21.

The errors cause the reported net income for the year ending December 31, 2006 to be

a. Overstated by P72,000 c. Understated by P28,000

b. Overstated by P65,000 d. Understated by P45,000

22. The errors cause the reported retained earnings at December 31, 2006 to be

a. Overstated by P65,000 c. Overstated by P25,000

b. Overstated by P32,000 d. Understated by P18,000

23.Collection of notes receivable of P50,000 plus interest of P500 was recorded as debit to

cash of P50,500 and notes receivable of P50,500. This error will

a. Overstate the expenses by P500

b. Understate the liability by P500

c. Understate assets by P500 and understate revenue by P500

d. Understate revenue by P500

24.Accounts payable of P32,000 was paid and erroneously recorded as debit to accounts

payable and credit to cash for P23,000. The working capital

a. Has no effect c. Is understated by P9,000

b. Is overstated by P9,000 d. Is understated by P23,000

25. The beginning accumulated depreciation per record was P100,000. During the year, the

firm sold one of its machines recorded as follows:

Cash 270,000

Accumulated depreciation - machine 30,000

Machine 300,000

If the actual cash proceeds is P300,000, the correcting entry would be:

a. Cash 300,000

Machine 300,000

b. Cash 30,000

Gain on sale of machine 30,000

c. Accumulated depreciation - machine 30,000

Gain on sale of machine 30,000

d. Cash 300,000
Machine 270,000

Gain on sale of machine 30,000