Items 6 and 7 are based on the following information:The Beatles Manufacturing Company began operations on January 1, 2017. Financialstatements for the years ended December 31, 2017 and 2018, contained thefollowing errors:2017P16,000 understated6,000 understated10,000 overstated10,000 understated2018P15,000 overstatedEnding inventoryDepreciation expenseInsurance expense10,000 understatedPrepaid insurance In addition, on December 31, 2018, fully depreciated machinery was sold for P10,800cash, but the sale was not recorded until 2019. There were no other errors during2017 or 2018 and no corrections have been made for any of the errors.6. Ignoring income taxes, what is the total effect of the errors on 2018 profit?A. P30,200 overstated.B. P11,000 overstated.C. P 5,800 overstated.D. P 1,800 understated.7. Ignoring income taxes, what is the total effect of the errors on the amount ofworking capital at December 31, 2018?A. P4,200 overstated.B. P5,800 understated.C. P6,000 understated.D. P9,800 understated.

Name: Items 6 and 7 are based on the following information:The Beatles Manu
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Description: Items 6 and 7 are based on the following information:The Beatles Manufacturing Company began operations on January 1, 2017. Financialstatements for the years ended December 31, 2017 and 2018, contained thefollowing errors:2017P16,000 understated6,00

Overstatement: This term refers to the items of financial statements being recorded at an amount…

Business

Accounting

Items 6 and 7 are based on the following information: The Beatles Manufacturing Company began operations on January 1, 2017. Financial statements for the years ended December 31, 2017 and 2018, contained the following errors: 2017 P16,000 understated 6,000 understated 10,000 overstated 10,000 understated 2018 P15,000 overstated Ending inventory Depreciation expense Insurance expense 10,000 understated Prepaid insurance

Items 6 and 7 are based on the following information: The Beatles Manufacturing Company began operations on January 1, 2017. Financial statements for the years ended December 31, 2017 and 2018, contained the following errors: 2017 P16,000 understated 6,000 understated 10,000 overstated 10,000 understated 2018 P15,000 overstated Ending inventory Depreciation expense Insurance expense 10,000 understated Prepaid insurance

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 71APSA: Effects of an Inventory Error The income statements for Graul Corporation for the 3 years ending in...

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Your examination of the financial statements of water Corporation revealed the following errors were made in the preparation of the 2017 financial statements: a. The depreciation expense in 2017 was recorded as P100,000, instead of P10,000b. Sales made in December 2017 for P150,000 were recorded in January 2018c. Rent paid on April 30, 2017 covering a one-year period was recognized as expense in 2017. Unexpired portion of P40,000 was not recorded at year-endd. Advances from customers amounting to P25,000 were recognized as sales in 2017. The goods were shipped in 2018.e. Salaries totaling to P50,000 was not recorded at year-end. The expense was recorded upon payment in 2018.f. Collections of accounts receivable in 2017 amounting to P20,000 were recorded in 2018.g. The unadjusted net income for 2017 is P650,000 Required: What is the net effect of the errors in the working capital at the end of 2017 and 2018?
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