20x2 Ending inventory P320,000 understated P300,00
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PLease show the complete solution
Cromwell Company began operations on January 1, 20x1. Financial statements for the years ended December 31, 20x1 and 20x2 contained the following errors:
|
|
20x1 |
20x2 |
|
Ending inventory |
P320,000 understated |
P300,000 overstated |
|
|
120,000 understated |
|
|
Insurance expense |
200,000 overstated |
200,000 understated |
|
Prepaid insurance |
100,000 understated |
|
The reported net income for 20x1 is P648,000 and P894,000 for 20x2. In addition, on December 31, 20x2, a fully depreciated machinery was sold for P216,000 cash, but the sale was not recorded until 20x3. There were no other errors during 20x1 and 20x2, and no corrections have been made for any of the errors. Ignore income tax effects.
REQUIRED: Compute the total effects of errors and indicate whether overstated or understated.
Total effect of the errors on Elizabeth’s 20x1 net income
Total effect of the errors on Elizabeth’s 20x2 net income
Total effect of the errors on Elizabeth’s
Total effect of the errors on
Corrected net income for 20x1
Corrected net income for 20x2
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- The following are independent errors made by a company that uses the periodic inventory system: a. Goods in transit, purchased on credit and shipped FOB destination, 10,000, were included in purchases but not in the physical count of ending inventory. b. Purchase of a machine for 2,000 was expensed. The machine has a 4-year life, no residual value, and straight-line depreciation is used. c. Wages payable of 2,000 were not accrued. d. Payment of next years rent, 4,000, was recorded as rent expense. e. Allowance for doubtful accounts of 5,000 was not recorded. The company normally uses the aging method. f. Equipment with a book value of 70,000 and a fair value of 100,000 was sold at the beginning of the year. A 2-year, non-interest-bearing note for 129,960 was received and recorded at its face value, and a gain of 59,960 was recognized. No interest revenue was recorded and 14% is a fair rate of interest. Required: 1. Next Level Indicate the effect of each of the preceding errors on the companys assets, liabilities, shareholders equity, and net income in the year in which the error occurs. State whether the error causes an overstatement (+), an understatement (), or no effect (NE). 2. Prepare the correcting journal entry or entries required at the beginning of the year for each of the preceding errors, assuming the company discovers the error in the year after it was made. Ignore income taxes.Assuming a companys year-end inventory were overstated by $5,000, 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: EquityAssuming 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
- If Wakowski Companys ending inventory was actually $86,000 but was adjusted at year end to a balance of $68,000 in error, what would be the impact on the presentation of the balance sheet and income statement for the year that the error occurred, if any?Cromwell Company began operations on January 1, 20x1. Financial statements for the years ended December 31, 20x1 and 20x2 contained the following errors:20x1 20x2Ending inventory P320,000 understated P300,000 overstatedDepreciation expense 120,000 understatedInsurance expense 200,000 overstated 200,000 understatedPrepaid insurance 100,000 understatedThe reported net income for 20x1 is P648,000 and P894,000 for 20x2. In addition, on December 31, 20x2, a fully depreciated machinery was sold for P216,000 cash, but the sale was not recorded until 20x3. There were no other errors during 20x1 and 20x2, and no corrections have been made for any of the errors. Ignore income tax effects.REQUIRED: Compute the total effects of errors and indicate whether overstated or understated.5. Total effect of the errors on Elizabeth’s 20x1 net income _____________6. Total effect of the errors on Elizabeth’s 20x2 net income _____________7. Total effect of the errors on Elizabeth’s working capital on December…Please show the complete solution. Thank you At the beginning of 20x2, Jericho, Inc. discovered the following errors made in the preceding two (2) years: 20x1 20x2 Overstatement of ending inventory P50,000 P20,000 Omission of wages payable 7,000 8,000 Omission of allowance for doubtful accounts 13,000 17,000 Prepaid insurance recorded as expense 5,000 2,000 The reported net income was P270,000 in 20x1, and P350,000 in 20x2. The allowance for doubtful accounts had a zero balance at the beginning of 20x1. No accounts were written off during 20x1 or 20x2. Ignore income taxes. REQUIRED: Corrected net income for 20x1 Corrected net income for 20x2
- Company started operations on January 1, 2019. Financial Statements for 2019 and 2020 contained the following errors: December 31, 2019 December 31, 2020 Ending inventory P55,000 overstated P65,000 understated Depreciation expense 35,000 overstated - Insurance expense 25,000 understated 25,000 overstated Prepaid insurance 25,000 overstated - Additionally, a fully depreciated equipment was sold for P12,000 on December 31, 2020. The sale was not recorded until 2021. No corrections have been made for any of the errors. (Ignore income tax considerations) How much would be the total effect of the errors in company's 2020 net income? A.Overstated by P83,000 B.Understated by P157,000 C.Overstated by P48,000…Peter Senen Company started operations on January 1, 2019. Financial Statements for 2019 and 2020 contained the following errors: December 31, 2019 December 31, 2020 Ending inventory 55,000 overstated 65,000 understated Depreciation expense 35,000 overstated - Insurance expense 25,000 understated 25,000 overstated Prepaid insurance 25,000 overstated - Additionally, a fully depreciated equipment was sold for $12,000 on December 31, 2020. The sale was not recorded until 2021. No corrections have been made for any of the errors. (Ignore income tax considerations) How much would be the understatement in Peter Senen’s Accumulated Profits balance at…Peter Senen Company started operations on January 1, 2019. Financial Statements for 2019 and 2020 contained the following errors: December 31, 2019 December 31, 2020 Ending inventory 55,000 overstated 65,000 understated Depreciation expense 35,000 overstated - Insurance expense 25,000 understated 25,000 overstated Prepaid insurance 25,000 overstated - Additionally, a fully depreciated equipment was sold for $12,000 on December 31, 2020. The sale was not recorded until 2021. No corrections have been made for any of the errors. (Ignore income tax considerations) How much would be the total effect of the errors in Peter Senen’s 2020 net income?
- On December 1, 20x1, the warehouse of A Company and all inventories contained therein were damaged by flood. Off-site back up of data base shows the following data:Beginning inventory - 18,850.00Payable, beginning - 7,500.00Payable, November 30 - 1,980.00Payments to supplier - 51,450.00Transportation in - 4,760.00Purchase returns - 1,570.00Sales up to November 30 - 75,200.00Sales returns - 5,300.00Sales discounts - 3,300.00GPR based on sales - 25%Additional information: Goods in transit as of November 30, 20x1 amounted to P5,000 and materials damaged by flood can be sold at a salvage value of P2,580. Inventory loss isShannon Company began operations on January 1, 2013. The financial statements contained the following errors: 2013 2014 Ending inventory 160,000 understated 150,000 overstated Depreciation expense 60,000 understated Insurance expense 100,000 overstated 100,000 understated Prepaid insurance 100,000 understated On December 31, 2014, fully depreciated machinery was sold for P108,000 cash but the sale was not recorded until 2015. No corrections have been made for any of the errors. Ignoring income tax, what is the total effect of the errors on Working capital on December 31, 2014?(Error Analysis) Peter Henning Tool Company's December 31 year-end financial statements contained the following errors. December 31, 2020 December 31, 2021 Ending inventory $9,600 understated $8,100 overstated Depreciation expense $2,300 understated — An insurance premium of $66,000 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $15,000 cash, but the entry was not recorded until 2022. There were no other errors during 2020 or 2021, and no corrections have been made for any of the errors. (Ignore income tax considerations.) Instructions a. Compute the total effect of the errors on 2021 net income. b. Compute the total effect of the errors on the amount of Henning's working capital at December 31, 2021. c. Compute the total effect of the errors on the balance of Henning's retained earnings at…
