The trial balance of Cielo Corporation prior to the closing of its accounts for the fiscal year ended

September 30, 2018 is as follows.

Debit Credit

Cash 225,000

Accounts receivable 936,000

Allowance for doubtful accounts 31,900

Notes receivable 155,000

Merchandise inventory 568,900

Furniture and equipment 618,000

Accumulated depreciation 187,500

Goodwill 300,000

Accounts payable  536,000

Notes payable 100,000

Ordinary share capital 1,000,000

Retained earnings 552,500

Sales 3,728,200

Sales returns and allowances 47,600

Purchases 2,159,300

Purchase returns and allowances 36,500

Advertising expense 96,100

Sales salaries 288,500

Commission expense 152,000

Miscellaneous selling expense  29,900

Rent expense 130,000

Office salaries 197,200

Light and water 15,000

Insurance expense 10,800

Taxes and licenses  47,800

General expenses 163, 400

Interest expense 41,200

Interest income 9,100

6,181,700 6,181,700

Your examination of the company's accounts has indicated the need for adjustments based on the
following information:

1. The cash account includes a customers' check for P15,000 deposited on September 25, 2018 but
returned by the bank on September 29, 2018 for lack of countersignature.  No entry was made
by the company for the return of the check or its redeposit on December 5, 2018.

2. Based on an aging schedule, the allowance for doubtful accounts should be adjusted to 5% of
the customers' outstanding balance as of September 30, 2018.

3. A physical inventory taken of the merchandise stock as of the close of the fiscal year amounted
to P601,200.

4. A purchase of merchandise, FOB shipping point, for which goods costing P50,000 were in transit
on September 30, 2018, was neither taken as a liability nor included in the inventory on that
date.

5. Goods received on consignment, still unsold, were included in the inventory at he agreed selling
price of P30,000.

6. The merchandise inventory at September 30, 2017 was correctly stated.

7. On July 1, 2018, equipment acquired on October 1, 2013 with a carrying value of P32,000 on
September 30, 2017, was sold of P35,000 cash. The sales proceeds were credited to the
furniture and equipment account.

8. Depreciation for the fiscal year 2017-2018 has not yet been recorded. Depreciation rate is 10%.

9. An insurance policy was renewed on the inventory and equipment on April 1, 2018 with the
annual premium of 8,400 paid on that date.

10. The rent expense account consisted of rent paid for store and office space for thirteen months
ending October 31, 2018.

11. The one-year Note Payable of P100,000 was discounted at the bank at 12% on August 31, 2018.
 12. The Goodwill account was set up by a credit to Retained Earnings under a resolution of  the
board of directors.

Required:

Prepare a working paper, providing columns for trial balance, adjustments, profit or loss, and financial
position. The company is subjected to income tax rate of 30%.  Ignore the deferred portion of the
income tax.