Determine the following as a result of your audit: (Please show your solution) 1. What is the correct depreciation expense in 2020? 2. What is the correct net income in 2018? 3. What is the correct net income in 2019? 4. What is the correct net income in 2020? 5. How much should be the adjustment to retained earnings at January 1, 2020?

For being an excellent audit associate, you were engaged to audit Ricial, Co., a small engineering firm with books rigged with errors. The income statements of Ricial, Co. indicate the following net income: 2018 P1,500,000 2019 1,750,000 2020 2,000,000 An examination of the accounting records for the year ended December 31, 2020 indicates that several errors were made. The following errors were discovered: A. Salary accruals on December 31, were consistently omitted: 2017 P95,000 2018 110,000 2019 100,000 2020 140,000 B. The footings and extensions showed that the inventory on December 31, 2019 was overstated by P190,000 C. P150,000 worth of inventories were received on January 4, 2021. Upon investigation, you discovered that these goods were shipped by the supplier on December 31, 2020 FOB Shipping point. Further investigation revealed that the liability on the item were recorded when the goods were received. D. Prepaid insurance were consistently omitted at the end of each year: 2017 P75,000 2018 100,000 2019 115,000 2020 120,000 E. Interest receivable were not recorded on December 31 of the following years: 2018 P20,000 2019 25,000 2020 30,000 F. On January 1, 2020, an equipment costing P400,000 was sold for P220,000. At the date of sale, the equipment had accumulated depreciation of P240,000. The cash received was recorded by the company as miscellaneous income. G. You also discovered on July 1, 2018, the company completed the construction of the left wing of its factory building incurring a total cost of P750,000, which it had charged to repairs and maintenance. The said building has been used in operations for five years as of July 1, 2018 and its life was unaffected by the extension. The building which had an original cost of P3,000,000 had an accumulated depreciation of P1,125,000 as of December 31, 2020