Problem
E Company had incorrectly determined its 2021 and 2022 net income figures to be P115,000 and 110,000 respectively. In a first-time audit of the company's financial statements, you determined the following errors: -Merchandise inventory was incorrectly determined. P5,000 over statement for 2021 and P15,000 over statement for 2022. -Revenue received in advance in 2021 of P25,000 was credited to a revenue account when received. Of the P25,000, 5,000 were earned in 2021, P12,000 was earned in 2022 and the remainder will be earned in 2023. -A P12,000 gain on sale of plant assets in 2022 was erroneously credited to the retained earnings account. Required: 2.1 Determine the correct net income for 2021 and 2022. 2.2 Prepare the correcting entry in early 2023, assuming the 2022 books are closed. 2.3 Prepare the journal entry in early 2023 to correct the books, assuming the 2022 books are not closed2. E Company had incorrectly determined its 2021 and 2022 net income figures to be P115,000 and 110,000 respectively. In a first-time audit of the company's financial statements, you determined the following errors:
• Merchandise inventory was incorrectly determined. P5,000 over statement for 2021 and P15,000 over statement for 2022.
• Revenue received in advance in 2021 of P25,000 was credited to a revenue account when received. Of the P25,000, 5,000 were earned in 2021, P12,000 was earned in 2022 and the remainder will be earned in 2023.
• A P12,000 gain on sale of plant assets in 2022 was erroneously credited to the retained earnings account.
Task
1) Determine the correct net income for 2021 and 2022.
2) Prepare the correcting entry in early 2023, assuming the 2022 books are closed.
3) Prepare the journal entry in early 2023 to correct the books, assuming the 2022 books are not closed.