ERROR AND CORRECTION

A. Universal Company had the following financial statement information:

2018 2017
Revenue P1,350,000 P1,000,000
Expenses 980,000 650,000
Net income 370,000 350,000

12/31/2010 12/31/2009
Total assets P1,570,000 P1,050,000
Total liabilities 500,000 350,000
Total owners’ equity P1,070,000 P 700,000
Universal failed to record P120,000 of accrued wages at the end of 2017. The wages were
recorded and paid in January 2018. The correct accruals were made on December 31, 2018.
1. What is the corrected net income for 2017?
2. What is the corrected net income for 2018?
3. The corrected total liabilities on December 31, 2017 should be
4. The corrected total owners’ equity on December 31, 2018 should be

B. Cola Company reported a retained earnings balance of P4,000,000 at January 1, 2017. Cola
determined that insurance premiums of P900,000 for the three-year period beginning January 1,
2016, had been paid and fully expensed in 2016. The entity has a 30% income tax rate.
What amount should Cola report as corrected beginning retained earnings in its 2017 statement
of retained earnings?

C. Victory Company’s statements for 2016 and 2017 included errors as follows:

Year Ending Inventory Depreciation

2016 P200,000 understated P50,000 understated
2017 P300,000 overstated P100,000 overstated

How much should retained earnings be retroactively adjusted at January 1, 2018?

D. On December 31, 2017, Blue Company sold merchandise forP750,000 to Red Company. The terms
of the sale were net 30,F.O.B shipping point. The merchandise was shipped on December 31, 2017, and
arrived at Red on January 5, 2018. Due to a clerical error, the sale was not recorded until January 2018
and the merchandise sold at a25% markup on cost was included in Blue’s inventory at December 31,
2017.
As a result, Red’s cost of goods sold for the year ended December 31, 2017 was

E. Blonde Company provided the following information for each year:

  2017 2016
Sales 4,600,000 1,350,000
Cost of goods sold 2,346,000 2,305,000
Expenses 1,598,000 1,533,000
Beginning retained earnings 1,441,000 1,077,000
Divideds paid 157,000 148,000

In 2018, the entity discovered the ending inventory for 2016 was understated by P100,000 and the
ending inventory for 2017 was overstated by P300,000.
1. What is the corrected income for 2016?
2. What is the corrected income for 2017?
3. What is the corrected balance of retained earnings on December 31, 2017?