Reference no: EM132809480

Nini Bonini Brown Fashion House is a manufacturer of high-fashion gowns and formal wears that was started in 2020 by two talented CPAs/Designers. As part of an internal audit the following facts were discovered. The audit occurred during 2021 before any adjusting entries or closing entries were prepared.

1. A five-year casualty insurance policy was purchased at the beginning of 2020 for 35,000 pesos. The full amount was debited to ensure that expands at the time
2. On December 31, 2021 merchandise inventory was overstated by 25,000 due to a mistake in the physical inventory count using the periodic inventory system
3. At the end of 2021 the company failed to accrue 15,500 pesos of sales commissions earned by dressmakers and sewers during 2021. The expense was recorded when the commissions were paid in early 2022.
4. Bad debts expense is determined each year as 1% of credit sales. Actual collection experience of recent years indicates that 0.75% is a better indication of uncollectible accounts. Management affects the change in 2022. Credit sales for 2022 are 4 million pesos, in 2021 they were 3.7 million pesos.
5. Additional heavy duty sewing machines were acquired at the beginning of 2020 added to the company's sewing process. The 100,000 pesos cost of the equipment was inadvertently recorded as repairs expense. Heavy duty sewing machines have 10-year useful lives and no material salvage value. This class of equipment is depreciated using straight-line method and not sum of the years digit method.

Requirements:

Question 1: Prepare the adjusting journal entries for each error discovered.