MERHAN, VHILFREY S.

2ND YEAR BSAIS

1. TOWER COMPANY a. 4,750,000

Computation:
Income before tax per book P 5,000,000
Prepaid insurance 200,000
Accrued wages (250,000)
Rent revenue collected in advance (300,000)
Interest receivable 100,000
Corrected income before tax 4,750,000

2. VICTORIA COMPANY b. 250,000 decrease

Computation:
2019 2020 retained earnings
Jan. 1, 2021

2019 inventory understated 200,000 (200,000)

2020 inventory overstated (300,000) (300,000)
2019 depreciation understated (50,000) (50,000)
2020 depreciation overstated 100,000 100,000
Net decrease 250,000

3. PAUL COMPANY c. 75,000 overstated

Computation:
2019 2020 retained earnings
Jan. 1, 2021
2019 inventory understated 60,000 (60,000)
2020 inventory overstated (75,000) (75,000)
Net correction 60,000 (135,000) (75,000)
4. CRESCENDO COMPANY d. 450,000 understated

Computation:

2019 2020
Ending inventory
2019 (150,000) 150,000
2020 200,000
Rent expense
2019 (50,000)
2020 100,000
Net correction (200,000) 450,000