Required: a. Prepare a statement of changes in equity for the year 2022, starting with comparative information for 2021. The company's income tax rate is 20%. 3-7.At the beginning of 2020, the Caesars Palace Company madeP100,000 in expenditures that should have been recorded as anexpense immediately.However, the company erroneouslyrecorded this expenditure as a debit to the equipment accountand depreciated the same over 5 years, with no scrap valuebeing considered. The error was discovered in 2022 when thefinancial statements for 2021 had been issued.The company reported retained earnings at the end of 2020 ofP1,500,000. In 2021, the company reported a profit of P500,000and declared dividends of P200,000. Profit for 2022 (correctlystated) was P750,000, and dividends declared during the yearwere P500,000.The company's share capital remained unchanged at P2,000,000since December 31, 2021. There is no other shareholders' equityaccount except ordinary share capital and retained earnings.Required:Prepare a statement of changes in equity for the year 2022,starting with comparative information for 2021. The company'sincome tax rate is 20%.

Statement of Changes in Equity is the reconciliation between the opening balance and closing balance…

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Business

Accounting

At the beginni

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 8P: At the beginning of 2020, Holden Companys controller asked you to prepare correcting entries for the...

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During 2019, White Company determined that machinery previously depreciated over a 7-year life had a total estimated useful life of only 5 years. An accounting change was made in 2019 to reflect the change in estimate. If the change had been made in 2018, accumulated depreciation at December 31, 2018, would have been 1,600,000 instead of 1,200,000. As a result of this change, the 2019 depreciation expense was 100,000 greater than it would have been if no change were made. Ignoring income tax considerations, what is the proper amount of the adjustment to Whites January 1, 2019, balance of retained earnings? a. 0 b. 100,000 c. 280,000 d. 400,000
The following are independent errors: a. In January 2019, repair costs of 9,000 were debited to the Machinery account. At the beginning of 2019, the book value of the machinery was 100,000. No residual value is expected, the remaining estimated life is 10 years, and straight-line depreciation is used. b. All purchases of materials for construction contracts still in progress have been immediately expensed. It is discovered that the use of these materials was 10,000 during 2018 and 12,000 during 2019. c. Depreciation on manufacturing equipment has been excluded from manufacturing costs and treated as a period expense. During 2019, 40,000 of depreciation was accounted for in that manner. Production was 15,000 units during 2019, of which 3,000 remained in inventory at the end of the year. Assume there was no inventory at the beginning of 2019. Required: Prepare journal entries for the preceding errors discovered during 2020. Ignore income taxes.
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 9,800
At the beginning of 2020, Holden Companys controller asked you to prepare correcting entries for the following three situations: 1. Machine X was purchased for 100,000 on January 1, 2015. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 45,000. The estimated residual value remains at 10,000, but the service life is now estimated to be 1 year longer than originally estimated. 2. Machine Y was purchased for 40,000 on January 1, 2018. It had an estimated residual value of 4,000 and an estimated service life of 8 years. It has been depreciated under the sum-of-the-years-digits method for 2 years. Now, the company has decided to change to the straight-line method. 3. Machine Z was purchased for 80,000 on January 1, 2019. Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value is 8,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry for each situation to record the depreciation for 2020. Ignore income taxes.
On July 1, 2018, Mundo Corporation purchased factory equipment for 50,000. Residual value was estimated at 2,000. The equipment will be depreciated over 10 years using the double-declining balance method. Counting the year of acquisition as one-half year, Mundo should record 2019 depredation expense of: a. 7,680 b. 9,000 c. 9,600 d. 10,000
At the end of 2020, while auditing Sandlin Companys books, before the books have been closed, you find the following items: a. A building with a 30-year life (no residual value, depreciated using the straight-line method) was purchased on January 1, 2020, by issuing a 90,000 non-interest-bearing, 4-year note. The entry made to record the purchase was a debit to Building and a credit to Notes Payable for 90,000; 12% is a fair rate of interest on the note. b. The inventory at the end of 2020 was found to be overstated by 15,000. At the same time, it was discovered that the inventory at the end of 2019 had been overstated by 35,000. The company uses the perpetual inventory system. c. For the last 3 years, the company has failed to accrue salaries and w-ages. The correct amounts at the end of each year were: 2018, 12,000; 2019, 18,000; and 2020, 10,000. Required: 1. Prepare journal entries to correct the errors. Ignore income taxes. 2. Assume, instead, that the company discovered the errors after it had closed the books. Prepare journal entries to correct the errors. Ignore income taxes.
Albany Corporation purchased equipment at the beginning of Year 1 for 75,000. The asset does not have a residual value and is estimated to be in service for 8 years. Calculate the depreciation expense for Years 1 and 2 using the double-declining-balance method. Round to the nearest dollar.
Sison Company reported profts of P4,000,000 and P8,000,000 in 2021 and 2022, respectively, In 2023, the following prior period errors were discovered: The inventory on December 31, 2021 was understated by P200,000. An equipment with an acquisition cost of P1,200,000 was erroneously charged as expense in 2021, The equipment has an estimated useful life of 5 years with no residual value. Sison Company provides full year depreciation in the year of acquisition. The unadjusted balance of retained earnings are P8,800,000 and P16,800,000 as of December 31, 2021 and 2022, respectively How much is the correct profit in 2021? How much is the correct profit in 2022? How much is the correct retained earnings in 2021?
In 2024, internal auditors discovered that PKE Displays, Incorporated, had debited an expense account for the $351,000 cost of equipment purchased on January 1, 2021. The equipment’s life was expected to be five years with no residual value. Straight-line depreciation is used by PKE. Required: Determine the cumulative effect of the error on net income over the three-year period from 2021 through 2023, and on retained earnings by the end of 2023. Prepare the correcting entry, assuming the error was discovered in 2024 before the adjusting and closing entries. (Ignore income taxes.) Assume instead that the equipment was disposed of in 2025 and the original error was discovered in 2026 after the 2025 financial statements were issued. Prepare the correcting entry in 2026.
Dimmu Company purchased a machine on January 1, 2021, at a cost of P 120.000. An additional P 50.000 was spent for installation, but this amount was charged erroneously to Repairs Expense and not discovered until 2013. The machine has a useful life of five years and a salvage value of P 20.000. As a result of the error, a. retained earnings at December 31, 2022, was understated by P 30,000, and 2022 income was overstated by P 6,000. b. retained earnings at December 31, 2022, was understated by P 38,000, and 2022 income was overstated by P 6,000. c. 2021 income was understated by P 50,000. d. retained earnings at December 31. 2022, was understated by P 30,000, and 2022 income was overstated by P 10,000.
On January 1, 2020, Company discovered that it had incorrectly expensed a P2,100,000 machine purchased on January 1, 2017. The entity estimated the machine’s original useful; life to be 10 years and the residual value at P100,000. The entity used the straight-line method of depreciation and is subject to a 30% income tax rate. In the December 31, 2020 financial statements, what amount should be reported as prior period error? A.P1,659,000 B.P1,029,000 C.P1,050,000 D.P1,680,000
During 2019, Bing Company constructed its own equipment costing P5,000,000. The weighted average accumulated expenditure on these assets during 2019 was P2,500,000. To help finance the construction, P1, 800,000 was borrowed at 10% on January 1, 2019, and funds not needed for construction were temporarily invested in short-term securities, yielding P45,000 in interest revenue. Other than the construction funds borrowed, the only other debt outstanding during the year was a P2,500,000, 10-year, 9% notes payable dated January 1, 2019. What is the amount of interest that should be capitalized by Bing during 2019?