CPA Reviewer in Auditing problems

You were assigned to audit for the first the time the financial statements of Baby Inc. as of and for the year ended December 31, 2020. Baby Inc. is a merchandiser of office and school supplies and has started operations in early 2018. No audit has been made on its financial statements from its inception. The following was as a result of your audit investigations: The retained earnings general ledger entries from 2018 to current year appears below: Date Particulars Debit Credit Balance 12/31/15 Net Income P600,000 P600,000 7/1/16 Land donated by a stockholder at fair value 400,000 1,000,000 12/31/16 Net Income 750,000 1,750,000 4/2/17 Loss on inventory due to flood P50,000 1,700,000 12/31/17 Net Income 300,000 2,000,000Audit notes: a. The following were omitted at each year end: 2018 2019 2020 Accrued operating expenses P90,000 P110,000 P98,000 Accrued rental income 40,000 45,000 50,000 Prepaid advertising expense 20,000 30,000 35,000 b. The following equipment acquisitions were erroneously charged to repairs and maintenance expense account each year. It is the company's policy to depreciated equipment using straight-line method over 5 years. Moreover, full years depreciation is charged on the year of acquisition, none on the year of disposal. 2018 2020 Equipment acquisitions charged to repairs and maintenance expense P400,000 P550,000 c. Cash dividends declared and paid for each year were charged to other operating expenses. 2018 2019 2020 Dividends declared and paid P100,000 P150,000 P200,000 Requirements: 6. What is the correct net income in 2018? 7. What is the correct net income in 2020? 8. What is the retroactive adjustment to the retained earning beginning balance in 2020? 9. What is the adjusted retained earnings at the end of 2020? 10. What is the effect of errors to the 2020 working capital?