Problem 1.The first audit of the books of ADAM Company was made for the year ended Dec reviewing the books, the auditor discovered that certain adjustment had either been overlo recorded at the end of 2012, 2013 and 2014. Gross profit rate is 20% of sales. Other detal below. December Omissions of the following accounts 2012 2013 a. Accrued Interest income P1,000 P2,000 b. Inventory 4,000 5,000 C. Accounts Receivable 7,000 8,000 d. Prepaid Expenses 10,000 11,000 e. Advances to suppliers 13,000 14,000 Over-recording of the following accounts f. Sales 16,000 17,000 g. Inventory 19,000 20,000 Omissions of the following accounts: h. Accrued rent expense 22,000 23,000 i. Accounts payable 25,000 26,000 Unearned Commission income 28,000 29,000 K. Advances from customers 31,000 32,000 Major expenditures had been recognized as repairs, but should have been capitalized as cost of equipment; annual depreciation rate on such equipment is 20%, but 34,000 35,000 depreciation in the year of the expenditure is at 10%