Reference no: EM132795334

Questions -

Q1. Sundae Company started operations on January 1, 2011. Financial statements for 2014 and 2015 contained the following errors:December 31, 2014December 31, 2015Ending inventoryP55,000 too highP65,000 too lowDepreciation expenseP35,000 too high-Insurance expenseP25,000 too lowP25,000 too highPrepaid insuranceP25,000 too high-Additionally, a fully depreciated equipment was sold for P12,000 on December 31, 2015. The sale was not recorded until 2016. No corrections have been made for any of the errors. (Ignore income tax considerations). How much would be the understatement in Sundae's Accumulated Profits balance at December 31, 2015?

P132,000

P 77,000

P137,000

P112,000

Q2. Sundae Company started operations on January 1, 2011. Financial statements for 2014 and 2015 contained the following errors:December 31, 2014December 31, 2015Ending inventoryP55,000 too highP65,000 too lowDepreciation expenseP35,000 too high-Insurance expenseP25,000 too lowP25,000 too highPrepaid insuranceP25,000 too high-Additionally, a fully depreciated equipment was sold for P12,000 on December 31, 2015. The sale was not recorded until 2016. No corrections have been made for any of the errors. (Ignore income tax considerations). How much would be the total effect of the error in Sundae's 2015 net income?

Understated by P157,000

Overstated by P48,000

Overstated by P83,000

Understated by P102,000

Q3. Dalmatian Company's beginning inventory at January 1, 2014 was understated by P26,000 and its ending inventory was overstated by P52,000.As a result, Dalmatian's cost of goods for 2014 was -

P26,000 overstated

P78,000 overstated

P26,000 understated

P78,000 understated