Prepare the necessary adjusting entries on December 31, 2020

DOMINIC DE MESA ADVERTISING AGENCY

PROBLEM 4-1. INSTRUCTION: 1. Prepare the necessary adjusting entries on December 31, 2020. DOMINIC DE MESA follows the policy of recording prepayments in REVENUE and EXPENSE accounts and reverses appropriate adjusting entries at the beginning of the new accounting period. The records of the business show the following: A. On Sept. 1, 2020, De Mesa borrowed P 200,000 cash from PNB by issuing a 14% notes payable due in one year. The interest is payable upon maturity of the note. B. De Mesa purchased a three-year insurance policy for P 90,000 on July 31, 2020. C. On September 1, 2020, De Mesa paid P 60,000 representing rental for twelve months beginning on this date. D. Office supplies on hand on March 1, 2020, amounted to P 900. During the year, office supplies of P 2,200 were purchased. On December 31, there are unused supplies of P 1,800 E. De Mesa pays all employees every Friday. The total payroll for a five-day workweek ending on January 2, 2021 is P40,000. F. De Mesa purchased an office equipment on Sept 1, 2020, for P45,000. On January 1, 2020, the office equipment has a balance of P20,000. All assets of the company have estimated useful life of 10 years with no salvage value. G. Dominic reports accounts receivable of P 400,000 and Allowance for doubtful accounts of P 1,000 (debit balance); 3% of the receivables are estimated to be uncollectible