What is the effect on net income of wynona company

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Reference no: EM133116516

Question - The following balances below shows the existence of the accounts receivable balances as at December 31, 2020 of WYNONA COMPANY. The accountant has decided to send confirmation requests to customers. Below is a summary of the confirmation replies together with the exceptions and audit findings. Gross profit on sales is 20%. Perpetual inventory method should be used in accounting for the inventory.

Name of Customer

Balance Per Books

Comments From Customers

Audit Findings

Annie

P150,000

P90,000 was returned on December 30, 2020.  Correct balance as is P60,000.

Returned goods were received December 31, 2020.

Oniate

P30,000

Your CM representing price adjustment dated December 28, 2020 cancels this.

The CM was taken up by Wynona Company in 2021.

Jacobe

P144,000

You have overpriced us by P150.  Correct price should be P300.

The complaint is valid.

Lasco

P112,500

We received the goods only on January 6, 2021.

Term is shipping point.  Shipped in 2020.

Pascua

P135,000

Balance was offset by our December shipment of your raw materials.

Wynona Company credited accounts payable for P135,000 to record purchases.  Pascua is a supplier.

Required -

a. Assuming the necessary adjusting journal entry is made regarding customer Annie, the net income will decrease/increase by?

b. What is the effect on 2020 net income of Wynona Company of its failure to record the Credit Memo involving transaction with Oniate?

Reference no: EM133116516

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