(Error Analysis and Correcting Entry) The reported net incomes for the first 2 years of Sandra Gustafson Products, Inc., were as follows: 2017, $147,000; 2018, $185,000. Early in 2019, the following errors were discovered.1. Depreciation of equipment for 2017 was overstated $17,000.2. Depreciation of equipment for 2018 was understated $38,500.3. December 31, 2017, inventory was understated $50,000.4. December 31, 2018, inventory was overstated $16,200.InstructionsPrepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income tax considerations.)

(Error Analysis and Correcting Entry) The reported net incomes for the first 2 years of Sandra Gustafson Products, Inc., were as follows: 2017, $147,000; 2018, $185,000. Early in 2019, the following errors were discovered.1. Depreciation of equipment for 2017 was overstated $17,000.2. Depreciation of equipment for 2018 was understated $38,500.3. December 31, 2017, inventory was understated $50,000.4. December 31, 2018, inventory was overstated $16,200.InstructionsPrepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income tax considerations.)

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 15EB: Tanke Company reported net income on the year-end financial statements of $850,200. However, errors...

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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 9,800
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 beginning of 2020, Tanham Company discovered the following errors made in the preceding 2 years: Reported net income was 27,000 in 2018 and 35,000 in 2019. The allowance for doubtful accounts had a zero balance at the beginning of 2018. No accounts were written off during 2018 or 2019. Ignore income taxes. Required: 1. What is the correct net income for 2018 and 2019? 2. Prepare the adjusting journal entry in 2020 to correct the errors.
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.
Tanke Company reported net income on the year-end financial statements of $850,200. However, errors in inventory were discovered after the reports were issued. If inventory was overstated by $21,000, how much net income did the company actually earn?
Shetland Company reported net income on the year-end financial statements of $125,000. However, errors in inventory were discovered after the reports were issued. If inventory was understated by $15,000, how much net income did the company actually earn?
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?
Company Edgar reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 12,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
Company Elmira reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 32,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
It is the end of 2019 and you are an accountant for Stone Company. During 2019, sales of the companys products slumped and the companys earnings are expected to be much less than those of 2018. The president comes to you with an idea. He says, Our companys property, plant, and equipment cost 300,000, and that is the amount we usually report on our balance sheet. However, I just had these assets appraised by an independent appraiser, and she says they are worth 400,000. I think that the company should report the property, plant, and equipment at this amount on its December 31, 2019, balance sheet and should report the 100,000 increase in value as a gain on the 2019 income statement. If we use this approach, it will show how much our company is really worth and increase our earnings. This will make our shareholders happy. What do you think? Required: Prepare a written response to the president.
The reported net incomes for the first 2 years of Sandra Gustafson Products, Inc., were as follows: 2020, $147,000; 2021, $185,000. Early in 2022, the following errors were discovered. 1. Depreciation of equipment for 2020 was overstated $17,000. 2. Depreciation of equipment for 2021 was understated $38,500. 3. December 31, 2020, inventory was understated $50,000. 4. December 31, 2021, inventory was overstated $16,200. Instructions Prepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income tax considerations.)
Your examination of the financial statements of water Corporation revealed the following errors were made in the preparation of the 2017 financial statements: a. The depreciation expense in 2017 was recorded as P100,000, instead of P10,000b. Sales made in December 2017 for P150,000 were recorded in January 2018c. Rent paid on April 30, 2017 covering a one-year period was recognized as expense in 2017. Unexpired portion of P40,000 was not recorded at year-endd. Advances from customers amounting to P25,000 were recognized as sales in 2017. The goods were shipped in 2018.e. Salaries totaling to P50,000 was not recorded at year-end. The expense was recorded upon payment in 2018.f. Collections of accounts receivable in 2017 amounting to P20,000 were recorded in 2018.g. The unadjusted net income for 2017 is P650,000 Required: What is the net effect of the errors in the working capital at the end of 2017 and 2018?