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  • 12correction of Errors - Exercise

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    The document describes various errors found in the financial records of RODY Corporation over three years from 2013 to 2015. It provides information on how to correct the errors depending on whether the audit period is 2013, 2014, or 2015. The errors include understated inventory amounts, omitted interest receivable and payable amounts, rental income received in the wrong period, prepaid expenses recorded in the wrong periods, insurance expenses allocated incorrectly across periods, advances to suppliers and from customers recorded in the wrong periods, capital expenditures incorrectly expensed, and proceeds from asset sales misclassified. Correcting these errors would affect reported profits for the respective audit periods.

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    12Correction of Errors_Exercise

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    The document describes various errors found in the financial records of RODY Corporation over three years from 2013 to 2015. It provides information on how to correct the errors depending on whether the audit period is 2013, 2014, or 2015. The errors include understated inventory amounts, omitted interest receivable and payable amounts, rental income received in the wrong period, prepaid expenses recorded in the wrong periods, insurance expenses allocated incorrectly across periods, advances to suppliers and from customers recorded in the wrong periods, capital expenditures incorrectly expensed, and proceeds from asset sales misclassified. Correcting these errors would affect reported profits for the respective audit periods.

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    © All Rights Reserved
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    Отметить как неприемлемый контент
    19 просмотров3 страницы

    12correction of Errors - Exercise

    Загружено:

    glrosaaa c
    The document describes various errors found in the financial records of RODY Corporation over three years from 2013 to 2015. It provides information on how to correct the errors depending on whether the audit period is 2013, 2014, or 2015. The errors include understated inventory amounts, omitted interest receivable and payable amounts, rental income received in the wrong period, prepaid expenses recorded in the wrong periods, insurance expenses allocated incorrectly across periods, advances to suppliers and from customers recorded in the wrong periods, capital expenditures incorrectly expensed, and proceeds from asset sales misclassified. Correcting these errors would affect reported profits for the respective audit periods.

    Авторское право:

    © All Rights Reserved
    Скачайте в формате DOC, PDF, TXT или читайте онлайн в Scribd
    Отметить как неприемлемый контент
    из 3

    ACCTG 6A CORRECTION OF ERRORS

    RODY Corporation reported net income for three years as follows:


    2013 P2,800,000
    2014 P3,000,000
    2015 P3,450,000
    Income tax rate 30%
    In the course of your audit in the books of RODY, the following were found:

    1. The physical inventory was understated in: 2013 – P75,000 2014 – P50,000 2015 – P65,000
    If audit period is 2013: If audit period is 2014: If audit period is 2015:

    Inventory 75,000 Inventory, beginning 75,000 Inventory, beginning


    Cost of Sales 75,000 Retained earnings 52,500 Retained earnings
    Income tax payable 22,500 Income tax payable

    Inventory 50,000 Inventory


    Cost of Sales 50,000 Cost of Sales
    Effect on Profit: Effect on Profit: Effect on Profit:
    Understated by P75,000 Overstated by P75,000
    Understated by P50,000 Overstated by
    Understated by
    ------------- ------------- -------------
    Understated by P75,000 Overstated by P25,000 Understated by

    2. Omission of accrued interest receivable: 2013 – P50,000 2014 – P25,000 2015 – P40,000
    If audit period is 2013: If audit period is 2014: If audit period is 2015:

    Accrued Int. Income 50,000


    Interest Income 50,000

    Effect on Profit: Effect on Profit: Effect on Profit:

    3. Rental for two years received in 2013 was entirely credited to rent income on that date, P100,000.
    If audit period is 2013: If audit period is 2014: If audit period is 2015:

    Effect on Profit: Effect on Profit: Effect on Profit:


    4. Omission of prepaid insurance 2013 – P25,000 2014 – P70,000 2015 – P30,000
    If audit period is 2013: If audit period is 2014: If audit period is 2015:

    Effect on Profit: Effect on Profit: Effect on Profit:

    5. Insurance premium for three years paid in 2013 was charged entirely to expense in 2013, P75,000.
    If audit period is 2013: If audit period is 2014: If audit period is 2015:

    Effect on Profit: Effect on Profit: Effect on Profit:

    6. Insurance premium for three years paid in 2013 was charge entirely to prepaid insurance in 2013. P75,000
    If audit period is 2013: If audit period is 2014: If audit period is 2015:

    Effect on Profit: Effect on Profit: Effect on Profit:

    7. Advances to supplier were recorded as purchases but the merchandise was received in subsequent year
    2013 – P50,000 2014 – P80,000 2015 – P95,000
    If audit period is 2013: If audit period is 2014: If audit period is 2015:

    Effect on Profit: Effect on Profit: Effect on Profit:


    8. Advances from customers were recorded as sales but the goods were delivered in following year
    2013 – P35,000 2014 – P95,000 2015 – P82,000
    If audit period is 2013: If audit period is 2014: If audit period is 2015:

    Effect on Profit: Effect on Profit: Effect on Profit:

    9. Improvements on building for P100,000 had been charged to repairs and maintenance on January 1, 2014.
    The life of the improvement is estimated to be 5 years.
    If audit period is 2013: If audit period is 2014: If audit period is 2015:

    Effect on Profit: Effect on Profit: Effect on Profit:

    10. On January 1, 2013, an equipment costing P40,000 was sold for P20,000. At the date of sale, the
    equipment had an accumulated depreciation of P25,000. The cash received was recorded as other income
    in 2013.
    If audit period is 2013: If audit period is 2014: If audit period is 2015:

    Effect on Profit: Effect on Profit: Effect on Profit:

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