Reference no: EM132737745

Sky Repair Shop prepares quarterly statements. You were asked to conduct an audit of its transactions. The bookkeeper presented to you the records and you found out the following account balances before adjustments for the quarter ended March 31, 2020.

Required:

Problem 1: Prepare the necessary adjusting entries as of March 31, 2020. Show supporting computations in good form.

1. During the quarter, SRS collected in advance Php 50,000 from clients and credited the same to Unearned Service Fees. Studies revealed that at the beginning of the current quarter Unearned Service Fees have a balance of Php 25,000 and as of March 31, 2020, the same had a balance of Php 20,000.
2. The balance of Prepaid Insurance account of Php 44,000 represents a one-year policy contracted last November 1, 2019 for Php 20,000 and a two-year policy contracted last July 2019 for Php 24,000.
3. The balance of the Prepaid Rent account of Php 100,000 pertains to advance rent paid last December 1, 2019 six months effective on the same date.
4. The rate per day of each of the four shop workers is Php 700. SRS pays the weekly salaries of its workers every Monday if the following week (a week consists of five days from Monday to Friday). March 31, 2020 falls on Thursday.
5. Mortgage notes payable had a credit balance of Php 400,000 as of March 31, 2020. Interest at the rate of 12% is payable semi-annually every August 1 and February 1. SRS regularly paid the interest payments. 
6. Last January 15, 2020, SRS entered into a 9-month advertising contract with TV-5 Network paying Php 240,000, which was debited to advertising expense. The same shall commence on January 15, 2020.