Reference no: EM133147030

Question 1 - Calulut Corporation was established on January 1, 2020. On January 1, 2022, the Company purchased plant equipment at a cost of P3,500,000 for its expanding provincial operations. It is the Company policy that this equipment should be depreciated on the straight line method over a five-year period with no residual value. In the year 2022, the newly hired accountant made an error not to recognize depreciation in the Company's financial statements. During the preparation of the Company's 2023 financial statements, the error was discovered by the auditors. What should be the Depreciation expense on this machine for the year 2023?

a. P350,000

b. P2,100,000

c. P1,400,000

d. P700,000

Question 2 - During 2022, Camaganacan Company decided to change from the FIFO method of inventory valuation to the weighted average method.

	FIFO	Weighted Average
January 1 inventory	P7,100,000	P7,700,000
December 31 inventory	7,900,000	8,300,000

In the statement of retained earnings for 2022, what amount should be reported as the pretax cumulative effect of this accounting change?

a. P1,000,000 addition

b. P1,000,000 deduction

c. P600,000 deduction

d. P600,000 addition