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at follows. You reviewed the client's accounting records and books based thereon. You discovered that s are in agreement the said balance sheet as presented below:

at follows. You reviewed the client's accounting records and books based thereon. You discovered that s are in agreement the said balance sheet as presented below:

FINANCIAL ACCOUNTING
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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In line with your examination of Wisdom 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 the said balance sheet as presented below: Wisdom Inc. Statement of Financial Position December 31, 2014 ASSETS P 80,000 160,000 48,000 LIABILITIES AND OWNERS EQUITY Accounts Payable Notes Payable Capital Stock Retained Earnings Cash P 32,000 Accounts Receivable 64,000 Notes Receivable 160,000 432,000 P688,000 Inventories 400,000 P688,000 Total Total Audit notes: a. Further review and investigation of the company's books revealed the following omissions and errors which were not corrected during the year of errors. 2011 2012 2013 2014 Deferred Expense/Prepaid Expense P14,400 P11,200 6,400 1,200 2,000 P8,000 P9,600 Deferred Income/Unearned Income 4,800 Accrued Expense 3,200 1,600 800 Accrued Income 2,400 Ending Inventory-Overstated Ending Inventory-Understated b. A P50,000 routinary repair cost incurred on its equipment at the beginning of 2011 was charged to the equipment account and was depreciated using straight-line method over the remaining useful life of the equipment which was 5 years. A P90,000 major repair cost which enhanced the production capacity of one of its equipment at the beginning of 2013 was charged to repairs expense. Remaining useful life of the related production equipment was 3 years. 112,000 128,000 96,000 144,000 C.
Transcribed Image Text:In line with your examination of Wisdom 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 the said balance sheet as presented below: Wisdom Inc. Statement of Financial Position December 31, 2014 ASSETS P 80,000 160,000 48,000 LIABILITIES AND OWNERS EQUITY Accounts Payable Notes Payable Capital Stock Retained Earnings Cash P 32,000 Accounts Receivable 64,000 Notes Receivable 160,000 432,000 P688,000 Inventories 400,000 P688,000 Total Total Audit notes: a. Further review and investigation of the company's books revealed the following omissions and errors which were not corrected during the year of errors. 2011 2012 2013 2014 Deferred Expense/Prepaid Expense P14,400 P11,200 6,400 1,200 2,000 P8,000 P9,600 Deferred Income/Unearned Income 4,800 Accrued Expense 3,200 1,600 800 Accrued Income 2,400 Ending Inventory-Overstated Ending Inventory-Understated b. A P50,000 routinary repair cost incurred on its equipment at the beginning of 2011 was charged to the equipment account and was depreciated using straight-line method over the remaining useful life of the equipment which was 5 years. A P90,000 major repair cost which enhanced the production capacity of one of its equipment at the beginning of 2013 was charged to repairs expense. Remaining useful life of the related production equipment was 3 years. 112,000 128,000 96,000 144,000 C.
d. No dividends were declared during the years 2011 to 2014 and no adjustments were made to retained earnings. The company's books reported the following net income: Year 2011 2012 2013 2014 Net Income P120,000 P88,000 P104,000 P120,000 Considering the above findings, determine the adjusted amounts of the following: (Disregard tax implications) ANSWERS: 1. Net income (loss) in 2011 2. Net income (loss) in 2012 3. Net income (loss) in 2013 4. Net income (loss) in 2014 5. Net adjustment to retained earnings as of January 1, 2014 6. Net adjustment to working capital as of December 31, 2014
Transcribed Image Text:d. No dividends were declared during the years 2011 to 2014 and no adjustments were made to retained earnings. The company's books reported the following net income: Year 2011 2012 2013 2014 Net Income P120,000 P88,000 P104,000 P120,000 Considering the above findings, determine the adjusted amounts of the following: (Disregard tax implications) ANSWERS: 1. Net income (loss) in 2011 2. Net income (loss) in 2012 3. Net income (loss) in 2013 4. Net income (loss) in 2014 5. Net adjustment to retained earnings as of January 1, 2014 6. Net adjustment to working capital as of December 31, 2014
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