Reference no: EM132956905
Question - Monnicker Co.'s net income for 2018, 2019 and 2020 were P100,000, P145,000 and P185,000; respectively. The following items were not handled properly.
a. Rent of P6,500 for 2021 was received from a lessee on December 23, 2020; and recorded as outright income in 2020.
b. Salaries payable at the end of the following years were omitted:
December 31, 2017 2,500
December 31, 2018 5,500
December 31, 2019 7,500
December 31, 2020 4,700
c. The following unused office supplies were omitted in the accounting records:
December 31, 2017 3,500
December 31, 2018 6,500
December 31, 2019 3,700
December 31, 2020 7,100
d. On January 1, 2018, the company completed major repairs on the company's machinery and equipment totaling P220,000, which was expensed outright. The said equipment is 5 years old as of January 1, 2018. As of December 31, 2020, the equipment had an original cost of P500,000 and a carrying value of P250,000.
1. What is the correct 2020 depreciation expense?
a. 31,250
b. 50,000
c. 51,250
d. 70,000
2. What is the corrected 2018 net income?
a. 80,000
b. 234,000
c. 240,000
d. 300,000
3. What is the corrected 2019 net income?
a. 113,700
b. 120,200
c. 126,700
d. 139,300
4. What is the corrected 2020 net income?
a. 184,700
b. 170,900
c. 165,600
d. 164,700
5. What is the effect of the above errors on the 2020 beginning retained earnings?
a. 176,200 understatement
b. 136,200 understatement
c. 116,200 understatement
d. 3,800 overstatement
6. What is the effect of the above errors on 2020 working capital?
a. 4,100 understatement
b. 4,100 overstatement
c. 8,900 understatement
d. 8,900 overstatement
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