Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Textbook Question
Chapter 5, Problem 6P
Misclassifications Olson Company’s bookkeeper prepared the following income statement and
The preceding account balances are correct but have been incorrectly classified in certain instances. Assume the income tax amounts are correct and linked to the appropriate items.
Required:
Prepare a corrected 2019 multiple-step income statement and a retained earnings statement. Before preparing the 2019 retained earnings statement, determine the correct balance as of the beginning of the year.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Misclassifcations Roz Corporation's Multiple- Step income statement and retained earnings statement for the year ended December 31,2019 as developed by its bookeeper are shown here:
You determine that the account balances listed on the statements are correct but are incorrectly calssified in certain cases. The company laces a 30% tax rate. No shares of common stock were issued or retired during 2019
Required:
1. Review both statements and indicate where each incorrectly classified item should be classified.
2 Preoare a correct multiple - step income statement for 2019
3. Determine the correct beginning balance in retained earnings and then prepare a correct 2019 retained earnings statement.
Rox Corporation’s multiple-step income statement and retained earnings statement for the year ended December 31, 2019, as developed by its bookkeeper, are shown here:
1. Review both statements and indicate where each incorrectly classified item should be classified. 2. Prepare a correct multiple-step income statement for 2019. 3. Determine the correct beginning balance in retained earnings, and then prepare a correct 2019 retained earnings statement.
During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:
2019
understated by
$
142,000
2020
overstated by
194,000
WMC uses the periodic inventory system and the FIFO cost method. Required:1-a. Determine the effect of 2019 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.)1-b. Determine the effect of 2020 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.)2. Prepare a journal entry to correct the error in 2021.3. Will WMC account for the error (a) retrospectively or (b) prospectively?
a. & b. are attached images
c. & d. are below (they are short please please answer)
c. Record correction of error journal entry form.
d. Will WMC account for the error (a) retrospectively or (b) prospectively?
Chapter 5 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 5 - In general, how does the income statement help...Ch. 5 - Prob. 2GICh. 5 - Define income under the capital maintenance...Ch. 5 - Prob. 4GICh. 5 - What is net income?Ch. 5 - What three things must a company determine to...Ch. 5 - Prob. 7GICh. 5 - Prob. 8GICh. 5 - Give an example and explanation for each of the...Ch. 5 - Define expenses. What do expenses measure?
Ch. 5 - Prob. 11GICh. 5 - Define gains and losses. Give examples of three...Ch. 5 - Prob. 13GICh. 5 - What items are included in a companys income from...Ch. 5 - How are unusual or infrequent gains or losses...Ch. 5 - What is interperiod tax allocation?Ch. 5 - Prob. 17GICh. 5 - Prob. 18GICh. 5 - Prob. 19GICh. 5 - Prob. 20GICh. 5 - Prob. 21GICh. 5 - Prob. 22GICh. 5 - Prob. 23GICh. 5 - Prob. 24GICh. 5 - Prob. 25GICh. 5 - Prob. 26GICh. 5 - Prob. 27GICh. 5 - Prob. 28GICh. 5 - Prob. 29GICh. 5 - Prob. 30GICh. 5 - What is the rate of return on common equity? What...Ch. 5 - Prob. 32GICh. 5 - Prob. 33GICh. 5 - Which of the following is expensed under the...Ch. 5 - The following information is available for Cooke...Ch. 5 - The following information is available for Wagner...Ch. 5 - Prob. 4MCCh. 5 - A loss from the sale of a component of a business...Ch. 5 - In a statement of cash flows, receipts from sales...Ch. 5 - Brandt Corporation had sales revenue of 500,000...Ch. 5 - Refer to RE5-1. Prepare a single-step income...Ch. 5 - Shaquille Corporation began the current year with...Ch. 5 - Dorno Corporation incurred expenses during the...Ch. 5 - Niler Corporation reported the following after-tax...Ch. 5 - Jordan Corporation reported retained earnings of...Ch. 5 - Prob. 7RECh. 5 - Prob. 8RECh. 5 - Amelias Bookstore reported net income of 62,000...Ch. 5 - Prob. 10RECh. 5 - Prob. 1ECh. 5 - Cost of Goods Sold and Income Statement Schuch...Ch. 5 - Income Statement Calculation OConnor Companys...Ch. 5 - Results of Discontinued Operations On November 30,...Ch. 5 - Multiple-Step and Single-Step In coin Statements...Ch. 5 - Prob. 6ECh. 5 - Multiple-Step and Single-Step Income Statements,...Ch. 5 - Cost of Goods Sold, Income Statement. and...Ch. 5 - Net Cash Flow from Operating Activities The...Ch. 5 - Prob. 10ECh. 5 - Statement of Cash Flows The following items...Ch. 5 - Statement of Cash Flows The following are several...Ch. 5 - Classifications Where would each of the following...Ch. 5 - Rate of Change nalyses eiher Company presents the...Ch. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Income Statement and Retained Earnings Huff...Ch. 5 - Prob. 18ECh. 5 - Interim Reporting (Appendix 5.1) Miller Company...Ch. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Income Statement, Lower Portion Cunningham Company...Ch. 5 - Financial Statement Violations of U.S. GAAP The...Ch. 5 - Misclassiflcations Rox Corporations multiple-step...Ch. 5 - Misclassifications Olson Companys bookkeeper...Ch. 5 - Complex Income Statement The following items were...Ch. 5 - Prob. 8PCh. 5 - Financial Statement Deficiencies The following is...Ch. 5 - Comprehensive: Balance Sheet from Statement of...Ch. 5 - Net Income and Comprehensive Income At the...Ch. 5 - Statement of Cash Flows A list of Fischer Companys...Ch. 5 - Statement of Cash Flows The following are Mueller...Ch. 5 - Prob. 14PCh. 5 - Rate of Change Analyses and Ratios Analyses The...Ch. 5 - Comprehensive: Income Statement and Retained...Ch. 5 - Comprehensive: Income Statement and Supporting...Ch. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 1CCh. 5 - Prob. 2CCh. 5 - Prob. 3CCh. 5 - Prob. 4CCh. 5 - Nonrecurring Items Lynn Company sells a component...Ch. 5 - Prob. 6CCh. 5 - Accrual Accounting GAAP requires the use of...Ch. 5 - Ethics and Sale of Operating Component It is the...Ch. 5 - Analyzing Starbuckss Income Statement and Cash...Ch. 5 - Prob. 11C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Noren Company uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable debt for 2019. To manage earnings more favorably, Noren Company considers changing the past-due categories as follows. A. Complete each table by filling in the blanks. B. Determine the difference between totals uncollectible. C. Complete the following 2019 comparative income statements for 2019, showing net income changes as a result of the changes to the balance sheet aging method categories. D. Describe the categories change effect on net income and accounts receivable.arrow_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_forwardElegant Linens uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable debt for 2019. To manage earnings more favorably, Elegant Linens considers changing the past-due categories as follows. A. Complete each table by filling in the blanks. B. Determine the difference between total uncollectible. C. Complete the following 2019 comparative income statements for 2019, showing net income changes as a result of the changes to the balance sheet aging method categories. D. Describe the categories change effect on net income and accounts receivable.arrow_forward
- Intraperiod Tax Allocation Wright Company reports the following information for the year ended December 31, 2019: Required: 1. Prepare the year-end journal entry necessary to record the 2019 intraperiod income tax allocation in regard to the preceding information. 2. Prepare Wrights 2019 income statement and statement of retained earnings.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_forwardMultiple-Step and Single-Step Income Statements, and Statement of Comprehensive Income On December 31, 2019, Opgenorth Company listed the following items in its adjusted trial balance: Additional data: 1. Seven thousand shares of common stock have been outstanding the entire year. 2. The income tax rate is 30% on all items of income. Required: 1. Prepare a 2019 multiple-step income statement. 2. Prepare a 2019 single-step income statement. 3. Prepare a 2019 statement of comprehensive income.arrow_forward
- Comprehensive: Income Statement and Retained Earnings Milwaukee Manufacturing Company presents the following partial list of account balances, after adjustments, as of December 31, 2019: The following information is also available but is not reflected in the preceding accounts: a. The company sold Division E (a major component of the company) on August 2, 2019. During 2019, Division E had incurred a pretax loss from operations of 16,000. However, because the acquiring company could vertically integrate Division E into its facilities, Milwaukee Manufacturing was able to recognize a 42,000 pretax gain on the sale. b. On January 2, 2019, without warning, a foreign country expropriated a factory of Milwaukee Manufacturing which had been operating in that country. As a result of that expropriation, the company has incurred a pretax loss of 30,000. c. The common stock was outstanding for the entire year. A cash dividend of 1.20 per share was declared and paid in 2019. d. The 2019 income tax expense totals 31,050 and consists of the following: Required: 1. As supporting documents for Requirement 2, prepare separate supporting schedules for selling expenses and for general and administrative expenses (include depreciation expense where applicable in these schedules). 2. Prepare 2019 multiple-step income statement for Milwaukee Manufacturing. 3. Prepare a 2019 retained earnings statement. 4. Next Level What was Milwaukee Manufacturings return on common equity for 2019 if its average shareholders equity during 2019 was 500,000? What is your evaluation of this return on common equity if its target for 2019 was 15%? 5. Next Level Discuss how Milwaukee Manufacturings income statement in Requirement 2 might be different if it used IFRS.arrow_forwardCost of Goods Sold, Income Statement. and Statement of Comprehensive Income Gaskin Company derives the following items from its adjusted trial balance as of December 31, 2019: The following; additional information is also available. The December 31, 2019, ending inventory is 14,700. During 2019, 4,200 shares of'common stock were outstanding the entire year. The income tax rate 30% on all items of income. Required: 1. As a supporting document for Requirements 2 and 3, prepare a separate schedule for Gaskins cost of goods sold. 2. Prepare a 2019 single-step income statement. 3. Prepare a 2019 multiple-step income statement. 4. Prepare a 2019 statement of comprehensive income.arrow_forwardA 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_forward
- During 2020, an entity decided to change from the FIFO method of inventory valuation to the weighted average method. Inventory balances under each method were: FIFO Weighted Average December 31, 2017 4,500,000 5,400,000 December 31, 2018 7,800,000 7,100,000 December 31, 2019 8,300,000 7,800,000 The income tax rate is 30%. What amount should be reported as the effect of this accounting change in the statement of Retained Earnings for 2020? 350,000 decrease 350,000 increase 490,000 decrease 490,000 increasearrow_forwardDuring 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:2019 understated by $120,0002020 overstated by 150,000WMC uses the periodic inventory system and the FIFO cost method.Required:1. Determine the effect of these errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.)2. Prepare a journal entry to correct the error in 2021.3. Will WMC account for the error (a) retrospectively or (b) prospectively?arrow_forwardBefore 2020, KnowieNowl Company used the cash basis of accounting. For the year ended December 31, KnowieNowl changed to the accrual basis. KnowieNowl cannot determine the beginning balance of supplies inventory. What effect of KnowieNowl’s inability to determine beginning supplies inventory on its 2020 accrual basis profit and December 31, 2020 accrual basis capital, respectively? a. overstated; overstated b. no effect; no effect c. no effect; overstated d. overstated; no effectarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
The KEY to Understanding Financial Statements; Author: Accounting Stuff;https://www.youtube.com/watch?v=_F6a0ddbjtI;License: Standard Youtube License