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What is the amount of prepaid insurance to be reflected

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Question 1 - Crispin Santos started a retail merchandise business on January 1, 2021. During the year ended December 31, 2021, the entity paid trade creditors P2,000,000 and suffered a net loss of P350,000. The ledger account preclosing balances on December 31, 2021 included the following:

Accounts receivable- P600,000

Accounts payable- P750,000

Capital (total investment in cash)- P2,000,000

Expenses (paid in cash)- P100,000

Merchandise (unadjusted debit balance)- P700,000

There were no withdrawals. All sales and purchases were on credit. The merchandise account is debited for purchases and credited for sales. What is the amount of purchases for the year?

a. P2,750,000

b. P2,000,000

c. P2,800,000

d. P1,950,000

Question 2 - ABC Company acquired a fire insurance on Nov. 1, 2021. The company paid P12,000 for the said annual insurance. ABC uses asset method. What is the amount of Prepaid Insurance to be reflected on ABC Company Statement of Financial Position at the end of the year?

a. P12,000

b. P10,000

c. P0

d. P2,000

Reference no: EM133155144

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