Problem 7 CPA Co.'s December 31 year end financial statement contained the following errors: December 31,2020 P90,000 overstated December 31,2019 Ending Inventory Depreciation expense P100,000 understated 20,000 understated An insurance premium of P75,000 was prepaid in 2019 covering the years 2019, 2020 and 2021. The same was charged to expense in full in 2019. In addition, on December 31, 2020, a fully depreciated machinery was sold for P160,000 cash, but the sale was not recorded until 2021. There were no other errors during 2019, 2020 and 2021 and no corrections have been made for any of the errors. Based on the above and the result of your audit, determine the following: (Ignore income tax effect and write under or over) _8. Net effect of errors on the 2019 profit 9. Net effect of errors on the 2020 profit 10. Net effect of errors on the company's December 31, 2020 retained

Problem 7 CPA Co.'s December 31 year end financial statement contained the following errors: December 31,2020 P90,000 overstated December 31,2019 Ending Inventory Depreciation expense P100,000 understated 20,000 understated An insurance premium of P75,000 was prepaid in 2019 covering the years 2019, 2020 and 2021. The same was charged to expense in full in 2019. In addition, on December 31, 2020, a fully depreciated machinery was sold for P160,000 cash, but the sale was not recorded until 2021. There were no other errors during 2019, 2020 and 2021 and no corrections have been made for any of the errors. Based on the above and the result of your audit, determine the following: (Ignore income tax effect and write under or over) _8. Net effect of errors on the 2019 profit 9. Net effect of errors on the 2020 profit 10. Net effect of errors on the company's December 31, 2020 retained

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

Chapter8: Inventories: Special Valuation Issues

Section: Chapter Questions

Problem 16P: (Appendix 8.1) Inventory Write-Down Frost Companys inventory records tor the years 2019 and 2020...

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(Appendix 8.1) Inventory Write-Down Frost Companys inventory records tor the years 2019 and 2020 reveal the cost and market of the January 1, 2019, inventory to be 125,000. On December 31, 2019, the cost of inventory was 130,000, while the market value was only 128,000. The December 31, 2020, market value of inventory was 140,000, and the cost was only 135,000. Frost uses a periodic inventory system. Purchases for 2019 were 100,000 and for 2020 were 110,000. Required: 1. Assume the inventory that existed at the end of 2019 was sold in 2020. Prepare the journal entries at the end of 2019 and 2020 to record the lower of cost or net realizable value under the (a) allowance method and (b) direct method. 2. Prepare the cost of goods sold section of the income statement and show how the company would record the inventory on its balance sheet for 2019 and 2020 under the (a) allowance method and (b) direct method. 3. Next Level Refer to your answer for P8-3. How does the use of a periodic inventory system versus a perpetual inventory system affect the valuation of inventory and the amount reported as income?
Effects of an Inventory Error The income statements for Graul Corporation for the 3 years ending in 2019 appear below. During 2019, Graul discovered that the 2017 ending inventory had been misstated due to the following two transactions being recorded incorrectly. a. A purchase return of inventory costing $42,000 was recorded twice. b. A credit purchase of inventory' made on December 20 for $28,500 was not recorded. The goods were shipped F.O.B. shipping point and were shipped on December 22, 2017. Required: 1. Was ending inventory for 2017 overstated or understated? By how much? 2. Prepare correct income statements for all 3 years. 3. CONCEPTUAL CONNECTION Did the error in 2017 affect cumulative net income for the 3-year period? Explain your response. 4. CONCEPTUAL CONNECTION Why was the 2019 net income unaffected?
Effects of an Error in Ending Inventory Waymire Company prepared the partial income statements presented below for 2019 and 2018. During 2020, Waymires accountant discovered that ending inventory for 2018 had been understated by $6,500. Required: 1. Prepare corrected income statements for 2019 and 2018. 2. Prepare a schedule showing each financial statement item affected by the error and the amount of the error for that item (ignore the effect of income taxes). Indicate whether each error is an overstatement (+) or an understatement (-).
Periodic inventory accounts, multiple-step income statement, closing entries On December 31, 2019, the balances of the accounts appearing in the ledger of Wyman Company are as follows: Cash 13,500 Accounts Receivable 72,000 Merchandise Inventory, January 1,2019 257,000 Estimated Returns Inventory 35,000 Office Supplies 3,000 Prepaid Insurance 4,500 Land 150,000 Store Equipment 270,000 Accumulated DepreciationStore Equipment 55000 Office Equipment 78,500 Accumulated DepreciationOffice Equipment 16000 Accounts Payable 27,800 Customer Refunds Payable 50,000 Salaries Payable 3,000 Unearned Rent 8,300 Notes Payable 50,000 Shirley Wyman, Capital 515,600 Shirley Wyman, Drawing 25,000 Sales 3280000 Purchases 2650000 Purchases Returns and Allowances 93,000 Purchases Discounts 37,000 Freight In 48,000 Sales Salaries Expense 300,000 Advertising Expense 45,000 Delivery Expense 9,000 Depreciation ExpenseStore Equipment 6,000 Miscellaneous Selling Expense 12,000 Office Salaries Expense 175,000 Rent Expense 28,000 Insurance Expense 3,000 Office Supplies Expense 2,000 Depreciation Expense-Office Equipment 1,500 Miscellaneous Administrative Expense 3,500 Rent Revenue 7,000 Interest Expense 2,000 Instructions 1. Does Wyman Company use a periodic or perpetual inventory system? Explain. 2. Prepare a multiple-step income statement for Wyman Company for the year ended December 31, 2019. The merchandise inventory as of December 31, 2019, was 305,000. The adjustment for estimated returns inventory for sales for the year ending December 31, 2019, was 30,000. 3. Prepare the closing entries for Wyman Company as of December 31, 2019. 4. What would the net income have been if the perpetual inventory system had been used?
Recording Various Liabilities Glenview Hardware had the following transactions that produced liabilities during 2020: a. Purchased merchandise on credit for $30,000. ( Note: Assume a periodic inventory system.) b. Year-end wages of $10,000 were incurred, but not paid. Related federal income taxes of $1,200, Social Security of $620 (employee portion), and Medicare taxes of $145 were with-held from employees. c. Year-end estimated income taxes payable, but unpaid, for the year were $42,850. d. Sold merchandise on account for $1,262, including state sales taxes of S48. ( Note: Assume a periodic inventory system.) e. Employers share of Social Security and Medicare taxes for the period were $620 and $145, respectively. f. Borrowed cash under a 90-day, 9%, $25,000 note. Required: Prepare the entry to record each of these transactions (treat each transaction independently).
Periodic inventory accounts, multiple-step income statement, closing entries On June 30, 2019, the balances of the accounts appearing in the ledger of Simkins Company are as follows: Cash 125,000 Accounts Receivable 340,000 Merchandise Inventory. July 1,2018 415,000 Estimated Returns Inventory 25,000 Office Supplies 9,000 Prepaid Insurance 18,000 Land 300,000 Store Equipment 550,000 Accumulated DepreciationStore Equipment 190,000 Office Equipment 250,000 Accumulated DepreciationOffice Equipment 110,000 Accounts Payable 85,000 Customer Refunds Payable 20,000 Salaries Payable 9,000 Unearned Rent 6,000 Notes Payable 50,000 Amy Gant, Capital 820,000 Amy Gant, Drawing 275,000 Sales 6,590,000 Purchases 4,100,000 Purchases Returns and Allowances 32,000 Purchases Discounts 13,000 Freight In 45,000 Sales Salaries Expense 580,000 Advertising Expense 315,000 Delivery Expense 18,000 Depreciation ExpenseStore Equipment 12,000 Miscellaneous Selling Expense 28,000 Office Salaries Expense 375,000 Rent Expense 43,000 Insurance Expense 17,000 Office Supplies Expense 5,000 Depreciation Expense-Office Equipment 4,000 Miscellaneous Administrative Expense 16,000 Rent Revenue 32,500 Interest Expense 2,500 Instructions 1.Does Simkins Company use a periodic or perpetual inventory system? Explain. 2.Prepare a multiple-step income statement for Simkins Company for the year ended June 30, 2019. The merchandise inventory as of June 30, 2019, was 508,000. The adjustment for estimated returns inventory for sales for the year ending December 31, 2019, was 33,000. 3.Prepare the closing entries for Simkins Company as of June 30, 2019. 4.What would the net income have been if the perpetual inventory system had been used?
13 Mactan Company’s statements for 2018 and 2019 included the following errors: 12/31/18 inventory understated P2,000,000 12/31/19 inventory overstated 1,000,000 Depreciation for 2018 understated 400,000 Depreciation for 2019 overstated 800,000    How much should retained earnings be retroactively adjusted on January 1, 2020? Group of answer choices 1,400,000 decrease 600,000 increase 600,000 decrease 1,400,000 increase
Bonghill Company’s December 31 year-end financial statements had the following error:                                                 December 31, 2019                         December 31, 2020 Ending Inventory 13,500 understated 19,800 overstated Depreciation expense 3,600 understated                            - Unearned rental 5,000 understated                            - Prepaid insurance - 8,000 understated There were no other errors during the years 2019 or 2020 and no corrections have been made for any of the errors. (Ignore income tax considerations) What is the net effect of the errors in Bonghill’s December 31, 2020 accumulated profits balance?
Bonghill Company’s December 31 year-end financial statements had the following error: December 31, 2019                         December 31, 2020 Ending Inventory             P13,500 understated P19,800 overstated Depreciation expense        3,600 understated                            - Unearned rental                   5,000 understated                            - Prepaid insurance                     - 8,000 understated There were no other errors during the years 2019 or 2020 and no corrections have been made for any of the errors. (Ignore income tax considerations) What is the net effect of the errors in Bonghill’s December 31, 2020 accumulated profits balance? A.Understated by P20,300 B.verstated by P11,800 C.Overstated by P20,300 D.Overstated by P15,400
Peter Henning Tool Company's December 31 year-end financial statements contained the following errors. December 31, 2020 December 31, 2021 Ending inventory $9,600 understated $8,100 overstated Depreciation expense $2,300 understated — An insurance premium of $66,000 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $15,000 cash, but the entry was not recorded until 2022. There were no other errors during 2020 or 2021, and no corrections have been made for any of the errors. (Ignore income tax considerations.) Instructions a. Compute the total effect of the errors on 2021 net income. b. Compute the total effect of the errors on the amount of Henning's working capital at December 31, 2021. c. Compute the total effect of the errors on the balance of Henning's retained earnings at December 31, 2021.
Problem 13On the December 31, 2020 balance sheet of Mann Co., the current receivables consisted ofthe following:Trade accounts receivable 93,000Allowance for uncollectible accounts (2,000)Claim against shipper for goods lost in transit (November 2020) 3,000Selling price of unsold goods sent by Mann on consignment at130% of cost (not included in Mann’s ending inventory) 26,000Security deposit on lease of warehouse used for storing some inventories 30,000Total 150,000On December 31, 2020, the correct total of Mann’s current net receivables was _________. Problem 14The following information relates to Jay Co.’s accounts receivable for 2020:Accounts receivable, 1/1/20 650,000Credit sales for 2020 2,700,000Sales returns for 2020 75,000Accounts written off during 2020 40,000Collections from customers during 2020 2,150,000Estimated future sales returns at 12/31/20 50,000Estimated uncollectible accounts at 12/31/20 110,000What amount should Jay report for accounts receivable, before allowances…
Sheridan Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2020 December 31, 2021 Ending inventory $9,600 understated $7,600 overstated Depreciation expense $2,100 understated — An insurance premium of $62,100 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $16,300 cash, but the entry was not recorded until 2022. There were no other errors during 2020 or 2021, and no corrections have been made for any of the errors. (Ignore income tax considerations.)(a) Compute the total effect of the errors on 2021 net income. Total effect of errors on net income $Enter the total effect of errors on net income in dollars (b) Compute the total effect of the errors on the amount of Sheridan’s working capital…