Company started operations on January 1, 2019. Financial Statements for 2019 and 2020 contained the following errors: December 31, 2019 December 31, 2020 Ending inventory P55,000 overstated P65,000 understated Depreciation expense 35,000 overstated - Insurance expense 25,000 understated 25,000 overstated Prepaid insurance 25,000 overstated - Additionally, a fully depreciated equipment was sold for P12,000 on December 31, 2020. The sale was not recorded until 2021. No corrections have been made for any of the errors. (Ignore income tax considerations) How much would be the total effect of the errors in company's 2020 net income? A.Overstated by P83,000 B.Understated by P157,000 C.Overstated by P48,000 D.Understated by P102,000
Company started operations on January 1, 2019. Financial Statements for 2019 and 2020 contained the following errors:
December 31, 2019 December 31, 2020
Ending inventory P55,000 overstated P65,000 understated
Insurance expense 25,000 understated 25,000 overstated
Prepaid insurance 25,000 overstated -
Additionally, a fully depreciated equipment was sold for P12,000 on December 31, 2020. The sale was not recorded until 2021. No corrections have been made for any of the errors. (Ignore income tax considerations)
How much would be the total effect of the errors in company's 2020 net income?
A.Overstated by P83,000
B.Understated by P157,000
C.Overstated by P48,000
D.Understated by P102,000
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