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Financial statements of entity

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Reference no: EM133228792

The following errors were discovered in the financial statements of Entity L for the year ended Dec. 31, 2021:

Inventory at Jan. 1, 2021, had been overstated by P3,000.

Inventory at Dec. 31, 2021, was understated by P5,000.

An insurance policy covering three years had been purchased on Jan. 2, 2020, for P1,500. The entire amount was charged as an expense in 2020.

During 2021 the entity received a P1,000 cash advance from a customer for merchandise to be manufactured and shipped during 2022. The P1,000 had been credited to sales revenues. The entity's gross profit on sales is 50%. Profit reported on the 2021 income statement is P20,000.

The adjusted profit for 2021 is

a. P16.500

b. P20,500

C. P23,500

d. P26,500

Reference no: EM133228792

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