Based on the given data, answer the two questions. Show your solutions. PROBLEM 6-6 ComprehensiveCompany reported the following net income for 2019 to 2021:2021: 800,0002019: 600,0002020: 700,000A review of the company's books indicates that the following errors andomissions had not been corrected during the applicable years:2019202020211,0002,00010,0001,500600Prepaid expensesUnearned income3,000Ending inventory understatedEnding inventory overstated20,00025,000On January 1, 2020, P30,000 cash was received when it sold an equipment witha cost of P100,000 and accumulated depreciation of P60,000. The companycredited the equipment when it sold the asset. Depreciation of 10% was providedon the remaining balance of the equipment in 2020 but not in 2021. 4. The corrected net income in 2020a. P692,500b. P709,500c. P708,500d. P690,5005. The effect of the error in the 2020 working capitala. P1,500 understatedb. P18,500 overstatedc. P20,500 overstatedd. P21,500 understated

Computation of Correct Net Income of 2020 Net Income before Adjustments 700000 Add: Prepaid…

4. The corrected net income in 2020 a. P692,500 b. P709,500 c. P708,500 d. P690,500 5. The effect of the error in the 2020 working capital a. P1,500 understated b. P18,500 overstated c. P20,500 overstated d. P21,500 understated

4. The corrected net income in 2020 a. P692,500 b. P709,500 c. P708,500 d. P690,500 5. The effect of the error in the 2020 working capital a. P1,500 understated b. P18,500 overstated c. P20,500 overstated d. P21,500 understated

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Based on the given data, answer the two questions. Show your solutions.

PROBLEM 6-6 Comprehensive
Company reported the following net income for 2019 to 2021:
2021: 800,000
2019: 600,000
2020: 700,000
A review of the company's books indicates that the following errors and
omissions had not been corrected during the applicable years:
2019
2020
2021
1,000
2,000
10,000
1,500
600
Prepaid expenses
Unearned income
3,000
Ending inventory understated
Ending inventory overstated
20,000
25,000
On January 1, 2020, P30,000 cash was received when it sold an equipment with
a cost of P100,000 and accumulated depreciation of P60,000. The company
credited the equipment when it sold the asset. Depreciation of 10% was provided
on the remaining balance of the equipment in 2020 but not in 2021.

4. The corrected net income in 2020
a. P692,500
b. P709,500
c. P708,500
d. P690,500
5. The effect of the error in the 2020 working capital
a. P1,500 understated
b. P18,500 overstated
c. P20,500 overstated
d. P21,500 understated

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