PROBLEM 1
You have engaged to review the records and prepare corrected financial statements of Walang
Aayaw Corporation. The December 31, 2025 Statement of Financial Position is shown below:
Walang Aayaw Corporation
Statement of Financial Position
December 31, 2025
Assets
Cash P15,000
Accounts receivable 30,000
Notes receivable 9,000
Inventory 75,000
Total P129,000
Liabilities and Shareholders’ Equity
Accounts payable P6,000
Notes payable 12,000
Share capital 5,000
Share premium 25,000
Retained earnings 81,000
Total P129,000
A review of the books of the company indicates that the following errors and omissions had not
been corrected during years shown below:
2022 2023 2024 2025
Inventory under(over)statement 18,000 (21,000) (24,000) 27,000
Omissions:
Prepaid expense 2,700 2,100 1,500 1,800
Deferred income - 1,200 - 900
Accrued expense 600 225 300 150
Accrued income - 375 - 450
The unadjusted net income per books are: 2022: P10,000 2023: P22,500; 2024: P19,500; 2025:
P16,500. No dividends were declared during these years, and no adjustments were made to
retained earnings.
Requirements:
1. What is the adjusted net income/loss for the year ended December 31, 2022?
2. What is the adjusted net income/loss for the year ended December 31, 2023?
3. What is the adjusted net income/loss for the year ended December 31, 2024?
4. What is the adjusted net income/loss for the year ended December 31, 2025?
5. What is the adjusted retained earnings on December 31, 2025?
6. What is the adjusted total assets on December 31, 2025?
7. What is the adjusted total liabilities on December 31, 2025?
