Reference no: EM132995371

Question - Examination of the records of Grand Company for the year ended December 31, 2019 revealed the following:

Inventory at January 1, 2019 was overstated by P71,000 because some inventories were counted twice on December 31, 2018.

Goods in transit from a supplier on December 31, 2019 under FOB shipping point were appropriately recorded as purchases but were not included in the physical count, P96,000.

Grand recorded as sales a P60,000 invoice price of goods shipped to customers on December 30. The goods costing P52,000, were in transit at December 31 and were excluded from the ending inventory. 60% of these goods were shipped FOB shipping point, while the remaining goods were shipped FOB destination.

Purchases of P100,000 were recorded when payment was made in 2019, although the goods were received in 2018 and were included in the 2018 ending inventory.

Profit before income tax and before adjustments for the above items was P658,000.

Required -

(a) Calculate the correct profit before income tax for 2019.

(b) Determine the net effect of the foregoing errors on profit before income tax for the year 2018.