The first audit of the books of Huawei Company was made for the year ended December 31,

2020. In reviewing the books,

the auditor discovered that certain adjustments had either overlooked or improperly recorded at the end of 2018, 2019
and 2020. Omissions and other failures for each year are summarized below.

December 31
2018 2019 2020

Omissions of the following accounts:

a. Advances to suppliers 7,000.00 9,000.00 2,000.00
b. Advances from customers 4,000.00 3,000.00 8,000.00
c. Prepaid Rent Expense 5,000.00 2,000.00 7,000.00
d. Unearned Commission Income 9,000.00 5,000.00 6,000.00
e. Accounts Receivable 7,000.00 9,000.00 -
f. Accounts Payable 1,000.00 8,000.00 4,000.00
g. Merchandise Inventory 2,000.00 - 4,000.00
h. Accrued Utilities Expense 4,000.00 1,000.00 5,000.00
i. Accrued Interest Income 7,000.00 3,000.00 2,000.00

Over-recording of the following accounts:

j. Accounts Receivable 9,000.00
k. Merchandise Inventory 5,000.00

Minor repairs had been erroneously capitalized as cost of equipment;

annual depreciation rate on such equipment should have been 20%,
except the depreciation in the year of the expenditures, which is at 10% 10,000.00 5,000.00 12,000.00

Major repairs made at the end of the year been erroneously expensed.
Annual depreciation is 10%. 15,000.00 18,000.00

1. Assuming the unadjusted net income for the years 2018, 2019 and 2020 were P90,000, P87,000 and P78,000, respectively,
compute for the adjusted net income for 2018, 2019 and 2020.

2. Assuming that the unadjusted retained earnings balance at the end of 2018, 2019 and 2020 were P90,000, P177,000 and
P255,000, respectively, compute for the adjusted balance of 2020 retained earnings

3. What are the effects of the errors on the 2020 working capital.