Your new audit client, Guimba Company prepared the trial balance below as of December 31, 2021. Thecompany started its operations on January 1, 2020. Your examination resulted in the necessity of applyingthe adjusting entries indicated in the additional data below.Guimba CompanyTrial BalanceDecember 31, 2021Cash510,000Accounts Receivable-net600,000Inventories, 12/31/2020669,000660,000990,000LandBuildingAccumulated depreciation, buildingMachineryAccumulated depreciation, machinerySinking fund assetsBond discount19,800444,00045,00075,00075,000105,000Treasury sharesAccounts payable567,000Accrued bond interest11,250First mortgage, 6% sinking fund bondsShare capital679,5001,500,000Share premiumDonated shares150,000180,000Retained earnings, 12/31/2020Net salesPurchasesSalaries and wages222,4502,625,000850,500Factory operating expensesAdministrative expenses507,000364,500105,000Bond interest45,0006,000,0006,000,000Additional data are as follows:1. The 1,500,000 share capital was issued at a 10 percent premium to the owners of the land andbuildings on December 31, 2019, the date of organization. Shares with a par value of 180,000were donated back by the vendors. The company's accountant made an entry with the followingdetails: debit-Treasury shares P180.000 and credit Donated shares P180,000.The shares were donated because the proceeds from its subsequent sale were to be consideredas an allowance on the purchase price of land and buildings in proportion to their values as firstrecorded. The treasury shares were sold in 2021 for P75,000, which was credited to Treasuryshares.2. On December 31, 2021, a machine costing P15,000 when the business started was removed. Themachine had been depreciated at 10 percent during the first year. The only entry made was onecrediting the Machinery account with its sales price of P6,000.3. Depreciation is to be provided on the straight-line basis, as follows: buildings, 2 percent of cost;machinery, 10 percent of cost. Ignore residual values.Required:Prepare the necessary adjusting journal entries as of December 31, 2021.

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Your new audit client, Guimba Company prepared the trial balance below as of December 31, company started its operations on January 1, 2020. Your examination resulted in the necessity o the adjusting entries indicated in the additional data below. Guimba Company

Your new audit client, Guimba Company prepared the trial balance below as of December 31, company started its operations on January 1, 2020. Your examination resulted in the necessity o the adjusting entries indicated in the additional data below. Guimba Company

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter13: Auditing Debt, Equity, And Long-term Liabilities Requiring Management Estimates

Section: Chapter Questions

Problem 28RQSC

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