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PROBLEM 4: In the course of your examination of the December 31, 2014, financial statements of Insular Corp, you discovered certain errors that had occurred during 2013 and 2014. No errors were corrected during 2013. The errors are summarized below: a. Beginning merchandise inventory (January 1, 2013) was understated by P259,200.Merchandise costing P72,000 was sold for P120,000 to Naval Company on December 28, 2013 but the sale was recorded in 2014. The merchandise was shipped FOB shipping point and was not included in ending inventory. Insular uses the periodic inventory system. b. A two-year fire insurance policy was purchased on May 1, 2013, for P172,800. The whole amount was charged to Prepaid Insurance. No adjusting entry was prepared in 2013 and 2014. c. A one-year note receivable of P288,000 was held by Insular beginning October 1. 2013. Payment of the 10% note and accrued interest was received upon maturity. No adjusting entry was made on December 31, 2013. Page 2 of 10 d. Equipment with a 10-year useful life was purchased on January 1, 2013 for P1,176,000. No depreciation expense was recorded during 2013 and 2014. Assume that the equipment has no residual value and that Insular uses straight-line method for recording depreciation. The company reported a P1,500,000 net income in 2013 and a P1,750,000 net income in 2014. 12. What is the net adjustment to the beginning retained earnings account in 2014? b. 175,200 a. 69,600 d. 48,000 c. 127,200 13. What is the adjusted balance of net income in 2014? b. 1,512,400 a. 1,168,800 c. 1,538,800 d. 1,418,800

PROBLEM 4: In the course of your examination of the December 31, 2014, financial statements of Insular Corp, you discovered certain errors that had occurred during 2013 and 2014. No errors were corrected during 2013. The errors are summarized below: a. Beginning merchandise inventory (January 1, 2013) was understated by P259,200.Merchandise costing P72,000 was sold for P120,000 to Naval Company on December 28, 2013 but the sale was recorded in 2014. The merchandise was shipped FOB shipping point and was not included in ending inventory. Insular uses the periodic inventory system. b. A two-year fire insurance policy was purchased on May 1, 2013, for P172,800. The whole amount was charged to Prepaid Insurance. No adjusting entry was prepared in 2013 and 2014. c. A one-year note receivable of P288,000 was held by Insular beginning October 1. 2013. Payment of the 10% note and accrued interest was received upon maturity. No adjusting entry was made on December 31, 2013. Page 2 of 10 d. Equipment with a 10-year useful life was purchased on January 1, 2013 for P1,176,000. No depreciation expense was recorded during 2013 and 2014. Assume that the equipment has no residual value and that Insular uses straight-line method for recording depreciation. The company reported a P1,500,000 net income in 2013 and a P1,750,000 net income in 2014. 12. What is the net adjustment to the beginning retained earnings account in 2014? b. 175,200 a. 69,600 d. 48,000 c. 127,200 13. What is the adjusted balance of net income in 2014? b. 1,512,400 a. 1,168,800 c. 1,538,800 d. 1,418,800

Intermediate Accounting: Reporting And Analysis
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 14E: Refer to the information in E22-13. Required: Prepare the correcting journal entries if the company...
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PROBLEM 4: In the course of your examination of the December 31, 2014, financial statements of Insular Corp, you discovered certain errors that had occurred during 2013 and 2014. No errors were corrected during 2013. The errors are summarized below: a. Beginning merchandise inventory (January 1, 2013) was understated by P259,200.Merchandise costing P72,000 was sold for P120,000 to Naval Company on December 28, 2013 but the sale was recorded in 2014. The merchandise was shipped FOB shipping point and was not included in ending inventory. Insular uses the periodic inventory system. b. A two-year fire insurance policy was purchased on May 1, 2013, for P172,800. The whole amount was charged to Prepaid Insurance. No adjusting entry was prepared in 2013 and 2014. Page 2 of 10 c. A one-year note receivable of P288,000 was held by Insular beginning October 1. 2013. Payment of the 10% note and accrued interest was received upon maturity. No adjusting entry was made on December 31, 2013. d. Equipment with a 10-year useful life was purchased on January 1, 2013 for P1,176,000. No depreciation expense was recorded during 2013 and 2014. Assume that the equipment has no residual value and that Insular uses straight-line method for recording depreciation. The company reported a P1,500,000 net income in 2013 and a P1,750,000 net income in 2014. 12. What is the net adjustment to the beginning retained earnings account in 2014? b. 175,200 a. 69,600 d. 48,000 d. 1,418,800 c. 127,200 13. What is the adjusted balance of net income in 2014? a. 1,168,800 b. 1,512,400 c. 1,538,800
Transcribed Image Text:PROBLEM 4: In the course of your examination of the December 31, 2014, financial statements of Insular Corp, you discovered certain errors that had occurred during 2013 and 2014. No errors were corrected during 2013. The errors are summarized below: a. Beginning merchandise inventory (January 1, 2013) was understated by P259,200.Merchandise costing P72,000 was sold for P120,000 to Naval Company on December 28, 2013 but the sale was recorded in 2014. The merchandise was shipped FOB shipping point and was not included in ending inventory. Insular uses the periodic inventory system. b. A two-year fire insurance policy was purchased on May 1, 2013, for P172,800. The whole amount was charged to Prepaid Insurance. No adjusting entry was prepared in 2013 and 2014. Page 2 of 10 c. A one-year note receivable of P288,000 was held by Insular beginning October 1. 2013. Payment of the 10% note and accrued interest was received upon maturity. No adjusting entry was made on December 31, 2013. d. Equipment with a 10-year useful life was purchased on January 1, 2013 for P1,176,000. No depreciation expense was recorded during 2013 and 2014. Assume that the equipment has no residual value and that Insular uses straight-line method for recording depreciation. The company reported a P1,500,000 net income in 2013 and a P1,750,000 net income in 2014. 12. What is the net adjustment to the beginning retained earnings account in 2014? b. 175,200 a. 69,600 d. 48,000 d. 1,418,800 c. 127,200 13. What is the adjusted balance of net income in 2014? a. 1,168,800 b. 1,512,400 c. 1,538,800
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