Principles of Accounting
12th Edition
ISBN: 9781285607047
Author: NEEDLES
Publisher: Cengage Learning
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Chapter 7, Problem 12EA
To determine
Compute the corrected operating income and its effect on the owner's equity.
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During 2016, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: 2014 understated by $120,000 2015 overstated by 150,000 WMC uses the periodic inventory system and the FIFO cost method. Required: 1. Determine the effect of these errors on retained earnings at January 1, 2016, before any adjustments. Explain your answer. (Ignore income taxes.) 2. Prepare a journal entry to correct the error. 3. What other step(s) would be taken in connection with the error?
During 2016, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts: 2014 understated by $120,000 2015 overstated by 150,000 WMC uses a periodic inventory system and the FIFO cost method. Required: 1. Determine the effect of these errors on retained earnings at January 1, 2016, before any adjustments. Explain your answer. (Ignore income taxes.) 2. Prepare a journal entry to correct the errors. 3. What other step(s) would be taken in connection with the correction of the errors?
The Mike Tomlin Company has a calendar-year accounting period. The
following error was discovered in April of 2019. This error would have
affected the financial statements for 2017 and 2018. The ending balance in
the inventory had been overstated at 12/31/2017 by $100,000.
INSTRUCTIONS: Compute the effect this error had on the 2017 net income.
Compute the effect, if any, each error had on the December 31, 2017
balance sheet items. Hint: be very careful about the time period!
Chapter 7 Solutions
Principles of Accounting
Ch. 7 - Prob. 1DQCh. 7 - Which of the following methods do not require a...Ch. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 1SECh. 7 - Assume the following data with regard to inventory...Ch. 7 - Prob. 3SE
Ch. 7 - Prob. 4SECh. 7 - Prob. 5SECh. 7 - Prob. 6SECh. 7 - Prob. 7SECh. 7 - Prob. 8SECh. 7 - Prob. 9SECh. 7 - Prob. 10SECh. 7 - Prob. 11SECh. 7 - Prob. 12SECh. 7 - Prob. 1EACh. 7 - Prob. 2EACh. 7 - Prob. 3EACh. 7 - Prob. 4EACh. 7 - Prob. 5EACh. 7 - Prob. 6EACh. 7 - During July 2014, Micanopy, Inc., sold 500 units...Ch. 7 - Prob. 8EACh. 7 - Prob. 9EACh. 7 - Prob. 10EACh. 7 - Prob. 11EACh. 7 - Prob. 12EACh. 7 - Midori Company merchandises a single product...Ch. 7 - The inventory of Wood4Fun and data on purchases...Ch. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6APCh. 7 - DiPaolos inventory, purchases, and sales for March...Ch. 7 - Prob. 8APCh. 7 - Prob. 9APCh. 7 - Zubac Company is a large retail furniture company...Ch. 7 - Prob. 1CCh. 7 - Prob. 2CCh. 7 - ExxonMobil Corporation had net income of 41.0...Ch. 7 - Prob. 4CCh. 7 - JCPenney, a large retail company with many stores,...
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- In 2016, Adonis Industries changed its method of valuing inventory from the average cost method to the FIFO method. At December 31, 2015, Adonis’s inventories were $47.6 million (average cost). Adonis’s records indicated that the inventories would have totaled $64 million at December 31, 2015, if determined on a FIFO basis. Ignoring income taxes, what journal entry will Adonis use to record the adjustment in 2016?arrow_forwardSunflower Co. reported net income of P150,000, P180,000, and P220,000 for the years 2017, 2018, and 2019. However, the following errors were detected and were not yet corrected:· 2017 ending inventory is overstated by P6000.· 2018 beginning inventory is overstated by P6000.· A prepayment for rent for three years amounting to P9000 was expensed in full in 2018.How much is the correct 2019 net income?arrow_forward(Error Analysis) The before-tax income for Lonnie Holdiman Co. for 2017 was $101,000 and $77,400 for 2018. However, the accountant noted that the following errors had been made:1. Sales for 2017 included amounts of $38,200 which had been received in cash during 2017, but for which the related products were delivered in 2018. Title did not pass to the purchaser until 2018.2. The inventory on December 31, 2017, was understated by $8,640.3. The bookkeeper in recording interest expense for both 2017 and 2018 on bonds payable made the following entry on an annual basis.Interest Expense 15,000Cash 15,000The bonds have a face value of $250,000 and pay a stated interest rate of 6%. They were issued at a discount of $15,000 on January 1, 2017, to yield an effective-interest rate of 7%. (Assume that the effective-yield method should be used.)4. Ordinary repairs to equipment had been erroneously charged to the Equipment account during 2017 and 2018. Repairs in the amount of $8,500 in 2017 and…arrow_forward
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