Karen Company reported net income for a 2-years period as follows:                2017 - Php 120,000        2018 - Php 180,000   In an audit of the financial statement for the year ended December 31, 2017, the following errors were discovered: Advances to supplier in 2017 were recorded as purchases but the merchandise was received in the following year - Php 20,000 Advances from customers in 2017 recorded as sales in 2017 but the goods were delivered in the following year - Php 50,000 On December 31, the ending inventory was overstated by Php 25,000 Required: Answer the following: Compute for the adjusted net income in 2017 and 2018 and the Retained Earnings as of December 31, 2017 and 2018

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Karen Company reported net income for a 2-years period as follows:     

          2017 - Php 120,000        2018 - Php 180,000

  In an audit of the financial statement for the year ended December 31, 2017, the following errors were discovered:

• Advances to supplier in 2017 were recorded as purchases but the merchandise was received in the following year - Php 20,000
• Advances from customers in 2017 recorded as sales in 2017 but the goods were delivered in the following year - Php 50,000
• On December 31, the ending inventory was overstated by Php 25,000

Required: Answer the following:

• Compute for the adjusted net income in 2017 and 2018 and the Retained Earnings as of December 31, 2017 and 2018.
• Give the effect of the error in the 2017 working capital
• Prepare the adjusting entries assuming the respective errors were discovered in (a) 2017; (b) 2018 and (c) 2019.