Absolute Corporation Income Statement For the year ended December 31, 2018 Sales 1,000,000 Cost of goods sold (600,000) Gross income 400,000 Operating expenses (150,000) 250,000 Net income he December 31, 2018 audit of the company's financial statements disclosed the following errors: • The December 31, 2018 inventory is understated by P31,000. Accrued expenses of P4,000 and prepaid expenses of P6,000 were not recognized in the company's books. Sales of P5,000 were not recorded until January 2019, although the goods were shipped in December 20 December 31 physical inventory. Purchases of P30,000 made in December 2018 were not recorded although the good were received and pro 31 physical inventory.

During the conduct of the audit of the financial statements of ABC Incorporated dated December 31, 2021, the following information were determined:   Inventory on January 1, 2021 is understated by 30,000. On May 1, 2021, sales made to a customer on account was recorded by debiting cash of 500,000 and crediting other income of 500,000. Payment of 100,000  insurance covering 10 months starting June 1, 2021, was not recorded. Inventory on December 31, 2021 is overstated by 40,000 On June 1, 2021, ABC paid 240,000 in payment for 24 months of rent. This was originally charged to an expense account. As of the end of the year, no adjustments were made yet. ABC failed to accrue salaries of their office workers amounting to 38,000. A note was received from a customer amounting to 150,000 on May 1, 2021. The note bears an interest of 15% and will mature after 25 months. No entries were made yet with respect to the accrual of interest.   The net income of ABC before reflecting any corrections…

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Subject: acounting