Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 3, Problem 3.21EX
Effect s of errors on financial statements
For a recent period, the balance sheet for Costco Wholesale Corporation reported accrued expenses of $3,446 million. For the same period, Costco reported income before income taxes of $3,197 million. Assume that the
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For a recent year, the balance sheet for The Campbell Soup Company includes accrued expenses of $553 million. The income before taxes for Campbell for the year was $1,073 million.a. Assume the adjusting entry for $553 million of accrued expenses was not recorded at the end of the year. By how much would income before taxes have been misstated?b. What is the percentage of the misstatement in (a) to the reported income of $1,073 million? Round to one decimal place.
1) What is the Net Income in the Income Statement at the year-end?
a) $81,500
b) $79,500
c) None of the above
d) $88,500
What is the Total Expense in the Income Statement at the year-end?
a) 16,300
b) $17,500
c) $95,000
d) 15,500
3. What is the Total End Retained Earnings in the Financial Statement at the year-end?
a) $16,000
b) $63,500
c) $0
d) $79,500
Clock Company showed the following errors in their account during December 31, 2021:
Dividends of P 100,000 had been declared but was not recorded on December 10, 2021.
Buildings and equipment maintenance for P 480,000 had been debited to expense at the end of April 2020. It had an estimated life of 8 years.
The company failed to record sales commissions payable amounting to P 10,500 and P 19,000 at the end of 2020 and 2021, respectively.
Supplies on hand amounting to P 6,000 and P 15,000 were not recognized at the end of 2020 and 2021, respectively.
What is the net effect of the error in the 2021 net income?
a.P 59,500 over
b.P 72,200 under
c.P 75,000 over
d.P 70,000 over
Chapter 3 Solutions
Corporate Financial Accounting
Ch. 3 - How are revenues and expenses reported on the...Ch. 3 - Is the matching concept related to (A) the cash...Ch. 3 - Why are adjusting entries needed at the end of an...Ch. 3 - What is the difference between adjusting entries...Ch. 3 - Identify the four different categories of...Ch. 3 - If the effect of the debit portion of an adjusting...Ch. 3 - If the effect of the credit portion of an...Ch. 3 - Prob. 8DQCh. 3 - Prob. 9DQCh. 3 - (A) Explain the purpose of the two accounts:...
Ch. 3 - Account requiring adjustment Indicate with a Yes...Ch. 3 - Type of adjustment Classify the following items as...Ch. 3 - Adjustment for accrued revenues At the end of the...Ch. 3 - Adjustment for accrued expense Prospect Realty Co....Ch. 3 - Adjustment for unearned revenue On June 1, 2018,...Ch. 3 - Adjustment for prepaid expense The prepaid...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Effect of omitting adjustments For the year ending...Ch. 3 - Effect of errors on adjusted trial balance For...Ch. 3 - Classifying types of adjustments Classify the...Ch. 3 - Classifying adjusting entries The following...Ch. 3 - Adjusting entry for accrued fees At the end of the...Ch. 3 - Effect on omitting adjusting entry The adjusting...Ch. 3 - Prob. 3.5EXCh. 3 - Prob. 3.6EXCh. 3 - Effect of omitting adjusting entry Accrued...Ch. 3 - Prob. 3.8EXCh. 3 - Adjusting entries for unearned fees The balance in...Ch. 3 - Prob. 3.10EXCh. 3 - Adjusting entry for supplies The balance in the...Ch. 3 - Determining supplies purchased The supplies and...Ch. 3 - Effect of omitting adjusting entry At March 31,...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for unearned and accrued fees...Ch. 3 - Prob. 3.17EXCh. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Determining fixed assets book value The balance in...Ch. 3 - Prob. 3.20EXCh. 3 - Effect s of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements The...Ch. 3 - Effects of errors on financial statements If the...Ch. 3 - Prob. 3.25EXCh. 3 - Adjusting entries from trial balances The...Ch. 3 - Prob. 3.27EXCh. 3 - Adjusting entries On March 31, the following data...Ch. 3 - Prob. 3.2APRCh. 3 - Adjusting entries Reliable Repairs Service, an...Ch. 3 - Adjusting entries Good Note Company specializes in...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Adjusting entries and errors At the end of April,...Ch. 3 - Adjusting entries On May 31, the following data...Ch. 3 - Adjusting entries Selected account balances before...Ch. 3 - Adjusting entries Crazy Mountain Outfitters Co.,...Ch. 3 - Adjusting entries The Signage Company specializes...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Adjusting entries and errors At the end of August,...Ch. 3 - The unadjusted trial balance that you prepared for...Ch. 3 - Prob. 3.1ADMCh. 3 - Chipotle: Vertical analysis Chipotle Mexican...Ch. 3 - Prob. 3.3ADMCh. 3 - Prob. 3.4ADMCh. 3 - Prob. 3.1TIFCh. 3 - Prob. 3.3TIF
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- A review of Anderson Corporations books indicates that the errors and omissions pertaining to the balance sheet accounts shown as follows had not been corrected during the applicable years. The net income per the books is: 2017, 10,000; 2018, 12,000; 2019, 15,000; and 2020, 20,000. No dividends were declared during these years and no adjustments were made to retained earnings. The Retained Earnings balance on December 31, 2020, is 50,000. Omissions Required: Determine the correct net income for the years 2017, 2018, 2019, and 2020, and the adjusted balance sheet accounts as of December 31, 2020. Ignore possible income tax effects.arrow_forwardShannon 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 9,800arrow_forwardDudley Company failed to recognize the following accruals. It also recorded the prepaid expenses and unearned revenues as expenses and revenues, respectively', in the following year when paid or collected. The reported pretax income was 20,000 in 2018, 25,000 in 2019, and 23,000 in 2020. Required: 1. Compute the correct pretax income for 2018, 2019, and 2020. 2. Prepare the journal entries necessary in 2020 if the errors are discovered at the end of that year. Ignore income taxes. 3. Prepare the journal entries necessary in 2021 if the errors are discovered at the end of that year. Ignore income taxes.arrow_forward
- At the beginning of 2020, Tanham Company discovered the following errors made in the preceding 2 years: Reported net income was 27,000 in 2018 and 35,000 in 2019. The allowance for doubtful accounts had a zero balance at the beginning of 2018. No accounts were written off during 2018 or 2019. Ignore income taxes. Required: 1. What is the correct net income for 2018 and 2019? 2. Prepare the adjusting journal entry in 2020 to correct the errors.arrow_forwardNet Income (or Loss) and Retained Earnings The following information is available from the records of Prestige Landscape Design Inc. at the end of the year: Required Use the previous information to answer the following questions. What is Prestiges net income for the year? What is Prestiges Retained Earnings balance at the end of the year? What is the total amount of Prestiges assets at the end of the year? What is the total amount of Prestiges liabilities at the end of the year? How much owners equity does Prestige have at the end of the year? What is Prestiges accounting equation at the end of the year?arrow_forwardThe Skies Company reported net income of $58,200 for the year ended December 31, 20X0. An analysis of the firm's books and related records disclosed that certain adjustments were not made at year end; therefore, reported net income was incorrect. The following errors and omissions were made. a. Accrued interest earned on investments amounted to $205, but the amount wasn't recorded. b. Depreciation of $370 on machinery wasn't recorded. c. Rent revenue of $220 was received in advance and credited to the Rent Revenue account. d. Semiannual bond payable interest of $1,820 was paid, but the amount wasn't recorded. e. The unexpired insurance premium at year end totaled $440. The total insurance premium was debited to the Insurance Expense accountarrow_forward
- 4) Accrued taxes payable of $150,000 were not recorded at December 31, 2020. Office supplies on hand of $95,000 at December 31, 2021 were erroneously treated as expense instead of supplies inventory. Neither of these errors was discovered nor corrected. The effect of these two errors would cause retained earnings at December 31, 2021 to be in error by what amount?arrow_forwardError Correction A review of Anderson Corporation’s books indicates that the errors and omissions pertaining to the balance sheet accounts shown as follows had not been corrected during the applicable years. The net income per the books is: 2017, $10,000; 2018, $12,000; 2019, $15,000; and 2020, $20,000. No dividends were declared during these years and no adjustments were made to retained earnings. The Retained Earnings balance on December 31, 2020, is $50,000. Omissions December 31 Ending InventoryOvervalued Ending InventoryUndervalued PrepaidExpense UnearnedRevenues AccruedExpense AccruedRevenues 2017 $ — $4,000 $600 $ — $300 $ — 2018 3,000 — — 500 — 700 2019 2,000 — 400 — 100 2020 — 1,000 900 200 350 800 Required: Determine the correct net income…arrow_forwardEffects of Errors on Financial Statements The accountant for Healthy Life Company, a medical services consulting firm, mistakenly omitted adjusting entries for (a) unearned revenue earned during the year ($27,780) and (b) accrued wages ($7,780). If the net income for the current year had been $537,000, what would have been the correct net income if the proper adjusting entries had been made?$fill in the blankarrow_forward
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