Problem 4Ahw Tsu prepares financial statements on the cash basis. The statement of financial position on December 31, 2020 andthe income statement for the current year are as follows:CashP1,500,0002,500,000P4,000,000Furniture and equipmentNote payableCapital:Balance, January 1Add: Net incomeP1,000,000P1,600,0002,250,000P3,850,000850,000Less: Withdrawals3,000,000P4,000,000Professional feesP5,000,000Expenses:RentP1,200,000800,000SuppliesOther expensesNet income750,0002,750,000P2,250,000It was decided that the financial statements should be prepared on the accrual basis. Relevant information is as follows:1) The furniture and equipment were acquired on July 1, 2019. The estimated life is 10 years.2) The 12% promissory note us dated April 1, 2020 and matures in one year. Interest is payable on the date of maturity.3) The accounts receivable as at December 31, 2020 and 2019 is P750,000 and P500,000, respectively.4) Accrued rent on December 31, 2020, P100,000.5) Unused office supplies as at December 31, 2020 and 2019 is P250,000 and P300,000, respectively.Required:a) Adjusting entries to convert the records to accrual basis of accountingb) Income statementc)Statement of financial position

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a) Adjusting entries to convert the records to accrual basis of accounting

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter7: Introduction To Financial Statement Analysis

Section: Chapter Questions

Problem 31P

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