PROBLEM 6-4 Noncounterbalancing Errors You discovered the following errors in connection with your examination of the financial statements of Joy Corporation: 1) The Company paid one- year insurance premium of P24,000 effective April 1, 2020. The entire amount was debited to asset account and no adjustment was made at the end of 2020. 2) The company leased a portion of its building for P48,000. The term of the lease is one year ending April 30, 2021. Collection of rent was credited to unearned rent revenue account. At the end of 2020, no entry was made to take up the earned portion of the amount collected. 3) Depreciation expense in 2020 was understated by P12,000. 4) Improvements on building amounting to P200,000 had been charged to expense on January 1, 2020. Improvements have a life of 5 years. 5) On January 1, 2020, an equipment costing P40,000 was sold for P20,000. At the date of sale, the equipment had an accumulated depreciation of P15,000. The cash received was recorded as other income in 2020. 6) Repairs expense on the building amounting to P20,000 had been charged to the building account on January 1, 2020. Depreciation expense has been recorded in 2020 and 2021 based on the 5 year remaining useful life of the building. The following data were extracted from the financial statements of Joy Corporation: 2020 2021 Net income Working capital RE, end of the year 100,000 300,000 100,000 150,000 400,000 250,000
PROBLEM 6-4 Noncounterbalancing Errors You discovered the following errors in connection with your examination of the financial statements of Joy Corporation: 1) The Company paid one- year insurance premium of P24,000 effective April 1, 2020. The entire amount was debited to asset account and no adjustment was made at the end of 2020. 2) The company leased a portion of its building for P48,000. The term of the lease is one year ending April 30, 2021. Collection of rent was credited to unearned rent revenue account. At the end of 2020, no entry was made to take up the earned portion of the amount collected. 3) Depreciation expense in 2020 was understated by P12,000. 4) Improvements on building amounting to P200,000 had been charged to expense on January 1, 2020. Improvements have a life of 5 years. 5) On January 1, 2020, an equipment costing P40,000 was sold for P20,000. At the date of sale, the equipment had an accumulated depreciation of P15,000. The cash received was recorded as other income in 2020. 6) Repairs expense on the building amounting to P20,000 had been charged to the building account on January 1, 2020. Depreciation expense has been recorded in 2020 and 2021 based on the 5 year remaining useful life of the building. The following data were extracted from the financial statements of Joy Corporation: 2020 2021 Net income Working capital RE, end of the year 100,000 300,000 100,000 150,000 400,000 250,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Can you explain how are the amounts in the errors calculated given the attached problem? Thank you
Transcribed Image Text:PROBLEM 6-4 Noncounterbalancing Errors
You discovered the following errors in connection with your examination of the
financial statements of Joy Corporation:
1) The Company paid one- year insurance premium of P24,000 effective April
1, 2020. The entire amount was debited to asset account and no adjustment
was made at the end of 2020.
2) The company leased a portion of its building for P48,000. The term of the
lease is one year ending April 30, 2021. Collection of rent was credited to
unearned rent revenue account. At the end of 2020, no entry was made to
take up the earned portion of the amount collected.
3) Depreciation expense in 2020 was understated by P12,000.
4) Improvements on building amounting to P200,000 had been charged to
expense on January 1, 2020. Improvements have a life of 5 years.
5) On January 1, 2020, an equipment costing P40,000 was sold for P20,000. At
the date of sale, the equipment had an accumulated depreciation of P15,000.
The cash received was recorded as other income in 2020.
6) Repairs expense on the building amounting to P20,000 had been charged to
the building account on January 1, 2020. Depreciation expense has been
recorded in 2020 and 2021 based on the 5 year remaining useful life of the
building.
The following data were extracted from the financial statements of Joy
Corporation:
2020
2021
Net income
Working capital
RE, end of the year
150,000
400,000
100,000
300,000
100,000
250,000
Transcribed Image Text:Net Income
Retaimed
Eaunings.
Warking
Capital
2020
2021
2020
2021
2020
2021
Unadjusted
Balomce
100,000 ISD,000 100,000 250,000 300,000/400,000,
(18,000) (6.0B,00) (94, 00 00(24,0
132,0003 16,000 32,000 48,000 32000
12,000
160,000 (40,000) 160, 000 120.000
(25,000) (25,000)
CI6,000) 400o (16,000 C12,o0)
Evroo1
48,000
Eooror3
Enor4
Eoror5
Error 6
12,000
12,000
(25,000)
pus,000 |124,000 245,000 345,00 314,000 424,000
Adjusted
Balance
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