CASH TO ACCRUAL, SINGLE ENTRY AND CORRECTION OF ERRORS 1. The results of your audit of Heave Company for 2 consecutive years are shown below:a. Net income for 2018 and 2019 are P46, 520 and P51, 230 respectively.b. Equipment worth P6, o00 purchased on 2018 was charged to expense. Theequipment has a useful life of 10 years.c. In 2017, merchandise inventory was understated by P5, o00 and was overstatedby P3, 000 in 2019.d. Inventory purchased on account was not recorded in 2018 and included asinventory only on 2019.e. P4, 000 worth of accrued taxes were not recorded in 2018.f. Unearned rent received was taken up as income amounted to P2, o00.Requirement:a. The adjusted net income for 2018 and 2019.2. Vertical Company has determined its 2019 and 2018 net income to be P115, 000 andP110, 000, respectively. After conducting your audit, you found out the following:a. Loss on the sale of plant asset in 2019 was credited to the retained earningsaccount. The loss amounted to P12, 000.b. Cash received in advance for rendering services amounting to P25, o0o wascredited to a revenue account when received. Based from findings, P6,000 wasearned in 2018, P10,000 was earned in 2019 and the remainder will be earnedin 2020.c. Ending inventory was understated by P5, 000 in 2018 and overstated by P15,000 in 2019.Requirement:a. The adjusted net income for 2018 and 2019..

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The results of your audit of Heave Company for 2 consecutive years are shown below: a. Net income for 2018 and 2019 are P46, 520 and P51, 230 respectively. b. Equipment worth P6, o00 purchased on 2018 was charged to expense. The equipment has a useful life of 10 years. c. In 2017, merchandise inventory was understated by P5, o00 and was overstated by P3, 000 in 2019. d. Inventory purchased on account was not recorded in 2018 and included as inventory only on 2019. e. P4, 000 worth of accrued taxes were not recorded in 2018. Unearned rent received was taken up as income amounted to P2, 000. f. Requirement: a. The adjusted net income for 2018 and 2019.

The results of your audit of Heave Company for 2 consecutive years are shown below: a. Net income for 2018 and 2019 are P46, 520 and P51, 230 respectively. b. Equipment worth P6, o00 purchased on 2018 was charged to expense. The equipment has a useful life of 10 years. c. In 2017, merchandise inventory was understated by P5, o00 and was overstated by P3, 000 in 2019. d. Inventory purchased on account was not recorded in 2018 and included as inventory only on 2019. e. P4, 000 worth of accrued taxes were not recorded in 2018. Unearned rent received was taken up as income amounted to P2, 000. f. Requirement: a. The adjusted net income for 2018 and 2019.

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 10MC: Shannon Corporation began operations on January 1, 2019. Financial statements for the years ended...

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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
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?
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?
Soon after December 31, 2019, the auditor requested a depreciation schedule for trucks of Jarrett Trucking Company, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period 2016 to 2019, inclusive. The following data were in the Trucks account as of January 1, 2016: The Accumulated DepreciationTrucks account, previously adjusted to January 1,2016, and duly entered in the ledger, had a balance on that date of 16,460. This amount represented the straight-line depreciation on the four trucks from the respective dates of purchase, based on a 5-year life and no residual value. No debits had been made to this account prior to January 1, 2016. Transactions between January 1,2017, and December 31, 2019, and their record in the ledger were as follows: 1. July 1, 2016: Truck no. 1 was sold for 1,000 cash. The entry was a debit to Cash and a credit to Trucks, 1,000. 2. January 1, 2017: Truck no. 3 was traded for a larger one (no. 5) with a 5-year life. The agreed purchase price was 12,000. Jarrett paid the other company 1,780 cash on the transaction. The entry was a debit to Trucks, 1,780, and a credit to Cash, 1,780. 3. July 1, 2018: Truck no. 4 was damaged in a wreck to such an extent that it was sold as junk for 50 cash. Jarrett received 950 from the insurance company. The entry made by the bookkeeper was a debit to Cash, 1,000, and credits to Miscellaneous Revenue, 50, and Trucks, 950, 4. July 1, 2018: A new truck (no. 6) was acquired for 20,000 cash and debited at that amount to the Trucks account. The truck has a 5-year life. Entries for depreciation had been made at the close of each year as follows: 2016, 8,840; 2017, 5,436; 2018, 4,896; 2019, 4,356. Required: 1. Next Level For each of the 4 years, calculate separately the increase or decrease in earnings arising from the companys errors in determining or entering depreciation or in recording transactions affecting trucks. 2. Prove your work by one compound journal entry as of December 31, 2019; the adjustment of the Trucks account is to reflect the correct balances, assuming that the books have not been closed for 2019.
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?
At the end of 2019, Manny Company recorded its ending inventory at 350,000 based on a physical count. During 2020, the company discovered that the correct inventory value at the end of 2019 should have been 400,000 because it made a counting error. Upon discovery of this error in 2020, what correcting journal entry will Manny make? Ignore income taxes.
During the course of an audit of the financial statements of Julie Company for the yearended December 31, 2019, the following data are discovered: Inventory on January 1, 2019 had been overstated by P300,000. Inventory on December 31, 2019 was understated by P500,000. An insurance policy covering three years had been purchased on January 1, 2018for P150,000. The entire amount was charged as an expense in 2018. During 2019, the entity received a P100,000 cash advance from a customer formerchandise to be manufactured and shipped during 2020. The amount had beencredited to sales revenue. The gross profit on sales is 50%.Net income for 2019 per book was P2,000,000. What is the proper net income for 2019?
During your audit of the books of Antigua Corporation for the year ended December 31, 2021, you discovered the following errors during the years 2019, 2020 and 2021. Errors 2019 2020 2021 Understatement of ending inventory 25,000 30,000 Overstatement of ending inventory 16,000 Omission of the following: Prepaid insurance 7,500 10,000 Unearned rent income 8,000 Accrued salaries expense 12,000 10,000 Accrued interest revenue 2,000 3,000 Erroneous capitalization of machinery repairs 15,000 Overstatement of machinery depreciation 1,500 1,500 Erroneous charging to expense of equipment cost 25,000 Understatement of equipment depreciation 2,500 2,500 2,500 Net income for the year 1,500,000 2,000,000 2,250,000 Retained earnings at year-end 7,500,000 8,750,000 9,250,000 Machinery has an estimated useful life of 10 years while equipment is 5 years. REQUIRED: Compute the corrected balances of the…
JYD Corporation has determined its 2019 and 2020 net income figures to be $1,150,000 and $1,100,000, respectively. In a first time audit of the company’s financial statements, you determine the following errors: Merchandise inventory was incorrectly determined: $50,000 overstatement for 2019 and $150,000 overstatement for 2020. Revenue received in advance in 2019 of $250,000 was credited to a revenue account when received. Of the total $50,000 was earned in 2019, $120,000 was earned in 2020 and the remainder will be earned in 2021. $120,000 gain on sale of plant assets in 2020 was erroneously credited to Accumulated Profits and losses. What is the corrected net income for the year 2020?
Henson company had determined the 2019 and 2020 net income to be 4,000,000 and 5,000,000 respectively. In a first time audit of the financial statements, the following errors are discovered: Merchandise inventory was incorrectly determined - 50,000 overstatement for 2019 and 150,000 overstatement for 2020 Revenues received in advance in 2019 of 300,000 was credited to be a revenue account when received. Of the total 50,000 was earned in 2019, 200,000 was earned in 2020 and the remainder will be earned in 2021. 400,000 gain on sale of plant asset in 2020 was erroneously credited to retained earnings. What is the corrected net income for 2020? a. 5,500,000 b.5,450,000 c.5,400,000 d.5,550,000
Upon inspection of the records of Eisenhower Company in connection to its financial statement audit for the year ended December 31, 2022, the following errors were revealed: A fire insurance premium of P 40,000 was paid and charged to insurance expense in 2021. This covers one year from April 1, 2021. Inventory at December 31, 2020 was understated by P 80,000. Inventory at December 31, 2021 was understated by P 120,000. The year 2021 last quarter taxes amounting to P 60,000 were paid on January 19, 2022 and charged to expense account of 2022. A cash advance of P 100,000 in payment of goods to be delivered in January 2022 was received on December 15, 2021 and credited to Sales. The gross profit on sales is 40%. The net income for the year ended December 31, 2021 before any adjustments is P 1,550,000. Group of answer choices 1,600,000 1,200,000 1,440,000 1,550,000
Use the following information for the next three (3) questions: Silhouette Corporation reported profit for the year 2014 and 2015 at P550,000 and P700,000, respectively. Your audit of the company’s account disclosed the need for adjustments as follows: 2014 2015 Overstatement of ending inventory due to error in pricing 29,000 33,000 Omission of depreciation on newly-acquired equipment 15,000 15,000 Understatement of commission receivable 22,000 18,000 A purchase of merchandise was not recorded until the following year, and also was not included in the ending inventory 60,000 33) The adjusted profit for 2015 was 34) What is the effect of the foregoing errors (overstatement) on total assets at December 31, 2015? 35) What is the effect on the foregoing errors on retained earnings at December 31, 2014?