Reference no: EM132787619

Everlasting Company discovered the following errors in its financial records at the beginning of the year 2015:

• The physical inventory count on December 31, 2014 excluded a merchandise with a cost of P39,000 that had been temporarily stored in a public warebouse. Everlasting uses the periodic inventory system.
• During 2014, a competitor filed a patent infringement suit against Everlasting claiming damages of P440,000. The company's legal counsel has indicated that an unfavorable verdict is probable and a reasonable estimate of the court's award to the competitor is P250.000 The company has not reflected or disclosed this situation in the financial statements.
• A trademark was acquired at the beginning of 2013 for P100,000. No amortization has been recorded since acquisition. It is the company's policy to amortize all intangibles with a definite life or a maximum of 20 years. At the time of acquisition, the trademark was estimated to have a definite life of 20 years.

Problem 1: The January 1, 2015 accumulated profits is understated or overstated by?