The December 31 year-end financial statements of Wiz Khalifa Company contained the following errors:

December 31, 2016 December 31, 2017

Ending inventory 48,000 understated 40,500 overstated

Depreciation expense 11,500 understated -----

An insurance premium of P330,000 was prepaid in 2016 covering the years 2016, 2017, and 2018. The entire amount was charged

to expense in 2016. In addition, on December 31, 2017, a fully depreciated machinery was sold for P75,000 cash, but the sale was

not recorded until 2018. There were no other errors during 2016 and 2017, and no corrections have been made for any of the

errors. Ignore income tax effects.

4) What is the total effect of the errors on Wiz Khalifas 2017 net income?

A. 123,500 overstatement

B. 27,500 overstatement

C. 192,500 understatement

D. 177,500 understatement

5) What is the total effect of the errors on the amount of Wiz Khalifas working capital at December 31, 2017?

A. 75,500 overstatement

B. 40,500 overstatement

C. 225,500 understatement

D. 144,500 understatement

6) What is the total effect of the errors on the balance of Wiz Khalifas retained earnings at December 31, 2017?

A. 156,000 understatement

B. 87,000 overstatement

C. 133,000 understatement

D. 85,000 understatement