1. Karen Company reported net income for a two year period as follows:

2017 -Php 120,0002018 -Php 180,000

In an audit of the financial statement for the year ended December 31, 2017, you had discovered the following errors:

• Accrued interest receivable of Php 15,000 was not recorded at the end of 2017
• Accrued salaries expense of Php 12,000 was not recorded at the end of 2017
• The company leased a portion of its building for Php 24,000 with a one year lease term ending June 1, 2018. Collection of rent was credited to a revenue account. At the end of 2017, no entry was made to take up the unearned portion of the amount collected.
• The company had paid a 12month insurance premium of Php 18,000 effective May 1, 2017. The entire amount was recognized as an expense account and no adjustment was made at the end of year 2017.

Required:Answer the following:

• Compute for the adjusted net income and retained earnings in 2017 and 2018.
• Give the effect of the error in the 2017 working capital
• Prepare the adjusting entries assuming errors were discovered in (a) 2017; (b) 2018 and (c) 2019