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The December 31 year-end financial statements of Wiz Khalifa Company contained the following errors: December 31, 2016 December 31, 2017 40,500 overstated Ending inventory Depreciation expense 48,000 understated 11,500 understated An insurance premium of P330,000 was prepaid in 2016 covering the years 2016, 2017, and 2018. The entire amount was charged to expense in 2016. In addition, on December 31, 2017, a fully depreciated machinery was sold for P75,000 cash, but the sale was not recorded until 2018. There were no other errors during 2016 and 2017, and no corrections have been made for any of the errors. Ignore income tax effects.

The December 31 year-end financial statements of Wiz Khalifa Company contained the following errors: December 31, 2016 December 31, 2017 40,500 overstated Ending inventory Depreciation expense 48,000 understated 11,500 understated An insurance premium of P330,000 was prepaid in 2016 covering the years 2016, 2017, and 2018. The entire amount was charged to expense in 2016. In addition, on December 31, 2017, a fully depreciated machinery was sold for P75,000 cash, but the sale was not recorded until 2018. There were no other errors during 2016 and 2017, and no corrections have been made for any of the errors. Ignore income tax effects.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The December 31 year-end financial statements of Wiz Khalifa Company contained the following errors: December 31, 2016 December 31, 2017 40,500 overstated Ending inventory Depreciation expense 48,000 understated 11,500 understated An insurance premium of P330,000 was prepaid in 2016 covering the years 2016, 2017, and 2018. The entire amount was charged to expense in 2016. In addition, on December 31, 2017, a fully depreciated machinery was sold for P75,000 cash, but the sale was not recorded until 2018. There were no other errors during 2016 and 2017, and no corrections have been made for any of the errors. Ignore income tax effects.
Transcribed Image Text:The December 31 year-end financial statements of Wiz Khalifa Company contained the following errors: December 31, 2016 December 31, 2017 40,500 overstated Ending inventory Depreciation expense 48,000 understated 11,500 understated An insurance premium of P330,000 was prepaid in 2016 covering the years 2016, 2017, and 2018. The entire amount was charged to expense in 2016. In addition, on December 31, 2017, a fully depreciated machinery was sold for P75,000 cash, but the sale was not recorded until 2018. There were no other errors during 2016 and 2017, and no corrections have been made for any of the errors. Ignore income tax effects.
What is the total effect of the errors on Wiz Khalifa's 2017 net income? A. 123,500 overstatement В. 27,500 overstatement C. 192,500 understatement D. 177,500 understatement What is the total effect of the errors on the amount of Wiz Khalifa's working capital at December 31, 2017? A. 75,500 overstatement B. 40,500 overstatement C. 225,500 understatement D. 144,500 understatement What is the total effect of the errors on the balance of Wiz Khalifa's retained earnings at December 31, 2017? Page 1 of 3 A. 156,000 understatement В. 87,000 overstatement C. 133,000 understatement D. 85,000 understatement
Transcribed Image Text:What is the total effect of the errors on Wiz Khalifa's 2017 net income? A. 123,500 overstatement В. 27,500 overstatement C. 192,500 understatement D. 177,500 understatement What is the total effect of the errors on the amount of Wiz Khalifa's working capital at December 31, 2017? A. 75,500 overstatement B. 40,500 overstatement C. 225,500 understatement D. 144,500 understatement What is the total effect of the errors on the balance of Wiz Khalifa's retained earnings at December 31, 2017? Page 1 of 3 A. 156,000 understatement В. 87,000 overstatement C. 133,000 understatement D. 85,000 understatement
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