Reference no: EM133136800

Question 1 - The accumulated profits of New Era Corporation has a beginning unadjusted balance of P550,000.

The errors were discovered as follows:

1) The prepaid expense of P35,000 as of the statement of financial position date last year was not recorded.

2) The prepaid expense as of the end of this year in the amount of P50,000 was also not recorded.

3) The office equipment is overstated last year by P40,000 due to under depreciation.

Net Income for the period is P400,000.

Required -

1. Journalize the above transactions.

2. Compute the adjusted balance of accumulated profits.

Question 2 - Masagana Corporation has a Pl,500,000 credit balance of Accumulated Profits (Losses) in 20A. The following transactions are taken from the 20B operations:

a) net loss, P250,000

b) purchase of treasury shares at cost, P120,000

c) overstatement of depreciation in 20A, P40,000.

d) declaration of dividends, P450,000.

e) reversal of appropriation reserve for plant expansion, P500,000.

f) understatement of inventory in 20A; P75,000.

Required -

1. Journalize the above transactions.

2. Compute the adjusted accumulated profits (losses) at the end of the year.