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Refer to the information in E22-13. Required: Prepare the correcting journal entries if the company discovers each error 2 years after it is made and it has closed the books for the second year. Ignore income taxes. E22-13: The following are independent errors made by a company that uses the periodic inventory system: a. Goods in transit, purchased on credit and shipped FOB destination, $10,000, were included in purchases but not in the physical count of ending inventory. b. Purchase of a machine for $2,000 was expensed. The machine has a 4-vear life, no residual value, and straight-line depreciation is used. c. Wages payable of $2,000 were not accrued. d. Payment of next year’s rent, $4,000, was recorded as rent expense. e. Allowance for doubtful accounts of $5,000 was not recorded. The company normally uses the aging method. f. 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.

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281
BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281

Solutions

Chapter
Section
Chapter 22, Problem 14E
Textbook Problem

Refer to the information in E22-13.

Required:

Prepare the correcting journal entries if the company discovers each error 2 years after it is made and it has closed the books for the second year. Ignore income taxes.

E22-13:

The following are independent errors made by a company that uses the periodic inventory system:

  1. a. Goods in transit, purchased on credit and shipped FOB destination, $10,000, were included in purchases but not in the physical count of ending inventory.
  2. b. Purchase of a machine for $2,000 was expensed. The machine has a 4-vear life, no residual value, and straight-line depreciation is used.
  3. c. Wages payable of $2,000 were not accrued.
  4. d. Payment of next year’s rent, $4,000, was recorded as rent expense.
  5. e. Allowance for doubtful accounts of $5,000 was not recorded. The company normally uses the aging method.
  6. f. 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.

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Chapter 22 Solutions

Intermediate Accounting: Reporting And Analysis
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