Reference no: EM133130701

Question - The before tax income for Escalicas Gomez Co. for 2018 was P303,000 and P232,200 for 2019. However, the accountant noted that the following errors had been made:

1. Sales for 2018 included amounts of P114,600 which was received in cash during 2018, but for which the related products were delivered in 2019. title did not pass to the purchaser until 2019.

2. The inventory on December 31, 2018, was understated by P25,920.

3. The bookkeeper in recording interest expense for both 2018 and 2019 on bonds payable made the following entry:

(dr) Interest expense 15,000

(cr) Cash 15,000

The bonds have a face value of P250,000 and pay a stated interest rate of 6%. They were issued at a discount of P15,000 on January 1, 2018, to yield an effective interest of 7%.

4. Ordinary repairs to equipment had been erroneously charged to the Equipment account during 2018 and 2019 for P25,500 and P30,000, respectively. The company applies a rate of 10% to the balance in the equipment account at the end of the year in its determination of depreciation charges.

Required -

1. Create the adjusted 2018 net income?

2. Create the adjusted 2019 net income?