In line with your audit with DAVE, Inc. financial statements, the company accountantpresented to you the balance sheet that follows. You reviewed the client’s accountingrecords and books based thereon. You discovered that books of accounts are inagreement in the said balance sheet as presented below: DAVE, INC.STATEMENT OF FINANCIAL POSITIONDecember 31, 2021 ASSETS LIABILITIES AND OWNERS EQUITYCash P 80,000 Accounts Payable P 32,000Accounts Receivable 160,000 Notes Payable 64,000Notes Receivable 48,000 Capital Stock 160,000Inventories 400,000 Retained Earnings 432,000Total P 688,000 Total P 688,000 Further review and investigation of the company’s books revealed the followingomissions and errors which were not corrected during the year of errors: 2018 2019 2020 2021Deferred expense 14,400 11,200 8,000 9,600Deferred income 6,400 4,800Accrued expense 3,200 1,200 1,600 800Accrued income 2,000 2,400Ending inventory - Overstated 112,000 128,000Ending inventory - Understated 96,000 144,000 No dividends were declared during the years 2018 to 2021 and no adjustments weremade to retained earnings. The company’s reported the following net income: The year 2018 2019 2020 2021Net Income P120,000 P88,000 P104,000 P120,000 NOTE: Disregard tax implications 1. What is the correct net income/(loss) in 2020? 2. What is the net adjustment to Retained earnings as of January 1, 2019? 3. What is the correct retained earnings as of December 31, 2021?
In line with your audit with DAVE, Inc. financial statements, the company accountant
presented to you the balance sheet that follows. You reviewed the client’s accounting
records and books based thereon. You discovered that books of accounts are in
agreement in the said balance sheet as presented below:
DAVE, INC.
December 31, 2021
ASSETS LIABILITIES AND OWNERS EQUITY
Cash P 80,000 Accounts Payable P 32,000
Notes Receivable 48,000 Capital Stock 160,000
Inventories 400,000
Total P 688,000 Total P 688,000
Further review and investigation of the company’s books revealed the following
omissions and errors which were not corrected during the year of errors:
2018 2019 2020 2021
Deferred expense 14,400 11,200 8,000 9,600
Deferred income 6,400 4,800
Accrued expense 3,200 1,200 1,600 800
Accrued income 2,000 2,400
Ending inventory - Overstated 112,000 128,000
Ending inventory - Understated 96,000 144,000
No dividends were declared during the years 2018 to 2021 and no adjustments were
made to retained earnings. The company’s reported the following net income:
The year 2018 2019 2020 2021
Net Income P120,000 P88,000 P104,000 P120,000
NOTE: Disregard tax implications
1. What is the correct net income/(loss) in 2020?
2. What is the net adjustment to Retained earnings as of January 1, 2019?
3. What is the correct retained earnings as of December 31, 2021?
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