Items 16 and 17 are based on the following information:
You were engaged as an independent auditor of Thomas Corporation. In the course of
your examination of the accounts on December 31, 2004, the end of the accounting period, you
determined that certain prepaid and accrued items were not recorded in prior years and in the
current year as follows:
Accrued expenses
Prepaid expenses
Prepaid revenues
Revenues receivable
2002
2003
2004
4,500
7,500
6,500
5,000
12,000
8,000
1,200
3,000
2,750
2,500
Retained earnings at the end of 2002 amounted to P445,000 while net income for 2003
was reported at P126,000. The income summary account for 2004 shows a credit balance of
P150,000 before any audit adjustments. You have verified that no dividends were declared in
the two year period.
16.
Compute for the corrected Retained earnings balance as of December 31, 2002.
a.
P 444,300
b.
P 450,000
c.
P 578,500
d.
P 445,000
17.
The corrected net income for the years ended December 31, 2003 and 2004 are:
2003
2004
a.
P126,000
P150,000
b.
P134,200
P143,750
c.
P146,700
P168,000
d.
P122,200
P155,750
