Fujii Co.’s December 31 year-end financial statements contained the following errors:

A. Gain on sale of equipment
2017 - 45,000 over
2018 - 40,500 under

B. Ending inventory
2017 - 405,000 under
2018 - 168,750 over

C. Accrued salaries omitted
2017 - 145,625
2018 - 130,000

D. Capital expenditures charged to repairs expense
2017 - 94,000
2018 - 87,000
Capital expenditures had been charged to repairs but should have been charged to Equipment account. Depreciation rate is 10% per year but only 5% is to be recognized on the year of the expenditures.

E. An insurance premium of P56,250 was paid in advance in 2017 covering the insurance premium of the company’s fixed assets for five years commencing in 2017. The company charged the whole amount to expense in 2017.

F. Rent of P81,000 was collected in advance in 2017 covering the years 2017, 2018 and 2019. The company credited the whole amount to rental income.

Based on the information above, answer the following:

1. The total understated of the errors on the 2017 net income
2. The total overstated of the errors on the 2018 net income
3. The total overstated of the errors on the 2018 retained earnings

Answer rating: 100% (QA)

The total understated of the errors on the 2017 net income Effect on net income P A Gain on sale of ... View the full answer