Question

In: Accounting

The reported net incomes for the first 2 years of Sandhill Co. were as follows: 2017,...

The reported net incomes for the first 2 years of Sandhill Co. were as follows: 2017, $169,000; 2018, $225,000. Early in 2019, the following errors were discovered. 1. Depreciation of equipment for 2017 was overstated by $7,900. 2. Depreciation of equipment for 2018 was understated by $15,400. 3. December 31, 2017 ending inventory was overstated by $20,300. 4. December 31, 2018 inventory was overstated by $28,300.

Prepare the correcting entry necessary when these errors are discovered. Assume that the books are closed.

Solutions

Expert Solution

Answer - Entry to be parked -

Account Debit $ Credit $
Prior year error adjustment entry Retained earnings          56,100
Equipment            7,500
Inventory          48,600

Workings / Explaination -

Account Debit Credit
1. Depreciation of equipment for 2017 was overstated by $7,900. Equipment            7,900
Retained earnings            7,900
2. Depreciation of equipment for 2018 was understated by $15,400 Retained earnings          15,400
Equipment          15,400
3. December 31, 2017 ending inventory was overstated by $20,300. Retained earnings          20,300
Inventory          20,300
4. December 31, 2018 inventory was overstated by $28,300. Retained earnings          28,300
Inventory          28,300

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

The reported net incomes for the first 2 years of Splish Products, Inc., were as follows:...
The reported net incomes for the first 2 years of Splish Products, Inc., were as follows: 2020, $147,800; 2021, $202,000. Early in 2022, the following errors were discovered. 1. Depreciation of equipment for 2020 was overstated $15,900. 2. Depreciation of equipment for 2021 was understated $38,300. 3. December 31, 2020, inventory was understated $49,500. 4. December 31, 2021, inventory was overstated $14,900. Prepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income...
Hendry Corp. reported net incomes for the last three years as follows: 2018 2017 2016 $180,000...
Hendry Corp. reported net incomes for the last three years as follows: 2018 2017 2016 $180,000 $240,000 $225,000 During the 2018 year-end audit, Hendry's newly appointed auditors discover that Hendry bought a machine on January 1, 2015 for $125,000 cash, with a $25,000 estimated residual value and a five-year life. The company debited an expense account for the entire cost of the asset. Hendry uses straight-line depreciation for all machinery. Instructions (Ignore all income tax effects) a) Prepare the general...
Hendry Corp. reported net incomes for the last three years as follows: 2018: $180,000 2017: $240,000...
Hendry Corp. reported net incomes for the last three years as follows: 2018: $180,000 2017: $240,000 2016: $225,000 During the 2018 year-end audit, Hendry's newly appointed auditors discover that Hendry bought a machine on January 1, 2015 for $125,000 cash, with a $25,000 estimated residual value and a five-year life. The company debited an expense account for the entire cost of the asset. Hendry uses straight-line depreciation for all machinery. Instructions (Ignore all income tax effects) a) Prepare the general...
In its income statement for the year ended December 31, 2017, Sandhill Co. reported the following...
In its income statement for the year ended December 31, 2017, Sandhill Co. reported the following condensed data. Salaries and wages expenses     $697,500                              Loss on disposal of plant assets $ 125,250 Cost of goods sold 1,480,500                      Sales revenue   3,315,000 Interest expense 106,500                             Income tax expense 37,500 Interest revenue 97,500                               Sales discounts   240,000 Depreciation expense 465,000                   Utilities expense 165,000 Prepare a multiple-step income statement. Calculate the profit margin and gross profit rate. (Round answers to 1 decimal place, e.g. 15.2%.) Profit...
Manila Corp reported net incomes for a three-year period as follows: 2012 2011 2010 $240,000 $225,000...
Manila Corp reported net incomes for a three-year period as follows: 2012 2011 2010 $240,000 $225,000 $180,000 During the 2012 year-end audit, the following items come to your attention: 1.   Manila bought a truck on January 1, 2009 for $98,000 cash, with an $8,000 estimated residual value and a six-year life. The company debited an expense account for the entire cost of the asset. Manila uses straight-line depreciation for all vehicles. 2.   During 2012, Manila changed from straight-line depreciation for...
On January 1 2017 the balance sheets of Potter Co. and Hogwarts Co. were as follows:...
On January 1 2017 the balance sheets of Potter Co. and Hogwarts Co. were as follows: Potter Hogwarts cash 1,000,000 50,000 equipment 1,000,000 100,000 a/d equip 100,000 10,000 Land 2,000,000 20,000 building 3,000,000 100,000 a/d building 1,000,000 30,000 patent 50,000 50,000 total assets 5,950,000 280,000 accounts payable 1,000,000 40,000 notes payable 1,000,000 40,000 common stock $5 par 3,000,000 150,000 apic c/s 100,000 0 r/e 850,000 50,000 On January 2nd Potter acquired 80% of the stock of Hogwarts by issuing 50,000...
On January 1 2017 the balance sheets of Potter Co. and Hogwarts Co. were as follows:...
On January 1 2017 the balance sheets of Potter Co. and Hogwarts Co. were as follows: Potter Hogwarts cash 1,000,000 50,000 equipment 1,000,000 100,000 a/d equip 100,000 10,000 Land 2,000,000 20,000 building 3,000,000 100,000 a/d building 1,000,000 30,000 patent 50,000 50,000 total assets 5,950,000 280,000 accounts payable 1,000,000 40,000 notes payable 1,000,000 40,000 common stock $5 par 3,000,000 150,000 apic c/s 100,000 0 r/e 850,000 50,000 On January 2nd Potter acquired all of the stock of Hogwarts by issuing 50,000...
Shamrock Co. reported $157,600 of net income for 2017. The accountant, in preparing the statement of...
Shamrock Co. reported $157,600 of net income for 2017. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2017 that might affect cash flows from operating activities. 1. Shamrock purchased 100 shares of treasury stock at a cost of $20 per share. These shares were then resold at $25 per share. 2. Shamrock sold 100 shares of IBM common at $180 per share. The acquisition cost of these shares was $160 per share. There...
Ayayai Co. reported $ 142,000 of net income for 2017. The accountant, in preparing the statement...
Ayayai Co. reported $ 142,000 of net income for 2017. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2017 that might affect cash flows from operating activities. 1) Ayayai purchased 100 shares of treasury stock at a cost of $ 20 per share. These shares were then resold at $ 25 per share. 2) Ayayai sold 100 shares of IBM common at $ 200 per share. The acquisition cost of these shares was...
Smyrna Company had financial and taxable incomes as follows: 2016                     2017              
Smyrna Company had financial and taxable incomes as follows: 2016                     2017                     2018 Pretax financial income                                             $150,000             $140,000            $135,000 Taxable income                                                              115,000             140,000               170,000 The tax rate for all three years was 30%. Required: a. Prepare the journal entries to record income taxes for all three years. b. Explain why the taxes paid in 2018 are different from the tax return and the amount reported in the financial statements and provide...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT