10

During the course of your examination of the financial statements of H Co., a new client, for the year ended December 31, 2020, you discover the following:

• Inventory at January 1, 2020, had been overstated by P3,000.
• Inventory at December 31, 2020, was understated by P5,000.
• An insurance policy covering three years had been purchased on January 2, 2019, for P1,500. The entire amount was charged as an expense in 2019.

During 2020 the company received a P1,000 cash advance from a customer for merchandise to be manufactured and shipped during 2021. The P1,000 had been credited to sales revenues. The company's gross profit on sales is 50%.

Net income reported on the 2020 income statement (before reflecting any adjustments for the above items) is P20,000.

The proper net income for 2020 is