Reference no: EM132915607

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:

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

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