Problem $3-$Aces Company

ACES Company began its manufacture and sale of stainless steel kitchen accessories on January $1,2020,$ with the owner, Christopher Jao, putting in P$2,000,000$ worth of cash and P$500,000$ worth of treasury bills. Along with this, Jao issued a P$1,000,0005-$year $8\%$ bond with interest payable annually. With this he paid advance rent for two years on the factory, worth P$500,000,$ and he purchased equipment worth $P1,500,000,$ which has an estimated useful life of $10$ years and no scrap value. Merchandise inventory worth P$3,000,000$ were purchased on account with terms $\frac{5}{10},\frac{n}{30}.$ The company also purchased supplies worth P$500,000$ at the beginning of the year. Christopher Jao registered the company with the Securities and Exchange Commission and secured the necessary licenses at a cost of P$40,000,$ which the company will amortize over a period of $20$ years.

Production orders started coming in and at the year, cash receipts totaled $P4,524,000,$ while credit sales totaled $P1,250,000.$ It is estimated that $4\%$ of outstanding credit sales would not be recovered. Supplies at the end of the year were worth P$150,000$ and the total cost of goods sold corresponding to sales was P$2,584,000.$ Wages paid throughout the year totaled P$1,258,000.$ By the end of the year, the company had also sold the treasury bills for P$650,000.$ All merchandise inventory were paid for in cash.

Use straight$-$line depreciation, and allowance method of recording bad debts. Income tax is $35\%$ payable annually.

Required:

Journalize and post adjusting entries.

Prepare the trial balance as of Dec. $31,2020.$

Journalize and post closing entries.

Prepare the balance sheet as of Dec. $31,2020.$

Prepare the income statement for the year.