Reference no: EM133146307
Question - Log Corp. reported pretax incomes of P4,545,000 and P3,483,000 for the years ended December 31, 2013 and 2014, respectively. Your audit however revealed the following errors:
a. Sales for 2013 included a P1,719,000 collection pertaining to a delivery made in January of 2014 under an FOB Shipping point freight term.
b. Inventory on December 31, 2013 was understated by P388,800 while inventory on December 31, 2014 was overstated by P255,000.
c. Interest expenses on Bonds for both years were recorded as payments were made every December 31. The bonds have a face value of P11,250,000 and pay a nominal interest rate of 6%. They were issued at a discount of P675,000 on January 1, 2012 to yield an effective interest rate of 7%.
d. Ordinary repairs to equipment had been charged to the Equipment account during 2013 to 2014. Repairs of P382,500 and. P423,000 had been incurred in 2013 and 2014, respectively. In determining depreciation charges, Loguses the double declining balance method over 10 a ten-year asset useful life. The rate is being applied to the balance of the asset account at the end of each year.
Required -
1) What is the corrected pretax income for 2013?
2) What is the corrected pretax income for 2014?
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