PROBLEM 3 You have been engaged to audit the accounts of EFU CORP. for the first time in 2004. During the audit you found the following: Year ending December 31 2002 2003 2004 Omissions from the books: a. Accrued expenses, Dec. 31 P18,000 P27,000 P9,000 b. Accrued income, Dec. 31 3,600 4,050 3,150 C. d. Prepaid expenses, Dec. 31 Unearned income. Dec. 31 108,000 31,500 81,000 22,500 54,000 13,500 REQUIREMENTS: a. For each number indicate the effect by writing O for overstated, U for understated or X for no effect. Indicate the amount of over or under statement. EFFECT b. AMOUNT 1. On 2004 net income of the omission of both accrued expense and unearned income at the end of 2002, 2003 and 2004 when considered together. 2. On Retained Earnings after closing at Dec. 31, 2004 of the omission unearned income at the end of 2002, 2003 and 2004. 3. On working capital at December 31, 2004 of the omission of accrued income at the end of 2002, 2003 and 2004 when considered together. 4. On working capital at Dec. 31, 2004 of the omission of unearned income at the end of 2002, 2003 and 2004. 5. On Retained Earnings after closing at Dec. 31, 2004 of the omission of accrued expenses at the end of 2002, 2003 and 2004. 6. On working capital at Dec. 31, 2004 of the omission of prepaid expenses at the end of 2003 and 2004. 7. On Retained Earnings after closing at Dec. 31, 2004 on the omission of prepaid expenses at the end of 2002 and 2003. 8. On 2003 net income of the omission of accrued expenses at the end of 2002. 9. On 2004 net income of the omission of accrued income at the end of 2002, 2003 and 2004 when considered together. 10. On the 2003 net income of the omission of both accrued income and prepaid expense at the end of 2002 and 2003. 11. On the 2004 net income of the omission of prepaid expenses at the end of 2003 and 2004. 12. On 2004 net income of the omission unearned income at the end of 2002 and 2003. 13. On Retained Earnings before closing at Dec. 31, 2002 of the omission of accrued income at the end of 2002. 14. On the 2004 net income of the omission of accrued expenses at the end of 2002, 2003 and 2004 when considered together. 15. On Retained Earnings after closing at Dec. 31, 2004 of the omission of both accrued expenses and unearned income at the end 2002, 2003 and 2004 when considered together