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How much is the correct retained earnings

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Reference no: EM133157957

Intermediate Accounting Question - Cash and Accrual Basis, Single Entry Accounting and Error Correction - Choose the CORRECT Answer. Use the following information for items 1-3:

Putin Company made the following errors:

a. December 31, 2022 inventory was understated by P100,000.

b. December 31, 2023 inventory was overstated by P160,000.

c. Purchases on account in 2022 were understated by P400,000. (Correctly Included in physical count).

d. Advances to suppliers in 2023 totaling P520,000 were inappropriately charged as purchases.

e. December 31, 2022 prepaid insurance was overstated by P20,000.

f. December 31, 2022 unearned rent income was overstated by P104,000.

g. December 31, 2023 interest receivable was understated by P68,000.

h. December 31, 2023 accrued salaries payable was understated by P120,000.

i. Advances from customers in 2023 totaling P240,000 were inappropriately recognized as sales but the goods were delivered in 2024.

j. Depreciation expense in 2022 was overstated by P28,800

k. In 2023, the acquisition cost of a delivery truck amounting to P360,000 was inappropriately charged as expense. The delivery truck has a useful life of five years. Putin's policy is to provide a full year's straight line depreciation in the year of acquisition and none in the year of disposal.

l. A fully depreciated equipment with no residual value was sold in 2024 for P200,000 but the sale was recorded in the following year.

Profits before correction of errors were P492,000, P624,000, and P840,000 in 2022, 2023, and 2024, respectively. Retained earnings before correction of errors were P4,492,000, P5,116,000 and P5,956,000 in 2022, 2023, and 2024, respectively.

1. What is the net effect of the errors on the 2023 retained earnings? (over) understatement

a. P348,800

b. (P348,800)

c. P384,800

 d. (P384,800)

2. How much is the correct retained earnings in 2022?

a. P4,404,800

b. P4,304,800

c. P4,524,400

d. P4,340,800

3. How much is the correct retained earnings in 2024?

a. P6,400,800

b. P6,340,800

c. P6,479,800

d. P7,004,400

Reference no: EM133157957

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