Milan Company reported pretax income of P 6,500,000 on December 31, 2021. During your audit, the following errors were revealed: Insurance premium covering the period from July 1, 2021 to July 1, 2022, amounting to P 200,000 was paid and recorded as expense on July 31, 2021. The client did not make any adjustment at year end. Advertising for December 2021, amounting to P 500,000, was recorded when payment was made in January 2022. Merchandise worth P 1,000,000 was purchased in 2021 and included in ending inventory. However, the purchase was recorded only in 2022. On November 1, 2021, the P 300,000 was received representing rent of an equipment applicable for six months. Upon receipt, the entire amount was credited to income account. A merchandise valued at P 1,500,000 was properly recorded as purchase at year-end. Since the merchandise was still at the port area, it was inadvertently omitted from the inventory on December 31, 2021. What is the corrected pretax income for the year 2021? 7,400,000 6,200,000 6,500,000 6,400,000
Milan Company reported pretax income of P 6,500,000 on December 31, 2021. During your audit, the following errors were revealed: Insurance premium covering the period from July 1, 2021 to July 1, 2022, amounting to P 200,000 was paid and recorded as expense on July 31, 2021. The client did not make any adjustment at year end. Advertising for December 2021, amounting to P 500,000, was recorded when payment was made in January 2022. Merchandise worth P 1,000,000 was purchased in 2021 and included in ending inventory. However, the purchase was recorded only in 2022. On November 1, 2021, the P 300,000 was received representing rent of an equipment applicable for six months. Upon receipt, the entire amount was credited to income account. A merchandise valued at P 1,500,000 was properly recorded as purchase at year-end. Since the merchandise was still at the port area, it was inadvertently omitted from the inventory on December 31, 2021. What is the corrected pretax income for the year 2021? 7,400,000 6,200,000 6,500,000 6,400,000
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 16E: Dudley Company failed to recognize the following accruals. It also recorded the prepaid expenses and...
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question
Milan Company reported pretax income of P 6,500,000 on December 31, 2021. During your audit, the following errors were revealed:
- Insurance premium covering the period from July 1, 2021 to July 1, 2022, amounting to P 200,000 was paid and recorded as expense on July 31, 2021. The client did not make any adjustment at year end.
- Advertising for December 2021, amounting to P 500,000, was recorded when payment was made in January 2022.
- Merchandise worth P 1,000,000 was purchased in 2021 and included in ending inventory. However, the purchase was recorded only in 2022.
- On November 1, 2021, the P 300,000 was received representing rent of an equipment applicable for six months. Upon receipt, the entire amount was credited to income account.
- A merchandise valued at P 1,500,000 was properly recorded as purchase at year-end. Since the merchandise was still at the port area, it was inadvertently omitted from the inventory on December 31, 2021.
What is the corrected pretax income for the year 2021?
7,400,000
6,200,000
6,500,000
6,400,000
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