Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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On December 31, 2018, Alan and Company prepared an income statement and balance sheet but failed to take into account four
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 following table to show the effects of the four adjusting journal entries. (Negative amounts should be indicated by a minus sign.)
Net Income. Total assets Total liabilities Stockholders equity
Including the impact of the income tax of 30%
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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.
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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
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Dudley 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.
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The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2019: Instructions 1. Prepare a multiple-step income statement. 2. Prepare a statement of owners equity. 3. Prepare a balance sheet, assuming that the current portion of the note payable is 50,000. 4. Briefly explain how multiple-step and single-step income statements differ.
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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.
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The adjusted trial balance of Pacific Scientific Corporation on December 31, 2016, the end of the company’s fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,106; cost of goods sold, $1,240; selling expenses, $126; general and administrative expenses, $105; interest expense, $35; and gain on sale of investments, $45. Income tax expense has not yet been recorded. The income tax rate is 40%. If the company’s accountant prepared a multiple-step income statement, what amount would appear in that statement for (a) operating income and (b) nonoperating income?
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The adjusted trial balance of Pacific Scientific Corporation on December 31, 2021, the end of the company’s fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,106; cost of goods sold, $1,240; selling expense, $126; general and administrative expense, $105; interest expense, $40; and gain on sale of investments, $45. Income tax expense has not yet been recorded. The income tax rate is 25%.
Using the account balances, prepare a single-step income statement for 2021.
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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.
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On December 31, 2022, Sheridan Company prepared an income statement and balance sheet, but failed to take into account three adjustments. The balance sheet showed total assets $159,000, total liabilities $74,200, and stockholders’ equity $84,800. The incorrect income statement showed net income of $74,200.The data for the three adjustments were:
1.
Salaries and wages amounting to $10,600 for the last 2 days in December were not paid and not recorded. The next payroll will be in January.
2.
Rent payments of $8,480 were received for two months in advance on December 1. The entire amount was recorded as Unearned Rent Revenue when received.
3.
Depreciation expense for 2022 is $9,540.
Complete the following table to correct the financial statement amounts shown. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Item
Net Income
Total Assets
Total Liabilities
Stockholders’ Equity
Incorrect balances…
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