You were first appointed auditor of the Pringles Corporation in 2007. You completed the audit for 2007 and prepared audited financial statements directly from the audit working papers. You have returned to make the 2008 audit and discovered that the client's bookkeeper failed to record the adjusting entries you made in 2007 audit working papers, which entailed adjustments for the following items: 1. The December 31, 2007 inventory was understated by P5,000. No entry was made for accrued utilities expense of P2,500 as of year end. Ordinary motor repairs of P3,200 were charged to Accumulated Depreciation during 2007. The Company failed to record the provision for uncollectible accounts in the amount of P6,000. 2. 3. 4. Your examination of the 2008 entries in the accounts uncovered the following: 1. An expenditure of P10,000 for repairs of office equipment had been charged to Furniture and Equipment. The Company records depreciation at 10% of the December 31 balance of the Property and Equipment accounts. 2. A 2007 account receivable in the amount of P4,000 had been written off as uncollectible by a charge to Retained Earnings. 3. Salesmen's commission includes P2,400 paid on undelivered customers' orders. Additional data: 1. The audited statement of 2007 showed a net income of P250,000. 2. The unadjusted net income for 2008 is P320,000. 38. The unadjusted net income for the year 2007 is: a. P 253,500 39. By how much would the December 31, 2008 retained earnings be misstated if no adjustments were made for the above errors? b. P 256,700 c. P 263,700 d. P 261,700 a. Retained earnings overstated by P11,800. b. Retained earnings overstated by P12,800. c. Retained earnings overstated by P15,800. d. Retained earnings overstated by P16,800.
You were first appointed auditor of the Pringles Corporation in 2007. You completed the audit for 2007 and prepared audited financial statements directly from the audit working papers. You have returned to make the 2008 audit and discovered that the client's bookkeeper failed to record the adjusting entries you made in 2007 audit working papers, which entailed adjustments for the following items: 1. The December 31, 2007 inventory was understated by P5,000. No entry was made for accrued utilities expense of P2,500 as of year end. Ordinary motor repairs of P3,200 were charged to Accumulated Depreciation during 2007. The Company failed to record the provision for uncollectible accounts in the amount of P6,000. 2. 3. 4. Your examination of the 2008 entries in the accounts uncovered the following: 1. An expenditure of P10,000 for repairs of office equipment had been charged to Furniture and Equipment. The Company records depreciation at 10% of the December 31 balance of the Property and Equipment accounts. 2. A 2007 account receivable in the amount of P4,000 had been written off as uncollectible by a charge to Retained Earnings. 3. Salesmen's commission includes P2,400 paid on undelivered customers' orders. Additional data: 1. The audited statement of 2007 showed a net income of P250,000. 2. The unadjusted net income for 2008 is P320,000. 38. The unadjusted net income for the year 2007 is: a. P 253,500 39. By how much would the December 31, 2008 retained earnings be misstated if no adjustments were made for the above errors? b. P 256,700 c. P 263,700 d. P 261,700 a. Retained earnings overstated by P11,800. b. Retained earnings overstated by P12,800. c. Retained earnings overstated by P15,800. d. Retained earnings overstated by P16,800.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please answer no. 38 and 39 questions.
Transcribed Image Text:You were first appointed auditor of the Pringles Corporation in 2007. You completed the audit for 2007 and
prepared audited financial statements directly from the audit working papers.
You have returned to make the 2008 audit and discovered that the client's bookkeeper failed to record the
adjusting entries you made in 2007 audit working papers, which entailed adjustments for the following items:
1.
The December 31, 2007 inventory was understated by P5,000.
No entry was made for accrued utilities expense of P2,500 as of year end.
Ordinary motor repairs of P3,200 were charged to Accumulated Depreciation during 2007.
The Company failed to record the provision for uncollectible accounts in the amount of P6,000.
2.
3.
4.
Your examination of the 2008 entries in the accounts uncovered the following:
1. An expenditure of P10,000 for repairs of office equipment had been charged to Furniture and Equipment.
The Company records depreciation at 10% of the December 31 balance of the Property and Equipment
accounts.
2. A 2007 account receivable in the amount of P4,000 had been written off as uncollectible by a charge to
Retained Earnings.
3. Salesmen's commission includes P2,400 paid on undelivered customers' orders.
Additional data:
1. The audited statement of 2007 showed a net income of P250,000.
2. The unadjusted net income for 2008 is P320,000.
38. The unadjusted net income for the year 2007 is:
a. P 253,500
39. By how much would the December 31, 2008 retained earnings be misstated if no adjustments were made
for the above errors?
b. P 256,700
c. P 263,700
d. P 261,700
a. Retained earnings overstated by P11,800.
b. Retained earnings overstated by P12,800.
c. Retained earnings overstated by P15,800.
d. Retained earnings overstated by P16,800.
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