Ans: Adjusted net income for year 2016 is:

P 55,000 - P 2900 - P 1500 + P 2200 - P 12000

= P 40,800

As ending inventory overstated by P 2900 it has to reduced, depreciation is omitted P 1500 , it has to
be reduced, understatement of commission receivable P 2200 it has to be added, purchase of
merchandise 6000 has to be deducted but included in the year end inventory, therefore reduced
12000 from income.