Reference no: EM133901347

Problem

In its financial statements for the year ended. December 31, 2018 TBB COMPANY reported P73, 500 revenue (sales), P53, 500 costs of goods sold, P6, 000 income tax expense, P20, 000 retained earnings at January 1, 2018 and P34, 000 retained earnings at December 31, 2018.

In 2019, after the 2018 financial statements were approved for issue, TBB COMPANY discovered that some products sold in 2018 were incorrectly included in inventories at December 31, 2018 at their cost of P6, 500. In 2019, TBB COMPANY changed its accounting policy for the measurement of investments property after initial recognition from the cost model to the fair value model. It acquired its only investments property for P3, 000 many years ago, The fair value of the investment was determined on December 31, 2019 a P25, 000. (P20, 000 in 2018 and P18, 000 in 2017). At December 31, 2019, as a result of the invention of improved lubricants, TBB COMPANY reassessed the useful life of Machine A from four years to seven years. Machine A is depreciated on the straight-line method to a nil residual value. It was acquired for P6, 000 on January 1, 2017. Inventories of the type manufactured by Machine A were immaterial at the end of each reporting period. Get the instant assignment help.

TBB COMPANY's accounting records for the year ended December 31, 2019, before accounting for the change in accounting policy and before accounting for the change in accounting estimate, record P104, 000 revenue( asset) , P86, 500 costs of goods sold and P5, 050 income tax expense.

Assume that the income tax rate is 30%

What is the amount that should be charged against retained earnings in 2019 as a result of the above accounting changes and errors?