On December 31, 2014, Fashion Nugget Company prepared an income statement and balance sheet and failed to take into account three adjusting entries. The incorrect income statement showed net income of $35,000. The balance sheet showed total assets, $115,000; total liabilities, $45,000; and owner's equity, $70,000. The data for the three adjusting entries were: (1) Depreciation of $10,000 was not recorded on equipment. (2) Wages amounting to $7,000 for the last two days in December were not paid and not recorded. The next navroll will be in January Ihe

On December 31, 2014, Fashion Nugget Company prepared an income statement and balance sheet and failed to take into account three adjusting entries. The incorrect income statement showed net income of $35,000. The balance sheet showed total assets, $115,000; total liabilities, $45,000; and owner's equity, $70,000. The data for the three adjusting entries were: (1) Depreciation of $10,000 was not recorded on equipment. (2) Wages amounting to $7,000 for the last two days in December were not paid and not recorded. The next navroll will be in January Ihe

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 10P: At the beginning of 2020, Tanham Company discovered the following errors made in the preceding 2...

See similar textbooks

Similar questions

Reece Financial Services Co., which specializes in appliance repair services, is owned and operated by Joni Reece. Reece Financial Services Co.s accounting clerk prepared the following unadjusted trial balance at July 31, 2016: The data needed to determine year-end adjustments are as follows: a. Depreciation of building for the year, 6,400. b. Depreciation of equipment for the year, 2,800. c. Accrued salaries and wages at July 31, 900. d. Unexpired insurance at July 31, 1,500. e. Fees earned but unbilled on July 31, 10,200. f. Supplies on hand at July 31, 615. g. Rent unearned at July 31, 300. Instructions 1. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable; Rent Revenue; Insurance Expense; Depreciation ExpenseBuilding; Depreciation ExpenseEquipment; and Supplies Expense. 2. Determine the balances of the accounts affected by the adjusting entries and preparean adjusted trial balance.
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, 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.
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.
On December 31, 2018, Alan and Company prepared an income statement and balance sheet but failed to take into account four adjusting journal entries. The income statement, prepared on this incorrect basis, reported income before income tax of $26,000. The balance sheet (before the effect of income taxes) reflected total assets, $82,000; total liabilities, $36,000; and stockholders’ equity, $46,000. The data for the four adjusting journal entries follow:Effect of Amortization of $7,200 for the year on software was not recorded.Salaries and Wages amounting to $16,200 for the last three days of December 2018 were not paid and not recorded (the next payroll will be on January 10, 2019).Rent revenue of $3,600 was collected on December 1, 2018, for office space for the three-month period December 1, 2018, to February 28, 2019. The $3,600 was credited in full to Deferred Revenue when collected.Income taxes were not recorded and not paid. The income tax rate for the company is 30%.Complete the…
The following accounts were taken from the trial balance of Cole Company as of December 31, 2015: Given the information below, make the necessary adjusting entries. The equipment has an estimated useful life of 10 years and a salvage value of $4,000. Depreciation is calculated using the straight-line method. Of selling expense, $1,500 has been paid in advance. Interest of $800 has accrued on notes receivable. Of advertising expense, $440 was incorrectly debited to Selling Expense.
On December 31, Trinkets Supply Company noted the following transactions that occurred during 2015, some or all of which might require adjustment to the books. (a)Payment of $4,300 to suppliers was made for purchases on account during the year and was not recorded.(b)Building and land were purchased on January 2 for $190,000 . The building’s fair value was $141,000 at the time of purchase. The building is being depreciated over a 30-year life using the straight-line method, assuming no salvage value.(c)Of the $52,000 in Accounts Receivable, 5% is estimated to be uncollectible. Currently, Allowance for Bad Debts shows a debit balance of $200 .(d)On September 1, $80,000 was loaned to a customer on a 12-month note with interest at an annual rate of 11% .(e)During 2015, Trinkets Supply received $15,200 in advance for services, 80% of which will be performed in 2016. The $15,200 was credited to Sales Revenue.(f)The interest expense account was debited for all interest charges incurred…
For this example, Zion Corporation discovers the following errors in January 2017 relating to 2016 accounting transactions. The books for the 12 months ending December 31, 2016, are still open. All years prior to January 1, 2016, are closed: 1- A math mistake was made, and depreciation expense is understated by $35,000 for 2016. 2- Zion failed to recognize and accrue salaries payable of $3,000 on 12/31/16. 3- Zion shipped an order to a customer on 12/26/16 for $4,500, but did not record it on the books yet. The sale was on account and the cost of this order to Zion was $2,875. 4- Zion further notices that depreciation expense for years prior to January 1, 2016, is understated by an additional $50,000 5- Cash Payment for Furniture $77 debited to Cash account and credited to Furniture account on 12/14/16. 6- A check for a utility bill (paid with cash) for $146 was incorrectly recorded in the journal as $164 on 12/3/16. 7 -A shipment of…
The accountant of Reliable Consulting, Inc. failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year. Assume the company initially recorded a liability. Which of the following statements is true? A. The total liabilities will be overstated. B. The total liabilities will be understated. C. The total assets will be overstated. D. The total assets will be understated.
Reece Financial Services Co., which specializes in appliance repair services, is owned and operated by Joni Reece. Reece Financial Services’ accounting clerk prepared the following unadjustedtrial balance at July 31, 2018: The data needed to determine year-end adjustments are as follows:• Depreciation of building for the year, $6,400.• Depreciation of equipment for the year, $2,800.• Accrued salaries and wages at July 31, $900.• Unexpired insurance at July 31, $1,500.• Fees earned but unbilled on July 31, $10,200.• Supplies on hand at July 31, $615.• Rent unearned at July 31, $300.Instructions1. Journalize the adjusting entries using the following additional accounts: Salaries and WagesPayable; Rent Revenue; Insurance Expense; Depreciation Expense—Building; DepreciationExpense—Equipment; and Supplies Expense.2. Determine the balances of the accounts affected by the adjusting entries, and prepare anadjusted trial balance.
Prepare the necessary adjusting entries at December 31, 2016, for the Falwell Company for each of the following situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded. 1. A three-year fire insurance policy was purchased on July 1, 2016, for $12,000. The company debited insurance expense for the entire amount. 2. Depreciation on equipment totaled $15,000 for the year. 3. Employee salaries of $18,000 for the month of December will be paid in early January 2017. 4. On November 1, 2016, the company borrowed $200,000 from a bank. The note requires principal and interest at 12% to be paid on April 30, 2017. 5. On December 1, 2016, the company received $3,000 in cash from another company that is renting office space in Falwell’s building. The payment, representing rent for December and January, was credited to deferred rent revenue.
Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2016 before any adjusting entries or closing entries are prepared. a. On December 30, 2012, Rival Industries acquired its office building at a cost of $10,000,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2016, the estimate of useful life was revised to 28 years in total with no change in residual value. b. At the beginning of 2012, the Hoffman Group purchased office equipment at a cost of $330,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the sum-ofthe- years’-digits method. On January 1, 2016, the company changed to the straight-line method. c. At the beginning of 2016, Jantzen Specialties, which uses the sum-of-the-years’-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change…