Problem 4The Huawei Corporation reported the following net income:2020-P320,0002021 - P380,000An investigation of the accounts in 2023 reveals the following errors:Errorsa. Understatement of unused suppliesb. Overstatement of merchandise inventoryc. Omission of accrued wagesd. Overstatement of unearned subscription income2022-P 430,000As of December 3120212020P 10,00030,0002,400P -50,0007,0003,0001. Determine the net over/understatement of the net income of 2020, 2021 and 2022.2. Determine the corrected net income of 2020, 2021 and 2022.3. Prepare the necessary correcting entries as of December 31, 2022.2022P 5,0008,0004,200

Name: Problem 4The Huawei Corporation reported the following net income:202
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Description: Problem 4The Huawei Corporation reported the following net income:2020-P320,0002021 - P380,000An investigation of the accounts in 2023 reveals the following errors:Errorsa. Understatement of unused suppliesb. Overstatement of merchandise inventoryc.

Notes: Overstatement of unearned income is not a Income statement item , it is a Balance sheet item.…

Business

Accounting

1. Determine the net over/understatement of the net income of 2020, 2021 and 2022. 2. Determine the corrected net income of 2020, 2021 and 2022. 3. Prepare the necessary correcting entries as of December 31, 2022.

1. Determine the net over/understatement of the net income of 2020, 2021 and 2022. 2. Determine the corrected net income of 2020, 2021 and 2022. 3. Prepare the necessary correcting entries as of December 31, 2022.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 71APSA: Effects of an Inventory Error The income statements for Graul Corporation for the 3 years ending in...

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Effects of an Inventory Error The income statements for Graul Corporation for the 3 years ending in 2019 appear below. During 2019, Graul discovered that the 2017 ending inventory had been misstated due to the following two transactions being recorded incorrectly. a. A purchase return of inventory costing $42,000 was recorded twice. b. A credit purchase of inventory' made on December 20 for $28,500 was not recorded. The goods were shipped F.O.B. shipping point and were shipped on December 22, 2017. Required: 1. Was ending inventory for 2017 overstated or understated? By how much? 2. Prepare correct income statements for all 3 years. 3. CONCEPTUAL CONNECTION Did the error in 2017 affect cumulative net income for the 3-year period? Explain your response. 4. CONCEPTUAL CONNECTION Why was the 2019 net income unaffected?
Refer to RE22-2. Assume Heller Company had sales revenue of 510,000 in 2019 and 650,000 in 2020. Prepare Hellers partial income statements (through gross profit) for 2019 and 2020. RE22-2 Heller Company began operations in 2019 and used the LIFO method to compute its 300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been 250,000 in 2019. For 2020, Hellers cost of goods sold under FIFO was 360,000, while it would have been 410,000 under LIFO. Heller is subject to a 21% income tax rate. Compute the cumulative effect of the retrospective adjustment on prior years income (net of taxes) that Heller would report on its retained earnings statement for 2020.
Recording Various Liabilities Glenview Hardware had the following transactions that produced liabilities during 2020: a. Purchased merchandise on credit for $30,000. ( Note: Assume a periodic inventory system.) b. Year-end wages of $10,000 were incurred, but not paid. Related federal income taxes of $1,200, Social Security of $620 (employee portion), and Medicare taxes of $145 were with-held from employees. c. Year-end estimated income taxes payable, but unpaid, for the year were $42,850. d. Sold merchandise on account for $1,262, including state sales taxes of S48. ( Note: Assume a periodic inventory system.) e. Employers share of Social Security and Medicare taxes for the period were $620 and $145, respectively. f. Borrowed cash under a 90-day, 9%, $25,000 note. Required: Prepare the entry to record each of these transactions (treat each transaction independently).
Recording Various Liabilities Plymouth Electronics had the following transactions that produced liabilities during 2020: a. Purchased merchandise on credit for $80,000. ( Note: Assume a periodic inventory system.) Year-end wages of $40,000 were incurred, but not paid. Related federal income taxes of $13,000 and Medicare taxes of $580 were withheld. Employee wages are all above the Social Security maximum, so only Medicare was paid. b. Year-end estimated income taxes payable, but unpaid, for the year were $113,615. c. Sold merchandise on account for $3,636, including state sales taxes of $180. ( Note: Assume a periodic inventory system.) d. Employers share of Medicare taxes for the period was $580. The taxes will be paid at a later date. e. Borrowed cash under a 180-day, 8%, $155,000 note. Required: Prepare the entry to record each of these transactions (treat each transaction independently).
Effects of an Error in Ending Inventory Waymire Company prepared the partial income statements presented below for 2019 and 2018. During 2020, Waymires accountant discovered that ending inventory for 2018 had been understated by $6,500. Required: 1. Prepare corrected income statements for 2019 and 2018. 2. Prepare a schedule showing each financial statement item affected by the error and the amount of the error for that item (ignore the effect of income taxes). Indicate whether each error is an overstatement (+) or an understatement (-).
Average Uncollectible Account Losses and Bad Debt Expense The accountant for Porile Company prepared the following data for sales and losses from uncollectible accounts: Required: 1. Calculate the average percentage of losses from uncollectible accounts for 2015 through 2018. 2. Assume that the credit sales for 2019 are $1,260,000 and that the weighted average percentage calculated in Requirement 1 is used as an estimate of loses from uncollectible accounts for 2019 credit sales. Determine the bad debt expense for 2019 using the percentage of credit sales method. 3. CONCEPTUAL CONNECTION Do you believe this estimate of bad debt expense is reasonable? 4. CONCEPTUAL CONNECTION How would you estimate 2019 bad debt expense if losses from uncollectible accounts for 2018 were What other action would management consider?
Refer to RE22-2. Assume the pretax cumulative effect adjustment is 50,000. Prepare the journal entry that Heller Company would make at the beginning of 2020 to record the cumulative effect of the change from LIFO to FIFO. RE22-2 Heller Company began operations in 2019 and used the LIFO method to compute its 300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been 250,000 in 2019. For 2020, Hellers cost of goods sold under FIFO was 360,000, while it would have been 410,000 under LIFO. Heller is subject to a 21% income tax rate. Compute the cumulative effect of the retrospective adjustment on prior years income (net of taxes) that Heller would report on its retained earnings statement for 2020.
Company Elmira reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 32,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
Company Edgar reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 12,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
Borys Companys periodic inventory at December 31, 2019, is understated by 10,000, but purchases are correct. Johnson correctly values its 2020 ending inventory. What is the effect of this error on Boryss 2019 and 2020 financial statements?
Assuming a companys year-end inventory were understated by $16,000, indicate the effect (overstated/understated/no effect) of the error on the following balance sheet and income statement accounts. A. Income Statement: Cost of Goods Sold B. Income Statement: Net Income C. Balance Sheet: Assets D. Balance Sheet: Liabilities E. Balance Sheet: Equity
Lower of Cost or Market Garcia Company uses FIFO, and its inventory at the end of the year was recorded in the accounting records at $17,800. Due to technological changes in the market, Garcia would be able to replace its inventory for $16,500. Required: 1. Using the lower of cost or market method, what amount should Garcia report for inventory on its balance sheet at the end of the year? 2. Prepare the journal entry required to value the inventory at the lower of cost or market.