Reference no: EM133136368

Question - The audit working paper is used to correct several misstatements in the financial statement. Below shows the illustration of a working paper. Assume that the following errors were discovered for the year 2020:

1. The company failed to accrue wages of P80,000 at December 31, 2020. The wages were recorded as expense when paid in 2021.

2. Accrued interest income of P48,000 at December 31, 2020 was recorded only when collected in 2021.

3. An insurance premium for P36,000 covering three years 2020 , 2021 , 2022 was paid in January 2020 and was charged to insurance expense . No adjustments were made in 2020 and 2021.

4. Research and development costs of P120,000 were incurred early in 2019 . They were erroneously capitalized and were being amortized over a three year period. Amortization was recorded by a charge to research and development expense and a credit to accumulated amortization account. At December 31, 2021, both the asset account and the related accumulated amortization were brought to zero balances.

5. A capital expenditure of P1,500,00 for office equipment with useful life of 5 years was erroneously charged to maintenance expense at December 31 , 2020.

Required -

1. Prepare the adjusting journal entries.

2. Prepare the audit working paper.