The first audit of the books of SISIW KAHIT NAKAPIKIT Company was made for the year ended December 31, 2020. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are:

a. At the beginning of 2018, the company purchased a machine for P1,020,000 (salvage value of P102,000) that had a useful life of 6 years. The bookkeeper used straight-line depreciation, but failed to deduct the salvage value in computing the depreciation base for the 3 years.

b. At the end of 2019, the company failed to accrue sales salaries of P90,000.

c. A tax lawsuit that involved the year 2018 was settled late in 2020. It was determined that the company owed an additional P170,000 in taxes related to 2018. The company did not record a liability in 2018 or 2019 because the possibility of loss was considered remote, and charged the P170,000 to a loss account in 2020.

d. SISIW KAHIT NAKAPIKIT Company purchased another company early in 2018 and recorded goodwill of P900,000. SISIW KAHIT NAKAPIKIT had not amortized goodwill because its value had not diminished. The estimated economic life of the goodwill is 20 years.

e. In 2020, the company wrote off P174,000 of inventory considered to be obsolete; this loss was charged directly to Retained Earnings.

f. Year-end wages payable of P6,800 was not recorded because the bookkeeper though that "they were immaterial."

g. Insurance for a 12-month period purchased on November 1 of this year was charged to insurance expense in the amount of P5,280 because "the amount of the check is about the same every year.

QUESTIONS:

7. The entry to record the adjustment of item "a" is:

a. Accumulated depreciation 17,000

Depreciation expense 17,000

b. Accumulated depreciation 34,000

Retained earnings 17,000

Depreciation expense 17,000

c. Accumulated depreciation 17,000

Retained earnings 17,000

d. Accumulated depreciation 51,000

Retained earnings 34,000

Depreciation expense 17,000

8. Net income of 2020 is overstated by:

a.P 69,400

b.P 312,000

c.P 103,400

d.P 367,000

9. The entry to record the adjustment of item "c":

a. Loss on damages 170,000

Estimated liability 170,000

b.No adjustment.

c. Retained earnings 170,000

Estimated liability 170,000

d. Loss on damages 170,000

Cash 170,000

10. Net income of 2019 is overstated by:

a.P 73,000

b.P 107,000

c.P 318,400

d.P 460,400