9.) SE9-21 Co.

reported income before tax of P370, 000 for 2001 and P26, 000 for
2002. A later audit produced the following information:

a.) The ending inventory for 2001 including 2, 000 units erroneously priced
at P5. 90 per unit. The correct cost was P9.50 per unit.
b.) Merchandise costing P17, 500 was shipped to SE9-21 Co, FOB Shipping
point on December 26, 2001. The purchase was recorded in 2001, but the
merchandise was excluded from the ending inventory because it was not
received until January 4, 2002.
c.) On December 28, 2001, merchandise-costing P2, 900 was sold to Deluxe
Paint Shop. Deluxe had asked SE9-21 Co. to keep the merchandise for it
until January 2, when it would come and pick it up. Because the
merchandise was still in the store at year-end, the merchandise was
included in the inventory account. The sale was correctly recorded in
December 2001.
d.) Craft Co. sold merchandise-costing P1, 500 to E9-21 Co. The purchase was
made on December 29, 2001, and the merchandise was shipped on
December 30. Terms were FOB shipping point. Because SE9-21 Co.’s
bookkeeper was on vacation, neither the purchase nor the receipt of
goods was recorded on the books until January 2002.

Assume that all amounts are material and a physical count of inventory was
taken every December 31.

Required:

Compute for the correct income before tax on:

2001: P393, 300

2002: P 7, 000

2001 2002

370, 000 26, 000

a.) -11, 800 b.) -17, 500

a.) +19, 000 d.) -1, 500

b.) +17, 500 7, 000

c.) -2, 900

d.) +1, 500

393, 300