During an audit of year 2020, the auditors discovered that expenses related to utilities were pa on cash basis. Cash payments during 2020 for utilities totaled $40,000. Some of these expense namely, $3,000, had invoices dated in December of 2019. Also, expenses incurred in Decemb of 2020, totaling $2,500, were not paid during 2020 and not included in 2020 expenses. Therefore, accrued expenses at December 31, 2019 and December 31,2020 were determined a follows 12/31/2019 12/31/2020 Utilities 3,000 $ 2,500 Make the adjusting entry based upon full accrual.
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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 9,800During your audit of the books of Alarcon Corporation for the year ended December 31, 2021, you discovered that certain accrued expenses were overlooked at the end of 2014, 2015 and 2016. Not recognized at year end 2019 2020 2021 Accrued salaries expenses 15,000 10,000 12,000 Accrued rent expense 25,000 Accrued interest payable 2,000 Net income for the year 500,000 550,000 600,000 Retained earnings at year end 8,300,000 8,800,000 9,200,000 REQUIRED: Based on the foregoing, compute the corrected balances of following: Net income for 2019 Net income for 2020 Net income for 2021 Retained Earnings as of December 31, 2019 Retained Earnings as of December 31, 2020 Retained Earnings as of December 31, 2021The net income for 2018 reported by the accountant of OH MAH GAHD Company amounted to P634,500. Your audit of the accounts disclosed that the following accounts were not properly accounted: 2017 2018 Rent received in advance 22,500 30,000 Accrued salaries 13,500 18,000 Prepaid interest 33,750 45,000 Commission receivable 15,750 14,625 Depreciation expense 26,250 26,250 Equipment purchased at the beginning of the year charged to expense (10 year life) 75,00010. What is the pre-tax net effect of the above errors on retained earnings on December 31, 2018? A. 3,375 understated B. 3,375 overstated C. 19,125 understated D. 19,125 overstated
- During your audit of the books of Colorado Corporation for the year ended December 31, 2021, you discovered that certain accrued income and expenses were overlooked at the end of 2019, 2020 and 2021. Not recognized at year end 2019 2020 2021 Accrued interest income 2,000 3,000 Accrued salaries expense 12,000 6,000 Accrued rent payable 20,000 Net income for the year 500,000 550,000 600,000 Retained earnings at year end 8,300,000 8,800,000 9,200,000 REQUIRED: Based on the foregoing, compute the corrected balances of following: Net income for 2019 Net income for 2020 Net income for 2021Lowell Corporation has used the accrual basis of accounting for several years. A review of the records, however, indicates that some expenses and revenues have been handled on a cash basis because of errors made by an inexperienced bookkeeper. Income statements prepared by the bookkeeper reported $29,000 net income for 2019 and $37,000 net income for 2020. Further examination of the records reveals that the following items were handled improperly. 1. Rent was received from a tenant in December 2019. The amount, $1,000, was recorded as revenue at that time even though the rental pertained to 2020. 2. Salaries and wages payable on December 31 have been consistently omitted from the records of that date and have been entered as expenses when paid in the following year. The amounts of the accruals recorded in this manner were: December 31, 2018 $1,100 December 31, 2019 1,200 December 31, 2020 940 3. Invoices for supplies purchased have been charged to expense…Dibiasky Corporation is a trading company based in Laguna. The auditor in charge for 2020 audit is examining the company’s liabilities as part of their procedures. The following accounts as of December 31, 2020 are relevant in the tests being performed by the auditor: Accounts payable 1. The balance in the company’s accounts payable account as of December 31, 2020 is P600,000 and this was before any necessary year-end adjustments relating to the following: a) On December 31, 2020, the company has a P50,000 debit balance in its accounts payable to Mindy, a supplier, resulting from a P50,000 advance payment for goods ordered by the company. b) On December 28, 2020, the company purchased and received goods for P40,000, terms 2/10, n/30. The company records purchases and accounts payable at net amounts. The invoice was recorded and paid January 3, 2021. c) Goods were in transit to the company from a vendor on December 31, 2020. The invoice cost was P50,000. The goods were shipped f.o.b.…
- Two Incorporated reported the following net income: 2019 9,680,000 2020 13,250,000 In an audit conducted in 2020, the following were determined: a. The beginning inventory in 2019 is overstated by 330,000 while the ending inventory in 2020 is overstated by 360,000 b. Salaries amounting to 500,000 and 320,000 were not accrued in 2019 and 2020 respectively c. A note amounting to 300,000 and bears an interest of 12% was received from a customer in June 1, 2019. No interest was accrued in 2019 but in 2020, the company accrued interest on the note which is equivalent for 2 years to compensate for the error committed the previous year. Ignore income Tax Effects Determine the corrected net income in 2020The Managing Director of Kotoku Ltd received the financial reports for year ended 31st December 2019 with the 2018 comparatives from his Accountant. He does not understand why the company started the year with a bank balance of GHS6,000,000 but ended the year with a bank balance of only GHS300,000. He feels the Accountant has misappropriated the funds because the company made profits of GHS4,425,000 during the 2019 financial year and so adding that amount to the opening bank balance should result in a closing bank balance of GHS10,425,000. He approached you as a financial analyst to do a thorough analysis of the financial statement. An extract of Profit or loss, statement of financial position and the cashflow prepared from the full financial statements are shown below: Statement of Cashflow for the year ended 31st December 2019 GH¢ GH¢ Cash flows from operating activities Profit before taxation 7,275,000 Adjustment for items not involving a flow of cash: Interest…You were engaged as an independent auditor of Thomas Corporation . In the course of your examination of the accounts on December 31, 2004, the end of the accounting period, you determined that certain prepaid and accrued items were not recorded in prior years and in the current year as follows: 2002 2003 2004 Accrued expenses 4,500 7,500 6,500 Prepaid expenses 5,000 12,000 8,000 Prepaid revenues 1,200 2,750 Revenues receivable 3,000 2,500 Retained earnings at the end of 2002 amounted to P445,000 while net income for 2003 was reported at P126,000. The income summary account for 2004 shows a credit balance of P150,000 before any audit adjustments. You have verified that no dividends were declared in the two year period. 16. Compute for the corrected Retained earnings balance as of December 31, 2002. a. P 444,300 b. P 450,000 c. P 578,500 d. P 445,000 17. The corrected net income for the years ended December 31, 2003 and 2004 are: 2003 2004 a. P126,000 P150,000 b. P134,200 P143,750 c.…
- As of Dec. 31, 2020, ABC Corporation reported total assets of P600,000 and totalliabilities of P250,000. During the audit, the following were determined:Advertising expense amounting to P45,000 was recorded on Jan. 1, 2020 but the contractis good for three years.The Supplies account balance was not yet established. It should be reported as P2,000.Unearned revenue of P70,000 is recorded in the books but this has decreased to P50,000as year-end.A write-off of P30,000 should be recorded. The allowance for bad debts is correctlystated even after this adjustment.Accounts payable amounting to P23,000 was settled but it was recorded as P32,000.What is the correct equity balance as of Dec. 31, 2020?The following are three independent, unrelated sets of facts relating to accounting changes. Situation 1: Sanford Company is in the process of having its first audit. The company has used the cash basis of accounting for revenue recognition. Sanford president, B. J. Jimenez, is willing to change to the accrual method of revenue recognition. Situation 2: Hopkins Co. decides in January 2021 to change from FIFO to weighted-average pricing for its inventories. Situation 3: Marshall Co. determined that the depreciable lives of its fixed assets are too long at present to fairly match the cost of the fixed assets with the revenue produced. The company decided at the beginning of the current year to reduce the depreciable lives of all of its existing fixed assets by 5 years. Instructions For each of the situations described, provide the information indicated below. a. Type of accounting change. b. Manner of reporting the change under current generally accepted accounting principles,…The 2020 comparative balance sheet and 2020 income statement of Maple Group Ltd, have just been prepare and presented to the owners by the company’s Accountant. Upon close examination of the financial information received, it was discovered that some figures in the balance sheet were erroneously omitted due to an oversight by the accountant who is not available to fix the problem due to his unavoidable absence from work. In addition, the owners were concerned about the movement in the company’s cash and cash equivalent given that the balance sheet does not show or explain the reason or reasons why there was an increase or decrease in this area. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the owners. Maple Group Ltd Comparative Balance Sheet December 31, 2020 and 2019 2020 2019 Increase/(Decrease) Assets Cash and…