Use the following information for the next four questions: GULOSITY GREEDINESS Co. reported profits of P4,000,000 and P8,000,000 in 20x1 and 20x2, respectively. In 20x3, the following prior period errors were discovered: • The inventory on December 31, 20x1 was understated by P200,000. • An equipment with an acquisition cost of P1,200,000 was erroneously charged as expense in 20x1. The equipment has an estimated useful life of 5 years with no residual value. GULOSITY Co. provides full year depreciation in the year of acquisition. The unadjusted balances of retained earnings are P8,800,000 and P16,800,000 as of December 31, 20x1 and 20x2, respectively. 7. How much is the correct profit in 20x1? a. 7,560,000 c. 4,760,000 d. 5,160,000 b. 5,610,000

Use the following information for the next four questions: GULOSITY GREEDINESS Co. reported profits of P4,000,000 and P8,000,000 in 20x1 and 20x2, respectively. In 20x3, the following prior period errors were discovered: • The inventory on December 31, 20x1 was understated by P200,000. • An equipment with an acquisition cost of P1,200,000 was erroneously charged as expense in 20x1. The equipment has an estimated useful life of 5 years with no residual value. GULOSITY Co. provides full year depreciation in the year of acquisition. The unadjusted balances of retained earnings are P8,800,000 and P16,800,000 as of December 31, 20x1 and 20x2, respectively. 7. How much is the correct profit in 20x1? a. 7,560,000 c. 4,760,000 d. 5,160,000 b. 5,610,000

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 77.2C

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Cromwell Company began operations on January 1, 20x1. Financial statements for the years ended December 31, 20x1 and 20x2 contained the following errors:20x1 20x2Ending inventory P320,000 understated P300,000 overstatedDepreciation expense 120,000 understatedInsurance expense 200,000 overstated 200,000 understatedPrepaid insurance 100,000 understatedThe reported net income for 20x1 is P648,000 and P894,000 for 20x2. In addition, on December 31, 20x2, a fully depreciated machinery was sold for P216,000 cash, but the sale was not recorded until 20x3. There were no other errors during 20x1 and 20x2, and no corrections have been made for any of the errors. Ignore income tax effects.REQUIRED: Compute the total effects of errors and indicate whether overstated or understated.5. Total effect of the errors on Elizabeth’s 20x1 net income _____________6. Total effect of the errors on Elizabeth’s 20x2 net income _____________7. Total effect of the errors on Elizabeth’s working capital on December…
The following are independent errors made by a company that uses a periodic inventory system: Failure to record a purchase of $10,000 inventory on credit; however, inventory was properly counted at the end of the period. Assume the error was discovered prior to any payment for the purchase. Expensed the purchase of a machine of $50,000. The machine has a 10 year useful life with no salvage value. Failure to accrue wages of $8,000. Wages had not been paid at the time the error was discovered. Failure to record an allowance for uncollectibles of $25,000. The error was discovered prior to the accrual for bad debt in the following year. Included collections in advance of $100,000 as revenue. Included payments of $12,000 advance as expenses. Failure to accrue warranty costs of $14,000. Failure to record depreciation expense of $6,000 on assets purchased during the year. Required: Prepare the correcting journal entries if the company discovers each error in the year after it is made.…
Problem: Remesh Corporation prepared the following income statement and statement of retained earnings for the year ended December 31, 2021. Remesh Corporation December 31, 2021 Expense and Profit Statement Dollars in thousands Sales (net) $206,000 Less: Selling Expenses (20,600) Net Sales $185,400 Add: Interest Revenue 2,400 Add: Gain on sale of equipment 3,600 Gross Sales Revenue $191,400 Less: Cost of operations: Cost of Goods Sold $126,100 Correction of overstatement in last years income because of error $5,500 (net of tax credit) $3850 Dividend cost ($0.50 per share for 8k common shares) $4000 Unusual loss due to a hurricane, $6,400 (net of tax credit) $1,920 ($135,870) Taxable Revenues $55,530 Less: Income tax on income from continuing operations $16,659 Net income $38871 Miscellaneous Deductions Loss from operations of…
The following is an independent error made by a company that uses the periodic inventory system: Equipment with a book value of $70,000 and a fair value of $100,000 was sold at the beginning of the year. A 2-year, non-interest-bearing note for $129,960 was received and recorded at its face value, and a gain of $59,960 was recognized. No interest revenue was recorded and 14% is a fair rate of interest. What is the journal entry needed to correct the sale of equipment? Ignore income taxesWhat is the journal entry adjustment needed to correct interest related to the note?