1. What is the total effect of the errors on the 2020 net income?

a. Overstated by P80,400 b. Understated by P775,800 c. none of the choices d. Understated by P1,236,600 e. Overstated by P165,000

2. What is the total effect of the errors on the balance of the company's retained earnings at December 31. 20217

a. Understated by P155,100 b. none of the choices c. Understated by P265,800 d. Overstated by P930,900 e. Overstated by P885,900

You were engaged by DIANE Company to audit its financial statements for the first time. In examining the books, you noted that certain adjustments had been overlooked at the end of 2020 and 2021. You also discovered that other items had been improperly recorded. These omissions and other errors for each year were summarized: 12-31- 12-31- 2020 2021 Salaries Payable 780,000 873,600 Interest Receivable 213,000 259,200 Prepaid Insurance 307.800 384,000 Advances from Customers 561,000 470,400 (Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year) Machinery 522,000 564.000 (Capital expenditures had been recorded as repairs but should have been charged to Machinery: the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%)