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26) Accrued salaries payable of P102,000 were not recorded at December 31, 2014 by Voodoo Jester

Company. Also office supplies on hand of P48,000 at December 31, 2015 were erroneously treated as

expense instead of supplies inventory. Neither of these errors was discovered nor corrected. What was the

effect of these two errors?

A. 2015 net income understated P150,000 and December 31, 2015 retained earnings understated

P48,000.

B. 2014 net income and December 31, 2014 retained earnings understated P102,000.

C. 2014 net income overstated P54,000 and 2015 net income understated P48,000.

D. 2015 net income and December 31, 2015 retained earnings understated P48,000.

27) After the issuance of its 2015 financial statements, Bobtail, Inc. discovered a computational error of

P150,000 in the calculation of its December 31, 2015 inventory. The error resulted in a P150,000

overstatement in the cost of goods sold for the year ended December 31, 2015. In October 2016, Bobtail

paid the amount of P500,000 in settlement of litigation instituted against it during 2015. Ignoring income

taxes. In the 2016 financial statements, the December 31, 2015 retained earnings balance, as previously

reported, should be adjusted by a

A. 150,000 credit B. 150,000 debit C. 500,000 debit D. 500,000 credit

28) Jags Company has recorded bad debts expense in the past at a rate of 1.5% of net sales. In 2023, Jags

decides to increase its estimate to 2%. If the new rate had been used in prior years, cumulative bad debt

expense would have been P380,000 instead of P285,000. In 2023, bad debt expense will be P120,000

instead of P90,000. If Jags tax rate is 35%, what amount should be adjusted to the beginning balance of the

retained earnings in 2023?

A. None B. 64,600 C. 95,000 D. 120,000

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