You have been engaged to audit the financial statements of LUNA Corp for the year ended December 31, 2020. Your audit reveals the following situations: 1. The physical inventory count on December 31, 2020, improperly included merchandise with a cost of P42,500 that had been recorded as a sale on December 29, 2020 and held for the customer to pick up on January 2, 2021. 2. In 2020, BSA sold for P18,500 fully depreciated equipment that originally cost P110,000. The proceeds from the sale were credited to the Equipment account. 3. BSA has a portfolio of current marketable equity securities acquired in 2019 for trading purposes. No valuation entry has been made. Information on cost and market value is as follows: Cost Market December 31, 2019 P 475,000 P 475,000 December 31, 2020 475,000 500,000 4. A P75,000 insurance premium paid on July 1, 2019 for a policy that expires on July 1, 2022 was charged to Insurance Expense. 5. A patent was acquired at the beginning of 2019 for P250,000. No amortization has been recorded since its acquisition. The patent had a 10-year useful life on the date of acquisition. Required: Prepare the necessary adjusting journal entries at December 31, 2020. Ignore income tax considerations.
You have been engaged to audit the financial statements of LUNA Corp for the year ended December 31, 2020. Your audit reveals the following situations:
1. The physical inventory count on December 31, 2020, improperly included merchandise with a cost of P42,500 that had been recorded as a sale on December 29, 2020 and held for the customer to pick up on January 2, 2021.
2. In 2020, BSA sold for P18,500 fully
3. BSA has a portfolio of current marketable equity securities acquired in 2019 for trading purposes.
No valuation entry has been made. Information on cost and market value is as follows:
Cost Market
December 31, 2019 P 475,000 P 475,000
December 31, 2020 475,000 500,000
4. A P75,000 insurance premium paid on July 1, 2019 for a policy that expires on July 1, 2022 was charged to Insurance Expense.
5. A patent was acquired at the beginning of 2019 for P250,000. No amortization has been recorded since its acquisition. The patent had a 10-year useful life on the date of acquisition.
Required:
Prepare the necessary
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