Crispy Corporation has been using the accrual basis of accounting. However, an examination of the records reveals that some expenses and revenues have been handled on a cash basis by the inexperienced bookkeeper of the company. Income statements prepared by the bookkeeper reported P145,000 net income for 2017 and P185,000 net income for 2018. Further review of the records reveals that the following items were handled improperly. Rent of P6,500 was received from a lessee on December 23, 2017. It was recorded as income at that time even though the rental pertains to 2018. Salaries payable on December 31 have been consistently omitted from the records of that date and have been recorded as expenses when paid in the following year. The salary accruals recorded in this manner were P5,500 for December 31, 2016; P7,500 for December 31, 2017; and P4,700 for December 31, 2018. Invoices for office supplies purchased have been charged to expense accounts when received. Inventories of supplies on hand at the end of each year have been ignored, and no entry has been made for them. Supplies on hand were P6,500 on December 31, 2016; P3,700 on December 31, 2017; and P7,100 on December 31, 2018.
Crispy Corporation has been using the accrual basis of accounting. However, an examination of the records reveals that some expenses and revenues have been handled on a cash basis by the inexperienced bookkeeper of the company. Income statements prepared by the bookkeeper reported P145,000 net income for 2017 and P185,000 net income for 2018. Further review of the records reveals that the following items were handled improperly. Rent of P6,500 was received from a lessee on December 23, 2017. It was recorded as income at that time even though the rental pertains to 2018. Salaries payable on December 31 have been consistently omitted from the records of that date and have been recorded as expenses when paid in the following year. The salary accruals recorded in this manner were P5,500 for December 31, 2016; P7,500 for December 31, 2017; and P4,700 for December 31, 2018. Invoices for office supplies purchased have been charged to expense accounts when received. Inventories of supplies on hand at the end of each year have been ignored, and no entry has been made for them. Supplies on hand were P6,500 on December 31, 2016; P3,700 on December 31, 2017; and P7,100 on December 31, 2018.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
what is the corrected net income for 2018?
Transcribed Image Text:PROBLEM B
Crispy Corporation has been using the accrual basis of accounting. However, an examination of the records
reveals that some expenses and revenues have been handled on a cash basis by the inexperienced
bookkeeper of the company. Income statements prepared by the bookkeeper reported P145,000 net
income for 2017 and P185,000 net income for 2018. Further review of the records reveals that the
following items were handled improperly.
Rent of P6,500 was received from a lessee on December 23, 2017. It was recorded as income at that
time even though the rental pertains to 2018.
Salaries payable on December 31 have been consistently omitted from the records of that date and
have been recorded as expenses when paid in the following year. The salary accruals recorded in
this manner were P5,500 for December 31, 2016; P7,500 for December 31, 2017; and P4,700 for
December 31, 2018.
Invoices for office supplies purchased have been charged to expense accounts when received.
Inventories of supplies on hand at the end of each year have been ignored, and no entry has been
made for them. Supplies on hand were P6,500 on December 31, 2016; P3,700 on December 31,
2017; and P7,100 on December 31, 2018.
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