Correction of errors In examining the books of Mulan Company, you found out that certain adjustments had been overlooked at the end of 2019 and 2020. You also discovered that other items had been improperly recorded. These omissions and other failures for each year are summarized below: 12/31/20 12/31/19 Salaries payable P780,000 P873,600 Interest receivable 213,000 259,200 Prepaid insurance 307,800 384,000 Advances from customers (Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year) 561,000 470,400 Machinery (Capital expenditures had been recorded as repairs but should have been charged to Machinery; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%) 522,000 564,000 Required: Compute for the total effect of errors in the net income of 2019 and 2020.
Correction of errors
In examining the books of Mulan Company, you found out that certain adjustments had been overlooked at the end of 2019 and 2020. You also discovered that other items had been improperly recorded. These omissions and other failures for each year are summarized below:
12/31/20 12/31/19
Salaries payable P780,000 P873,600
Interest receivable 213,000 259,200
Prepaid insurance 307,800 384,000
Advances from customers (Collections from customers had been
recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year) 561,000 470,400
Machinery (Capital expenditures had been recorded as repairs but should
have been charged to Machinery; the
Required:
Compute for the total effect of errors in the net income of 2019 and 2020.
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