please Answer item 4 Ridley Corporation is in the process of adjusting and correcting its books at the end of 2020. In reviewing its records, the following informationwas discovered. Prepare the journal entries necessary at December 31, 2020, to record the corrections and changes. The books are still open for2020. The income tax rate is 40%. The company has not yet recorded its 2020 income tax expense and payable amounts so current-year taxeffects may be ignored. Prior-year tax effects must be considered in item 4.1. The company did not accrue sales commissions payable at the end of each of the last 2 years, as follows.December 31, 2019 $19,000December 31, 2020 $11,0002. In reviewing the December 31, 2020, inventory, Ridley discovered errors in its inventory taking procedures that have caused inventories forthe last 3 years to be incorrect, as follows.UnderstatedDecember 31, 2018December 31, 2019December 31, 2020UnderstatedOverstated$16,000$19,000$ 6,700The company has already made an entry that established the incorrect December 31, 2020, inventory amount.3. At December 31, 2020, Ridley decided to change the depreciation method on its office equipment from double-declining-balance to straight-line. The equipment had an original cost of $100,000 when purchased on January 1, 2018. It has a 10-year useful life and no residual value.Depreciation expense recorded prior to 2020 under the double-declining- balance method was $36,000. The company has already recorded 2020depreciation expense of $12,800 using the double-declining-balance method.4. Before 2020, Ridley accounted for its income from long-term construction contracts on the cost-recovery basis. Early in 2020, the companychanged to the percentage-of- completion basis for accounting purposes. It continues to use the cost-recovery method for tax purposes. Incomefor 2020 has been recorded using the percentage-of-completion method.Pretax Income fromCost-RecoveryPercentage-of-Completion$150,000Prior to 2020$105,000202060,00020,0005. A collection of $5,600 on account from a customer received on December 31, 2020, was not recorded until January 2, 2021.

In this question, we will answer only point 4 , As student want the answer of point 4 only, we will…

4. Before 2020, Ridley accounted for its income from long-term construction contracts on the cost-recovery basis. Early in 2020, the company changed to the percentage-of- completion basis for accounting purposes. It continues to use the cost-recovery method for tax purposes. Income for 2020 has been recorded using the percentage-of-completion method. Pretax Income from Cost-Recovery Percentage-of-Completion $150,000 Prior to 2020 $105,000

4. Before 2020, Ridley accounted for its income from long-term construction contracts on the cost-recovery basis. Early in 2020, the company changed to the percentage-of- completion basis for accounting purposes. It continues to use the cost-recovery method for tax purposes. Income for 2020 has been recorded using the percentage-of-completion method. Pretax Income from Cost-Recovery Percentage-of-Completion $150,000 Prior to 2020 $105,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 16E: Dudley Company failed to recognize the following accruals. It also recorded the prepaid expenses and...

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Dudley Company failed to recognize the following accruals. It also recorded the prepaid expenses and unearned revenues as expenses and revenues, respectively', in the following year when paid or collected. The reported pretax income was 20,000 in 2018, 25,000 in 2019, and 23,000 in 2020. Required: 1. Compute the correct pretax income for 2018, 2019, and 2020. 2. Prepare the journal entries necessary in 2020 if the errors are discovered at the end of that year. Ignore income taxes. 3. Prepare the journal entries necessary in 2021 if the errors are discovered at the end of that year. Ignore income taxes.
Ridley Corporation is in the process of adjusting and correcting its books at the end of 2020. In reviewing its records, the following information was discovered. Prepare the journal entries necessary at December 31, 2020, to record the corrections and changes. The books are still open for 2020. The income tax rate is 40%. The company has not yet recorded its 2020 income tax expense and payable amounts so current-year tax effects may be ignored. Prior-year tax effects must be considered in item 4.1. The company did not accrue sales commissions payable at the end of each of the last 2 years, as follows. December 31, 2019 $19,000December 31, 2020 $11,0002. In reviewing the December 31, 2020, inventory, Ridley discovered errors in its inventory taking procedures that have caused inventories for the last 3 years to be incorrect, as follows.December 31, 2018 Understated $16,000December 31, 2019 Understated $19,000December 31, 2020 Overstated $ 6,700The company has already made an entry that…