Items 6 and 7 are based on the following information: The Beatles Manufacturing Company began operations on January 1, 2017. Financial statements for the years ended December 31, 2017 and 2018, contained the following errors: 2017 P16,000 understated 6,000 understated 10,000 overstated 10,000 understated 2018 P15,000 overstated Ending inventory Depreciation expense Insurance expense 10,000 understated Prepaid insurance
Items 6 and 7 are based on the following information: The Beatles Manufacturing Company began operations on January 1, 2017. Financial statements for the years ended December 31, 2017 and 2018, contained the following errors: 2017 P16,000 understated 6,000 understated 10,000 overstated 10,000 understated 2018 P15,000 overstated Ending inventory Depreciation expense Insurance expense 10,000 understated Prepaid insurance
Chapter10: Inventory
Section: Chapter Questions
Problem 14PB: Assuming a companys year-end inventory were understated by $16,000, indicate the effect...
Related questions
Topic Video
Question
![Items 6 and 7 are based on the following information:
The Beatles Manufacturing Company began operations on January 1, 2017. Financial
statements for the years ended December 31, 2017 and 2018, contained the
following errors:
2017
P16,000 understated
6,000 understated
10,000 overstated
10,000 understated
2018
P15,000 overstated
Ending inventory
Depreciation expense
Insurance expense
10,000 understated
Prepaid insurance](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F84b6d5c0-05d3-432f-b052-4d8c34f34ef0%2F8fdd077e-7bfb-4cb9-bf5e-2ca447468542%2F7ooonz_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Items 6 and 7 are based on the following information:
The Beatles Manufacturing Company began operations on January 1, 2017. Financial
statements for the years ended December 31, 2017 and 2018, contained the
following errors:
2017
P16,000 understated
6,000 understated
10,000 overstated
10,000 understated
2018
P15,000 overstated
Ending inventory
Depreciation expense
Insurance expense
10,000 understated
Prepaid insurance
![In addition, on December 31, 2018, fully depreciated machinery was sold for P10,800
cash, but the sale was not recorded until 2019. There were no other errors during
2017 or 2018 and no corrections have been made for any of the errors.
6. Ignoring income taxes, what is the total effect of the errors on 2018 profit?
A. P30,200 overstated.
B. P11,000 overstated.
C. P 5,800 overstated.
D. P 1,800 understated.
7. Ignoring income taxes, what is the total effect of the errors on the amount of
working capital at December 31, 2018?
A. P4,200 overstated.
B. P5,800 understated.
C. P6,000 understated.
D. P9,800 understated.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F84b6d5c0-05d3-432f-b052-4d8c34f34ef0%2F8fdd077e-7bfb-4cb9-bf5e-2ca447468542%2F51oujjn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:In addition, on December 31, 2018, fully depreciated machinery was sold for P10,800
cash, but the sale was not recorded until 2019. There were no other errors during
2017 or 2018 and no corrections have been made for any of the errors.
6. Ignoring income taxes, what is the total effect of the errors on 2018 profit?
A. P30,200 overstated.
B. P11,000 overstated.
C. P 5,800 overstated.
D. P 1,800 understated.
7. Ignoring income taxes, what is the total effect of the errors on the amount of
working capital at December 31, 2018?
A. P4,200 overstated.
B. P5,800 understated.
C. P6,000 understated.
D. P9,800 understated.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 4 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
![Cornerstones of Financial Accounting](https://www.bartleby.com/isbn_cover_images/9781337690881/9781337690881_smallCoverImage.gif)
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
![Cornerstones of Financial Accounting](https://www.bartleby.com/isbn_cover_images/9781337690881/9781337690881_smallCoverImage.gif)
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning