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Company showing the additions, retirements, depreciation and other data affecting the
income of the Company in the 4-year period 2016 to 2019, inclusive. The Semi-trucks
account consists of the following as of January 1, 2016:
Transactions between January 1, 2016, and December 31, 2019, and their record in the
ledger were as follows:
July 1, 2016 Truck No. 3 was traded for larger one (No. 5), the agreed purchase price of
which was P340,000. High Voltage Mfg. Co. paid the automobile dealer
P150,000 cash on the transaction. The entry was debit to Semi-trucks and a
credit to cash, P150,000.
Jan. 1, 2017 Truck No. 1 was sold for P35,000 cash; entry debited Cash and credited
Semi-trucks, P35,000.
July 1, 2018 A new truck (No. 6) was acquired for P360,000 cash and was charged at
that amount to Semi-trucks account. (Assume truck No. 2 was not retired.)
July 1, 2018 Truck No. 4 was damaged in a wreck to such an extent that it was sold as
junk for P7,000 cash. High Voltage Mfg. Co. received P25,000 from the
insurance company. The entry made by the bookkeeper was a debit to cash,
P32,000, and credits to Miscellaneous Income, P7,000 and Semi-trucks P
35,000.
Entries for depreciation had been made for the close of each year as follows: 2016,
P203,000 ; 2017, P211,000; 2018, P244,500; 2019, P278,000.
QUESTIONS:
Based on the above and the result of your audit, determine the following: (Disregard tax
implications)
5. Assuming the errors were not discovered and corrected, the December 31, 2019
retained earnings would have been understated by ________________