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- Shannon Corporation began operations on January 1, 2019. Financial statements for the years ended December 31, 2019 and 2020, contained the following errors: In addition, on December 31, 2020, fully depreciated machinery was sold for 10,800 cash, but the sale was not recorded until 2021. There were no other errors during 2019 or 2020, and no corrections have been made for any of the errors. Refer to the information for Shannon Corporation above. Ignoring income taxes, what is the total effect of the errors on the amount of working capital (current assets minus current liabilities) at December 31, 2020? a. working capital overstated by 4,200 b. working capital understated by 5,800 c. working capital understated by 6,000 d. working capital understated by 9,800Dudley 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.A review of Anderson Corporations books indicates that the errors and omissions pertaining to the balance sheet accounts shown as follows had not been corrected during the applicable years. The net income per the books is: 2017, 10,000; 2018, 12,000; 2019, 15,000; and 2020, 20,000. No dividends were declared during these years and no adjustments were made to retained earnings. The Retained Earnings balance on December 31, 2020, is 50,000. Omissions Required: Determine the correct net income for the years 2017, 2018, 2019, and 2020, and the adjusted balance sheet accounts as of December 31, 2020. Ignore possible income tax effects.
- At the end of 2019, Framber Company received 8,000 as a prepayment for renting a building to a tenant during 2020. The company erroneously recorded the transaction by debiting Cash and crediting Rent Revenue in 2019 instead of 2020. Upon discovery of this error in 2020, what correcting journal entry will Framber make? Ignore income taxes.It is February 16, 2020, and you are auditing Davenport Corporation's financial statements for 2019 (which will be issued in March 2020). You read in the newspaper that Travis Corporation, a major customer of Davenport, is in financial difficulty. Included in Davenports accounts receivable is 50,000 (a material amount) owed to it by Travis. You approach Jim Davenport, president, with this information and suggest that a reduction of accounts receivable and recognition of a loss for 2019 might be appropriate. Jim replies, Why should we make an adjustment? Ted Travis, the president of Travis Corporation, is a friend of mine; he will find a way to pay us, one way or another. Furthermore, this occurred in 2020, so lets wait and see what happens; we can always make an adjustment later this year. Our 2019 income and year-end working capital are not that high; our creditors and shareholders wouldnt stand for lower amounts than they already are. Required: From financial reporting and ethical perspectives, prepare a response to Jim Davenport regarding this issue.Managers from Cloud Ltd. have received the information that it is likely that one of its customers which represent 25%25% of trade receivables will not pay. The balance of trade receivables equals £135,200135,200. In addition, the current balance of insurance expense includes an amount of £4,2504,250 that corresponds to the next accounting period. After considering the two journal entries related to the two economic transactions, which of the following statements is true? a. Cloud Ltd. decreases assets by £29,55029,550 and increases expenses in the same quantity. b. Cloud Ltd. decreases assets by £33,80033,800, decreases expenses by £4,2504,250 and increases liabilities by £33,80033,800. c. Cloud Ltd. increases assets by £29,55029,550 and increases liabilities in £4,2504,250. d. None of the answers is true.
- Which of the following situations has the best chance of being detected when a CPAcompares 2013 revenues and expenses with the prior year and investigates all changesexceeding a fixed percent?(1) An increase in property tax rates has not been recognized in the company’s 2013accrual.(2) The cashier began lapping accounts receivable in 2013.(3) Because of worsening economic conditions, the 2013 provision for uncollectibleaccounts was inadequate.(4) The company changed its capitalization policy for small tools in 2013.1. What is the total effect of the errors on the 2020 net income? a. Overstated by P80,400b. Understated by P775,800c. none of the choicesd. Understated by P1,236,600e. Overstated by P165,000 2. What is the total effect of the errors on the balance of the company's retained earnings at December 31. 20217 a. Understated by P155,100b. none of the choicesc. Understated by P265,800d. Overstated by P930,900e. Overstated by P885,900Harvey Inc. is a calendar corporation. Its financial statements for the years 2021 and 2022 contained errors as follows: Year 2022 Year 2021 Inventory at year end 10,000 understated 30,000 overstated Depreciation expense 8,000 understated 25,000 overstated QUESTION: Assume that the proper correcting entries were made at December 31, 2021. By how much will 2022 income before income taxes be overstated or understated? ["", "", "", ""] Assume that no correcting entries were made at December 31, 2021. Ignoring income taxes, by how much will retained earnings at December 31, 2022 be overstated or understated? ["", "", "", ""] Assume that no correcting entries were made at December 31, 2021 or December 31, 2022, and that no additional errors occurred in 2023. Ignoring income taxes, by how much will working capital at December 31, 2023 be overstated or understated?
- In 2021, the internal auditors of Development Technologies, Inc., discovered that (a) 2020 accrued salaries of $2 million were not recognized until they were paid in 2021 and (b) a $3 million purchase of merchandise in 2021 was recorded as a debit to Purchases in 2020 instead. The physical inventory count at the end of 2020 was correct. Ignoring income taxes, what journal entries are needed in 2021 to correct each error? Also, briefly describe any other measures Development Technologies would take in connection with correcting the errors.The following pretax amounts pertain to Helsinki Company for the yearended December 31, 2021: Sales, P800,000; Distribution andadministrative costs, P84,000; Other income, P40,000; Interest expense, P4,000; Cost of goods sold, P480,000; Correction of priorperiod error (credit), P16,000; Discontinued operations (debit),P40,000; Cumulative effect of change in accounting policy (credit),P28,000; Retained earnings, January 1 (not restated), P160,000; Dividends declared, P12,000; Income tax rate is 30% How much retained earnings would be shown on December 31, 2021 statement of financial position?During the preparation of financial statement for Master Ltd for 2023 it was discovered thatan amount of $22,000, incurred in September 2021 and payable to an overseas supplier, wasoverlooked and not paid or provided for in the financial statement ending 30 June 2022. Theamount is considered to be material and will be permitted as a deduction for tax purposes(tax rate 30%).Required:i) Prepare the necessary journal entry to correct this error.