reement in t
In line with your audit with DAVE, Inc. financial statements, the company accountant presented to you the balance sheet that follows. You reviewed the client’s accounting records and books based thereon. You discovered that books of accounts are in agreement in the said balance sheet as presented below:
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DAVE, INC. |
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December 31, 2021 |
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ASSETS |
LIABILITIES AND OWNERS' EQUITY |
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|
Cash |
P 80,000 |
Accounts Payable |
P 32,000 |
|
|
160,000 |
Notes Payable |
64,000 |
|
Notes Receivable |
48,000 |
Capital Stock |
160,000 |
|
Inventories |
400,000 |
|
432,000 |
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Total |
P 688,000 |
Total |
P 688,000 |
Further review and investigation of the company’s books revealed the following omissions and errors which were not corrected during the year of errors:
|
2018 |
2019 |
2020 |
2021 |
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|
Deferred expense |
14,400 |
11,200 |
8,000 |
9,600 |
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Deferred income |
6,400 |
4,800 |
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|
Accrued expense |
3,200 |
1,200 |
1,600 |
800 |
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Accrued income |
2,000 |
2,400 |
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|
Ending inventory - Overstated |
112,000 |
128,000 |
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Ending inventory - Understated |
96,000 |
144,000 |
No dividends were declared during the years 2018 to 2021 and no adjustments were made to retained earnings. The company’s reported the following net income:
|
Year |
2018 |
2019 |
2020 |
2021 |
|
Net Income |
P120,000 |
P88,000 |
P104,000 |
P120,000 |
NOTE: Disregard tax implications
What is the net adjustment to Retained earnings as of January 1, 2019?
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