Problem 2 The following trial balance of Villar Trading as of December 31, 2011: Debits Credit Cash on hand 25,000 Cash in bank 175,000 Accounts receivable 110,000 Allowance for bad debts 8,000 Notes receivable (1 year, 15% due on July 1, 80,000 2011 Merchandise inventory, January 1 198,000 Prepaid rent 30,000 Supplies inventory 4,000 Furniture and fixtures 60,000 Accumulated depreciation 10,000 Accounts payable 16,000 Loan payable (2 year, 18% due August 1) 80,000 Villar Capital 100,000 Villar, Drawings 16,000 Purchases 954,000 Freight in 15,000 Purchase returns and allowances 19,000 Purchase discounts 8,000 Sales 1,692,000 Sales returns and allowances 25,000 Sales discounts 16,000 Freight out 19,000 Salaries and wages 72,000 Taxes expense 75,000 Utilities expense 64,000 Commission income 5,000 The following additional information was provided: 1. The policy of the company is to increase the allowance for bad debts to 10% of the accounts receivable. 2. Store furniture and fixtures were acquired on January 1, 2010 with a salvage value of P10,000 and a useful life of five years. 3. Accrue interest on the note. 4. Accrue interest on the loan. 5. Store rent was paid in advance for three months on December 1, 2011. 6. Salaries of P6,000 for December were not yet paid. 7. Commission income was collected in advance for one thousand books. Two hundred books were still unsold as of December 31. 8. Accrue taxes amounting to P88,000. 9. Inventory count showed P85,000 unsold goods as of December 31, 2011. Required: a. Prepare a ten-column working paper. b. Prepare the adjusting entries as of December 31, 2011. c. Prepare the income statement using the function of expense format. Three fourths of utilities were for the store. Two-thirds of salaries was for the store. d. Prepare a statement of changes in equity for the year ended December 31, 2011. e. Prepare a properly classified statement of financial position as at December 31, 2011. f. Prepare closing entries. g. Prepare a post-closing trial balance