Among other data, the general ledger of the Arsenio Company shows:

 Retained earnings Debit Credit 31-Dec-18 Appropriation 100,000 31-Dec-17 Balance, beg. 336,540 30-Jun-19 Dividends 80,000 31-Dec-18 Net income 201,560 31-Dec-19 Appropriation 100,000 31-Dec-18 Reversal of appropriation 50,000 30-Jun-20 Dividends 120,000 31-Dec-19 Net income 213,780 31-Dec-20 Appropriation 100,000 

Prior to closing the nominal accounts as of December 31, 2020 and the net income of 2020 of P224,560, the

following errors were discovered:

1. Inventory count as of December 31, 2019 was understated by P24,500; as of December 31, 2020 was

understated by P27,650.

2. Merchandise sales of P17,680 were billed and delivered in 2018 but were taken up in the books in

2019.

3. A 2-month store rent of P10,000 was paid on December 1, 2020 and was charged to rent expense.

Adjustment for the prepaid portion as of December 31, 2020 was omitted.

4. Costs of office chairs and table of P25,600, acquired on March 31, 2018, was charged to repairs

expense. The office furniture has an estimated useful life of 5 years.

5. Unused portion of the supplies expense was ignored as of the end of 2019, P1,850; at the end of 2020,

P2,750.

6. Purchases of merchandise in 2018 of P13,500 was taken up in 2019.

7. Accrued taxes were overlooked at the end of 2019, P5,470; at the end of 2020, P4,450.

Requirements:

1. Working paper for the correction of account balances of December 31, 2020.

2. Correcting journal entries as of December 31, 2020.

3. Adjustments/corrections to be prepared as of December 31, 2019, assuming that the income statement

of 2019 will be restated.

4. Comparative statements of retained earnings, as restated for the years ended December 31, 2019 and

December 31, 2020.