The errors below were noted after the books of CalMart Corporation were audited at the close of 2021 Indicate the effects of each of the following errors with an O for overstatement, U for understatement and N for no effect in the appropriate column. 2020 2021 Retaine Retained Retained d Earnings,befo Re, Earnings, befo Earning s, after closing Net Net Incom re after Incom re Asset Liability closing closing Asset Liability closing e Failure to record purchases of merchandise on account of P2,000 at the end of 2020. Sale of merchandise on account on December 30,2020 amounting to P2,000 was not recorded until the customer paid his account on january 2021. Depreciation expense on equipment in 2020 was overstated by P1,000. Paid one year insurance premium of P2,000 effective April 1,2020. The entire amount was debited to expense account and no adjustment was made at the end of 2020. On December 31,2020, the Company acquired a parcel of land and a building at a total cost of P5,000,000. The entire amount paid was debited to land account. A reasonable estimate of the cost that should have been allocated to the building was P,2000,000. The building has an estimated life of 20 years.
The errors below were noted after the books of CalMart Corporation were audited at the close of 2021 Indicate the effects of each of the following errors with an O for overstatement, U for understatement and N for no effect in the appropriate column. 2020 2021 Retaine Retained Retained d Earnings,befo Re, Earnings, befo Earning s, after closing Net Net Incom re after Incom re Asset Liability closing closing Asset Liability closing e Failure to record purchases of merchandise on account of P2,000 at the end of 2020. Sale of merchandise on account on December 30,2020 amounting to P2,000 was not recorded until the customer paid his account on january 2021. Depreciation expense on equipment in 2020 was overstated by P1,000. Paid one year insurance premium of P2,000 effective April 1,2020. The entire amount was debited to expense account and no adjustment was made at the end of 2020. On December 31,2020, the Company acquired a parcel of land and a building at a total cost of P5,000,000. The entire amount paid was debited to land account. A reasonable estimate of the cost that should have been allocated to the building was P,2000,000. The building has an estimated life of 20 years.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The errors below were noted after the books of CalMart Corporation were audited at the close of 2021
Indicate the effects of each of the following errors with an O for overstatement, U for understatement and N for
no effect in the appropriate column.
2020
2021
Retaine
Retained
Retained
d
Earnings,befo Re,
Earnings, befo Earning
s, after
closing
Net
Net
Incom
re
after
Incom
re
Asset Liability closing
closing
Asset
Liability closing
e
Failure to record purchases
of merchandise
on account of
P2,000 at the end of 2020.
Sale of merchandise on account on
December 30,2020 amounting to P2,000
was not recorded until the customer
paid his account on january 2021.
Depreciation expense on equipment
in 2020 was overstated by P1,000.
Paid one year insurance premium of
P2,000 effective April 1,2020.
The entire amount was debited to
expense account and no adjustment
was made at the end of 2020.
On December 31,2020, the
Company acquired a parcel of land
and a building at a total cost of
P5,000,000. The entire amount paid
was debited to land account. A
reasonable estimate of the cost
that should have been allocated to
the building was P,2000,000. The
building has an estimated life
of 20 years.
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