Reference no: EM132949247

You were the auditor-in-charge of the audit client, Viviane Manufacturing. During the audit of the company's financial statements, you discovered the following that need adjusting journal entries:

• The NSF check for P100,000 per December 2020 Bank Reconciliation Statement was not yet recorded in the books.
• As of December 31, 2020, PCF was not yet replenished for the following: Office Supplies Expense, P3,500 and Store Supplies Expense, P3,900.
• At the end of December 31, 2020, the fair market value of the Trading Securities amount to P1,350,000.
• Accounts Receivable worth P150,000 was found to be worthless based on the report of the Credit Department. This was overlooked for recording by the Accounting Department
• The Prepaid Warehouse Rental for P300,000 was for a two-year rental contract covering the years 2020 and 2021. This was paid on January 1, 2020.
• The Prepaid Insurance for P150,000 represents premium for Fire Insurance for 3-year period, which will commence on January 1, 2020. This was paid on January 1, 2020 with a very reputable insurance company.
• The Bank Loan Payable for P5,600,000 is a loan was used for working capital requirements. Borrowed from BPI on August 1, 2020 with a 8% interest per year. This short-term loan was expected to be paid in full , including the interest on April 30, 2021. No accrual for the interest as of December 31, 2020.
• The Mortgage Payable for P25,000,000 was secured from BPI on July 1, 2020, which was to be used in the purchase of new Equipment and Machinery in 2021. It was agreed that interest is to be paid every six months, with an interest rate of 9.5% per year. The interest for July 1 to December 31, 2020 was paid only on January 2, 2021. No accrual was made by the Accountant for this transaction.
• The Salaries and Wages for the period December 16-31, 2020 for P400,000 was paid only on January 1, 2021 due to the negligence of the Payroll Accountant. It was revealed that 40% of P400,000 is for the Sales and the 60% applies to Office and Administrative.
• It is the practice of the company to use 10% of its Outstanding Accounts Receivable (adjusted) in computing its allowance for bad debts.
• The adjusted net income is subject to 30% corporate tax.

Required:

Problem 1: Prepare a Statement of Financial Position