Kentucky Enterprises purchased a machine on January 2, 2020, at a cost of P120,000. An additional P50,000
Question:
Kentucky Enterprises purchased a machine on January 2, 2020, at a cost of P120,000. An additional P50,000 was spent for installation, but this amount was charged erroneously to repairs expense. The machine has a useful life of five years and a salvage value of P20,000. As a result of the error,
a.
retained earnings at December 31, 2021, was understated by P30,000 and 2021 income was overstated by P6,000.
b.
retained earnings at December 31, 2021, was understated by P38,000 and 2021 income was overstated by P6,000.
c.
retained earnings at December 31, 2021, was understated by P30,000 and 2021 income was overstated by P10,000.
d.
2020 income was understated by P50,000.
Intermediate Accounting Volume 1
ISBN: 978-1119496496
12th Canadian edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy