppliers for merchandise inventory purchased on November transaction #5.

5 Collected 80% of accounts receivable.

6 Paid P100,000 to satisfy warranty claims.

7 Sold 30,000 shares of treasury share for P15 per share.

8 Paid all liabilities associated with the November 30 payroll.

9 Paid the principal and interests of the note payable issued last June 15, 2022.

10 Declared a 10% share dividend to all outstanding ordinary shares to be distributed on December 30, 2022 to

shareholders of record December 24, 2022. The market value of the shares as of declaration date is P16 per share.

11 Paid P22,000 for utilities.

12 Purchased merchandise inventory on account for P900,000, terms n/30.

13 Distribute the share dividends.

14 Recorded cash sales for the month of P630,000 and credit sales of P1,470,000 The cost of the goods sold was

P1,260,000 and estimated warranty payable was 8%.

15 Recorded December payroll and paid employees.

16 Accrued employer additional payroll contributions for December.

17 Paid the first series of the 10% P1,200,000 bonds and the annual interest.

18 A physical inventory count conducted revealed total cost of P1,000,000. The entity also determined that the net realizable value of inventory was P1,100,000.

19 The bank statement as of December 31, 2022 showed a balance of P5,973,670.00. Upon comparing the statement

with the cash records, the following facts were determined:

a. The bank debited service charges for December of P10,000.

b. Receipts for December 31, 2022 for P500,000 were not recorded by bank until January 2, 2023.

c. Checks outstanding on December 31, 2022 totaled P685,000

d. Amount erroneously credited by bank to Bigfork's account, P150,000

20 Appropriated retained earnings equal to the cost of treasury shares.

21 Management decided to cancel the appropriation for contingencies because the possibility of such contingency occurring has now become very remote.

22 The following year-end market values are determined for all of investments as well as their reported Earnings:

Investment in Market Value Net Income (Loss)

Lagoon Company P 40 per share P 2,000,000

Horizon Company P 62 per share 3,000,000.00

Manda Company 99% of face amount (1,500,000.00)

Jack Source Company P 112 per share 6,000,000.00

1. Investment properties are measured using cost model

2. A full year depreciation is taken in the year of acquisition and no depreciation is taken in the year of disposition.

3. The accounting policy is to report inventory at lower of cost and net realizable value applied to total inventory.

Cost is determined under the first-in, first-out method. The entity used the direct write-off method of recording

inventory write-down. Any inventory loss will be charged directly to cost of goods sold account.

4. In estimating allowance for doubtful accounts, the entity used percentage of accounts receivables. The policy is to

maintain an allowance for doubtful accounts equal to 10% of the outstanding accounts receivable.

5. The entity opted to use the straight line method of depreciation for all property, plant and equipment. Residual values are ignored because they are considered immaterial. The following are the estimated useful life of the

properties:

a. Office Building 20 years

b. Office Furniture and Fixtures 5 years

c. Store Building 20 years

d. Store equipment 6 years

6. Accruals of interest will be computed by month instead of days.

Requirements:

1. Record the transactions for the last quarter in the general journal

2. Record adjusting entries for the year- ended December 31, 2022:

A. Depreciation on the office and store buildings, office furniture and fixtures and store equipment.

B. Accruals of interest expense and interest income.

C. Expiration of insurance premiums

D. Provision for doubtful accounts

E. Amortization of discounts or premiums

F. Recognition of changes in fair values

G. Bank reconciling items.

3. Post adjusting entries and prepare an ADJUSTED trial balance.

4. Post to the general ledger using T-accounts.

9. In preparation for recording the transactions, prepare and attach the following schedules:

A. An amortization schedule of the mortgage payable issued on October 1, starting from November 1, 2022 to December 31, 2023. Round interest calculations to the nearest whole number.

B. Amortization schedule of the investment in bonds of Manda Company acquired last April 1, 2022. Round interest calculations to the nearest whole number.

C. Amortization schedule of the P1,200,000 bonds payable issued by Bigfork last January 1, 2022. Round interest calculations to the nearest whole number.

D. Bank Reconciliation using ADJUSTED BALANCE method.