Problem 8 You have been engaged to examine the books and other records of Cece Corporation, which started its operations in 2018. Your examination disclosed the following information: 1) Reported profit (loss) for the years then ended December 31: 2018 P250,000 2019 320,000 2020 380,000 2) The company during the three-year period failed to recognize accruals and deferrals at yearend. The amounts omitted were as follows: 2018 2019 2020 Accrued expenses P20,000 P25,000 P30,000 Accrued income 32,000 30,000 26,000 Prepaid expenses 12,000 18,000 24,000 Unearned income 15,000 10.000 8,000 3) Goods which were in transit at yearend were omitted from the physical count. These goods had been properly recorded as purchases during the year: End of 2019 P28,000 End of 2020 64,000 4) The company purchased a machine costing P80,000 on August 31, 2018. The amount was recorded as expense. The company depreciates all its property, plant and equipment using the straight-line method, rounded to the nearest month and disregarding scrap values. This equipment had an estimated useful life of 8 years. 5) Dividends declared at the end of 2019 and 2020 amounting to P60,000 and P100,000, respectively were recorded when paid in 2020 and 2021, respectively. 6) The Retained Earnings account is reproduced below: RETAINED EARNINGS 2018 2019 2020 Balance, January 1 (P100,000) P300,000 Share premium P150,000 Gain on redemption of preference shares 30,000 Gain on sale of treasury shares - ordinary 80,000 Dividends paid (60,000) Profit (loss) for the year (250,000) 320,000 380,000 Balance, December 31 (P100,000) P300,000 P650,000 Required: a) Compute the correct profit (loss) for the years ended December 31, 2018, 2019 and 2020. b) Compute the correct retained earnings balance as at December 31, 2018, 2019 and 2020. Prepare the audit adjusting entries in 2020