Aljohn Company's year-end financial statements contained the following errors: 12.31.2021 12.31.2022 Ending inventory P95,000 understated P800,000 overstated Depreciation P250,000 understated An insurance premium of P600,000 was prepaid in 2021 covering the years 2021, 2022, and 2023. The entire amount was charged to expense in 2021. In addition, on December 31, 2022, fully depreciated machinery was sold for P150,000 cash, but the entry was not recorded until 2022. No corrections have been made for any of the errors. Ignore income tax. What was the total effect of the errors on retained earnings on December 31, 2022?

Aljohn Company's year-end financial statements contained the following errors: 12.31.2021 12.31.2022 Ending inventory P95,000 understated P800,000 overstated Depreciation P250,000 understated An insurance premium of P600,000 was prepaid in 2021 covering the years 2021, 2022, and 2023. The entire amount was charged to expense in 2021. In addition, on December 31, 2022, fully depreciated machinery was sold for P150,000 cash, but the entry was not recorded until 2022. No corrections have been made for any of the errors. Ignore income tax. What was the total effect of the errors on retained earnings on December 31, 2022?

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

Aljohn Company's year-end financial statements contained the following errors:
12.31.2021
12.31.2022
Ending inventory
P95,000 understated
P800,000 overstated
Depreciation
P250,000 understated
An insurance premium of P600,000 was prepaid in 2021 covering the years 2021, 2022, and
2023. The entire amount was charged to expense in 2021. In addition, on December 31,
2022, fully depreciated machinery was sold for P150,000 cash, but the entry was not
recorded until 2022. No corrections have been made for any of the errors. Ignore income
tax. What was the total effect of the errors on retained earnings on December 31, 2022?

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