6) After the ISsuance of the 2023 financial statements, Orange Company discovered a computational error of P400,000 in the calculation of the December 31, 2023 inventory. The error resulted in a P400,000 overstatement in the cost of goods sold for the year ended December 31, 2023. In October 2024, Orange paid the amount of P900,000 in settlement of litigation instituted against it during 2023. The income tax rate is 30%. What is the adjustment of the retained earnings on January 1, 2024 as a result of prior period errors? D. 630,000 debit A. 400,000 credit B. 280,000 credit C. 350,000 debit
6) After the ISsuance of the 2023 financial statements, Orange Company discovered a computational error of P400,000 in the calculation of the December 31, 2023 inventory. The error resulted in a P400,000 overstatement in the cost of goods sold for the year ended December 31, 2023. In October 2024, Orange paid the amount of P900,000 in settlement of litigation instituted against it during 2023. The income tax rate is 30%. What is the adjustment of the retained earnings on January 1, 2024 as a result of prior period errors? D. 630,000 debit A. 400,000 credit B. 280,000 credit C. 350,000 debit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:6) After the issuance of the 2023 financial statements, Orange Company discovered a computational error of
P400,000 in the calculation of the December 31, 2023 inventory. The error resulted in a P400,000
overstatement in the cost of goods sold for the year ended December 31, 2023. In October 2024, Orange
paid the amount of P900,000 in settlement of litigation instituted against it during 2023. The income tax rate
is 30%. What is the adjustment of the retained earnings on January 1, 2024 as a result of prior period errors?
A. 400,000 credit
B. 280,000 credit
C. 350,000 debit
D. 630,000 debit
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