33.You have been engaged to examine the financial statements of Tupac Corporation for the year 2023. The bookkeeper who maintains the financial records has prepared all of the unadjusted financial statements for the Corporation since its organization on January 2, 2021. You discover numerous errors that have been made in these statements. The client has asked you to compute the correct income for the three years 2021 through 2023 and to prepare a corrected balance sheet as of December 31, 2023. In the course of your examination, you discover the following: The Corporation includes sales taxes collected form customers in the Sales account. When sales tax collections for a month are remitted to the taxing authority on the 15thof the following month, the Sales Tax Expense account is charged. All sales are subjected to a 3% sales tax. Total sales plus sales taxes for 2021 through 2023 were P495,430, P762,200 and P875,500, respectively. The totals of the Sales Tax Expense account for the three year were P12,300, P21,780 and P26,640. Furniture and fixtures were purchased on January 2, 2021 for P12,000 but no portion of the cost has been charted to depreciation. The Corporation wishes to use the straight-line method for these assets which have been estimated to have a life of 10 years and no salvage value. In January 2021 installation costs of P5,700 on new machinery were charged to Repairs Expense. Other costs of this machinery of P30,000 were correctly recorded and have been depreciated using the straight-line method with an estimated life of 10 years and no salvage value. An account payable of P8,000 for merchandise purchased on December 23, 2021 was recorded in January 2022. This merchandise was not included in inventory at December 31, 2021. Merchandise having a cost of P6,550 was stored in a separate warehouse and was not included in the December 31, 2022 inventory, and merchandise having a cost of P2,180 was included twice in the December 31, 2023 inventory. The Corporation uses a periodic inventory method. The year-end salary accrual of P1,925 on December 31, 2023 has not been recorded. A check for P1,895 from a customer to apply to this account was received on December 31, 2021 but was not recorded until January 2, 2022. The Corporation has used the direct write-off method of accounting for bad debts. Accounts written off during each of the three years amount to P1,745, P2,200 and P5,625, respectively. The Corporation has decided that the Allowance for Doubtful Accounts at the end of each of the three years are: P6,100, P8,350 and P9,150. Assume that the net income computed before all adjustments and corrections was P180,000 for 2021, P212,000 for 2022 and P252,000 for 2023. Questions: What is the adjusted net income in 2021? ______What is the adjusted net income in 2022? ______What is the adjusted net income in 2023? ______What is the net effect of these errors on total assets as of December 31, 2023? ______What is the net effect of these errors on the total shareholders’ equity as of December 31, 2023? ______

ou have been engaged to examine the financial statements of Tupac Corporation for the year 2023. The bookkeeper who maintains the financial records has prepared all of the unadjusted financial statements for the Corporation since its organization on January 2, 2021. You discover numerous errors that have been made in these statements. The client has asked you to compute the correct income for the three years 2021 through 2023 and to prepare a corrected balance sheet as of December 31, 2023. In the course of your examination, you discover the following: The Corporation includes sales taxes collected form customers in the Sales account. When sales tax collections for a month are remitted to the taxing authority on the 15thof the following month, the Sales Tax Expense account is charged. All sales are subjected to a 3% sales tax. Total sales plus sales taxes for 2021 through 2023 were P495,430, P762,200 and P875,500, respectively. The totals of the Sales Tax Expense account for the three year were P12,300, P21,780 and P26,640. Furniture and fixtures were purchased on January 2, 2021 for P12,000 but no portion of the cost has been charted to depreciation. The Corporation wishes to use the straight-line method for these assets which have been estimated to have a life of 10 years and no salvage value.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

33.

You have been engaged to examine the financial statements of Tupac Corporation for the year 2023. The bookkeeper who maintains the financial records has prepared all of the unadjusted financial statements for the Corporation since its organization on January 2, 2021. You discover numerous errors that have been made in these statements. The client has asked you to compute the correct income for the three years 2021 through 2023 and to prepare a corrected balance sheet as of December 31, 2023. In the course of your examination, you discover the following:

The Corporation includes sales taxes collected form customers in the Sales account. When sales tax collections for a month are remitted to the taxing authority on the 15thof the following month, the Sales Tax Expense account is charged. All sales are subjected to a 3% sales tax. Total sales plus sales taxes for 2021 through 2023 were P495,430, P762,200 and P875,500, respectively. The totals of the Sales Tax Expense account for the three year were P12,300, P21,780 and P26,640.

Furniture and fixtures were purchased on January 2, 2021 for P12,000 but no portion of the cost has been charted to depreciation. The Corporation wishes to use the straight-line method for these assets which have been estimated to have a life of 10 years and no salvage value.

In January 2021 installation costs of P5,700 on new machinery were charged to Repairs Expense. Other costs of this machinery of P30,000 were correctly recorded and have been depreciated using the straight-line method with an estimated life of 10 years and no salvage value.

An account payable of P8,000 for merchandise purchased on December 23, 2021 was recorded in January 2022. This merchandise was not included in inventory at December 31, 2021.

Merchandise having a cost of P6,550 was stored in a separate warehouse and was not included in the December 31, 2022 inventory, and merchandise having a cost of P2,180 was included twice in the December 31, 2023 inventory. The Corporation uses a periodic inventory method.

The year-end salary accrual of P1,925 on December 31, 2023 has not been recorded.

A check for P1,895 from a customer to apply to this account was received on December 31, 2021 but was not recorded until January 2, 2022.

The Corporation has used the direct write-off method of accounting for bad debts. Accounts written off during each of the three years amount to P1,745, P2,200 and P5,625, respectively. The Corporation has decided that the Allowance for Doubtful Accounts at the end of each of the three years are: P6,100, P8,350 and P9,150.

Assume that the net income computed before all adjustments and corrections was P180,000 for 2021, P212,000 for 2022 and P252,000 for 2023.

Questions:

What is the adjusted net income in 2021? ______
What is the adjusted net income in 2022? ______
What is the adjusted net income in 2023? ______
What is the net effect of these errors on total assets as of December 31, 2023? ______
What is the net effect of these errors on the total shareholders’ equity as of December 31, 2023? ______

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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