Vertical Company has determined its 2019 and 2018 net income to be P115, 000 and P110, o00, 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 earnings account. The loss amounted to P12, 000. b. Cash received in advance for rendering services amounting to P25, 000 was credited to a revenue account when received. Based from findings, P6,000 was earned in 2018, P10,000 was earned in 2019 and the remainder will be earned in 2020. c. Ending inventory was understated by P5, 00o in 2018 and overstated by P15, 000 in 2019.

Vertical Company has determined its 2019 and 2018 net income to be P115, 000 and P110, o00, 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 earnings account. The loss amounted to P12, 000. b. Cash received in advance for rendering services amounting to P25, 000 was credited to a revenue account when received. Based from findings, P6,000 was earned in 2018, P10,000 was earned in 2019 and the remainder will be earned in 2020. c. Ending inventory was understated by P5, 00o in 2018 and overstated by P15, 000 in 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
Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year). A. A business depreciates a building with a book value of $12,000, using straight-line depreciation, no salvage value, and a remaining useful life of six years. B. An organization has a line of credit with a supplier. The company purchases $35,500 worth of inventory on credit. Terms of purchase are 3/20, n/60. C. An employee earns $1,000 in pay and the employer withholds $46 for federal income tax. D. A customer pays $4,000 in advance for legal services. The lawyer has previously recognized 30% of the services as revenue. The remainder is outstanding.
It is the end of 2019 and you are an accountant for Stone Company. During 2019, sales of the companys products slumped and the companys earnings are expected to be much less than those of 2018. The president comes to you with an idea. He says, Our companys property, plant, and equipment cost 300,000, and that is the amount we usually report on our balance sheet. However, I just had these assets appraised by an independent appraiser, and she says they are worth 400,000. I think that the company should report the property, plant, and equipment at this amount on its December 31, 2019, balance sheet and should report the 100,000 increase in value as a gain on the 2019 income statement. If we use this approach, it will show how much our company is really worth and increase our earnings. This will make our shareholders happy. What do you think? Required: Prepare a written response to the president.
The following information is available for Reynolds Corporation: Retained Earnings, December 31, 2020 $1,500,000 Profit for the year ended December 31, 2021 250,000 The company accountant, in preparing financial statements for the year ending December 31, 2021, has discovered the following information:The company's previous bookkeeper, who has been fired, had recorded depreciation expense on a machine in 2019 and 2020 using the double diminishing-balance method of depreciation. The bookkeeper neglected to use the straight-line method of depreciation which is the company's policy. The cumulative effect of the error on prior years was $9,000. Depreciation was calculated by the straight-line method in 2021. Reynolds' average tax rate is 22%. During 2021, Reynolds declared and paid cash dividends of $80,000.Instructions a)Calculate the impact on retained earnings. b)Prepare the statement of retained earnings for 2021. Please don't provide solution in an image format thank you
Eight Incorporated reported net income of 5,300,000 in 2021. The following were determined after the audit was conducted: a. The company paid rent amounting 630,000 which would cover May 1, 2021 to October 31, 2024. The company uses the asset method in recording prepayments. No adjustment was made at the end of the year. b. At the beginning of the year, a fully depreciated equipment was sold for 320,000. This machine was originally acquired for 10 million and was depreciated using the straight-line method over a ten-year useful without salvage value. The company recorded the sale by debiting cash of and crediting sales c. Acquisition of land on June 5, 2021 amounting to 1,500,000 was debited to machinery. Equipment and machineries are depreciated over a ten-year useful life without salvage value using the straight-line method. Since this was originally recorded as a machinery, depreciation was recognized. d. Salaries expense of 200,000 was recorded as maintenance expense of 20,000. e.…
2 On December 31, 2019, the statement of financial position of Twitter Corporation showed the following property and equipment after charging depreciation: Building P3,000,000 Accumulated depreciation (1,000,000) P2,000,000 Equipment 1,200,000 Accumulated depreciation (400,000) 800,000 The company has adopted the revaluation model for the valuation of property and equipment. This has resulted in the recognition in prior periods of an asset revaluation surplus for the building of P140,000. The company does not make a transfer to retained earnings in respect of realized revaluation surplus. On December 31, 2019, an independent valuer assessed the fair value of the building to be P1,600,000 and the equipment to be P900,000. The building and equipment had remaining useful lives of 25 years and 4 years, respectively, as of that date. The revaluation surplus as of December 31, 2020 is Group of answer choices…
Based on the accounting records, the total assets book value as of January 1, 2021 is P1,875,362.99 but due to inflation the current cost is determined to be P1,990,800.21 while the total liabilities is P988,123.54 as of January 1, 2021. The company received additional investments of P651,345.22 during the year while dividends declared and paid is P450,650. At the end of the year, the books reported Total assets of P2,992,748.55 and liabilities of P1,555,661.24. What is the net income (loss) under the physical capital concept?
4. On December 31, 2019, the statement of financial position of Twitter Corporation showed the following property and equipment after charging depreciation: Building P3,000,000 Accumulated depreciation (1,000,000) P2,000,000 Equipment 1,200,000 Accumulated depreciation (400,000) 800,000 The company has adopted the revaluation model for the valuation of property and equipment. This has resulted in the recognition in prior periods of an asset revaluation surplus for the building of P140,000. The company does not make a transfer to retained earnings in respect of realized revaluation surplus. On December 31, 2019, an independent valuer assessed the fair value of the building to be P1,600,000 and the equipment to be P900,000. The building and equipment had remaining useful lives of 25 years and 4 years, respectively, as of that date. The amount to be recognized in profit or loss for 2019 related to the revaluation of property and…
FDN Company shows the following balances on December 31, 2021: Accounts receivable P250,000 Accumulated depreciation P200,000 Allowance for uncollectible accounts P57,000 Cash P200,000 Property, plant and equipment P800,000 Supplies P20,000 How much is the Current Assets in the Statement of Financial Position as of December 31, 2021?
Tibra Inc.'s trial balance TBAcontained the following accounts at December 31, 2021, the end of company's fiscal year. Accounts …… …… …… …… …… …… …… Balances ($) Accumulated Depreciation-Building…. …… 123000 Accumulated Depreciation-Equipment….…. 36000 Additional Paid in Capital-Common Stock.. 220000 Auditors Fee …. …. …. …. …. …. ….. ….. ….. .. 207000 Buildings…. …. …. …. …. …. ….. ….. ….. ….. ... 406000 Cash …. …. …. …. …. …. ….. ….. ….. ….. ….. …. 148220 Common Stock ($2 each)…. …. …. …. …. ….. 104000 Cost of Goods Sold …. …. …. …. ….. …. ….… 1086000 Equipment …. …. …. …. …. …. ….. ….. ….. ….. 202000 Interest Expense …. …. …. …. …. …. ….. ….. …. 23100 Loss on Sale of Property …. …. …. …. …. …. 7530 Merchandise Inventory …. …. ……. …. …. …. 235000 Mortgage Loan …. …. …. …. …. …… …. …. …. 102000 Rent Revenue …. …. …. …. …. …. … …. …. …. 51000 Retained Earnings …. …. …. …. …… …. …. …. 51700 Salaries and Wages Expense …. …. …. …. …. 108000 Sales …. …. …. …. …. …. ….. ….. ……. …. …. ….…
The net income for 2018 reported by the accountant of OH MAH GAHD Company amounted to P634,500. Your audit of the accounts disclosed that the following accounts were not properly accounted: 2017 2018 Rent received in advance 22,500 30,000 Accrued salaries 13,500 18,000 Prepaid interest 33,750 45,000 Commission receivable 15,750 14,625 Depreciation expense 26,250 26,250 Equipment purchased at the beginning of the year charged to expense (10 year life) 75,00010. What is the pre-tax net effect of the above errors on retained earnings on December 31, 2018? A. 3,375 understated B. 3,375 overstated C. 19,125 understated D. 19,125 overstated
Part B The audited financial statements for New Life Manufacturing for year-end December 31, 2022, show an accounting profit after tax of $16,500,000 after charging the following: • Depreciation $2,500,000 ` • Tax for the year $500,000 • Property Tax $1,000,000 • Interest expense $15,000 • Preference dividends of $40,000 • Legal fees $1,110,000 • Insurance of $750,000 • Bad debts $40,000 • Foreign Travel $20,000 • Repairs and Maintenance $1,500,000 • General expenses $600,000 Other Information 1. Property Tax of $600,000 was paid for the property on which the company’s factory is located; $300,000 for the office premises and $100,000 for the CEO’s home. 2. The insurance was paid for the factory and office premises. 3. Loss on disposal of fixed assets $350,000 4. Income Tax Refund of $700,000 was included as part of the entity’s income. 5. The bad debt expense includes a general provision of $10,000 and a specific provision of $30,000. 6. The company paid final ordinary dividends…