Question

In: Accounting

Carla Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2020 December...

Carla Tool Company’s December 31 year-end financial statements contained the following errors.

	December 31, 2020	December 31, 2021
Ending inventory	$9,400 understated	$7,900 overstated
Depreciation expense	$2,200 understated	—

An insurance premium of $64,800 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $16,300 cash, but the entry was not recorded until 2022. There were no other errors during 2020 or 2021, and no corrections have been made for any of the errors. (Ignore income tax considerations.)

(a) Compute the total effect of the errors on 2021 net income.

Total effect of errors on net income

$Enter the total effect of errors on net income in dollars

understatedoverstated

(b) Compute the total effect of the errors on the amount of Carla’s working capital at December 31, 2021.

Total effect on working capital

$Enter the total effect on working capital in dollars

overstatedunderstated

(c) Compute the total effect of the errors on the balance of Carla’s retained earnings at December 31, 2021.

Total effect on retained earnings

$Enter the total effect on retained earnings in dollars

understatedoverstated

Expert Solution

Let me know if u have any concerns

ekkarill92 answered 2 years ago

Indigo Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2020 December...

Indigo Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2020 December 31, 2021 Ending inventory $10,300 understated $7,300 overstated Depreciation expense $2,500 understated — An insurance premium of $63,300 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $14,800 cash, but the entry was not recorded until 2022. There were no other...

Ayayai Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2017 December...

Ayayai Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2017 December 31, 2018 Ending inventory $10,500 understated $8,200 overstated Depreciation expense $2,400 understated — An insurance premium of $69,000 was prepaid in 2017 covering the years 2017, 2018, and 2019. The entire amount was charged to expense in 2017. In addition, on December 31, 2018, fully depreciated machinery was sold for $16,000 cash, but the entry was not recorded until 2019. There were no other...

Neilson Tool Corporation's December 31 year-end financial statements contained the following errors: .........................................December 31, 2016 ...............December...

Neilson Tool Corporation's December 31 year-end financial statements contained the following errors: .........................................December 31, 2016 ...............December 31, 2017 Ending Inventory ..........$9,600 overstated ..................$8,100 understated Depreciation Expense ..$2,300 overstated ............................- An insurance premium of $66,000 covering the years 2016, 2017, and 2018 was prepaid in 2016, with the entire amount charged to expense that year. In addition, on December 31, 2017, fully depreciated machinery was sold for $15,000 cash, but the entry was not recorded until 2018. There were no other...

Langley Company's December 31 year-end financial statements contained the following errors: Dec. 31, 2017 Dec. 31,...

Langley Company's December 31 year-end financial statements contained the following errors: Dec. 31, 2017 Dec. 31, 2018 Ending inventory $27,500 understated $35,000 overstated Depreciation expense 10,000 overstated An insurance premium of $290,000 was prepaid in 2017 covering the years 2017, 2018, and 2019. The prepayment was correctly recorded with a debit to prepaid insurance. However, the prepaid insurance account at December 31, 2018 had a balance of $290,000. (a) What is the total net effect of the errors on the...

At the end of its first year of operations on December 31, 2020, Carla Vista Company’s...

At the end of its first year of operations on December 31, 2020, Carla Vista Company’s accounts show the following. Partner Drawings Capital Art Niensted $22,900 $49,700 Greg Bolen 13,500 33,000 Krista Sayler 11,800 26,500 The capital balance represents each partner’s initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners’ capital accounts. To record the division of net income for the year 2020 under each of the following independent assumptions. 1....

Exercise 23-06 Pronghorn Company’s income statement for the year ended December 31, 2020, contained the following...

Exercise 23-06 Pronghorn Company’s income statement for the year ended December 31, 2020, contained the following condensed information. Service revenue $848,000 Operating expenses (excluding depreciation) $618,000 Depreciation expense 59,000 Loss on sale of equipment 25,000 702,000 Income before income taxes 146,000 Income tax expense 40,000 Net income $106,000 Pronghorn’s balance sheet contained the following comparative data at December 31. 2020 2019 Accounts receivable $39,000 $57,000 Accounts payable 39,000 32,000 Income taxes payable 4,200 8,900 (Accounts payable pertains to operating expenses.)...

Trio Company’s December 31, Year 2 financial statements reported the following (in millions). Cash December 31...

Trio Company’s December 31, Year 2 financial statements reported the following (in millions). Cash December 31 $1,132 Cash from operating activities $1,504 Cash from investing activities $(973) Cash from financing activities $(875) What did Trio Company report for cash on its December 31, Year 1 balance sheet? Select one: a. None of the these are correct. b. $344 million c. $2,281 million d. $1,476 million e. $788 million

Journalize the adjusting entry needed on December 31, 2020 the company’s year end, for each of...

Journalize the adjusting entry needed on December 31, 2020 the company’s year end, for each of the following independent cases. Adjusting entries are only made on December 31 in this company. Details of the Prepaid Rent Expense account are shown: prepaid rend Jan. 1 Bal 4500 Mar. 31 9000 Sept. 30 9000 The company pays office rent semi-annually on March 31 and September 30. At December 31, part of the last payment is still available to cover January to march...

At the end of its first year of operations on December 31, 2020, Crane Company’s accounts...

At the end of its first year of operations on December 31, 2020, Crane Company’s accounts show the following. Partner Drawings Capital Art Niensted $23,200 $46,700 Greg Bolen 14,100 31,500 Krista Sayler 10,800 26,000 The capital balance represents each partner’s initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners’ capital accounts. To record the division of net income for the year 2020 under each of the following independent assumptions. 1. Net...

Carla Vista Company has a December 31 fiscal year end. Selected information follows for Carla Vista...

Carla Vista Company has a December 31 fiscal year end. Selected information follows for Carla Vista Company for two independent situations as at December 31, 2021: 1. Carla Vista purchased a patent from Tamarisk Inc. for $411,000 on January 1, 2018. The patent expires on January 1, 2026. Carla Vista has been amortizing it over its legal life. During 2021, Carla Vista determined that the patent’s economic benefits would not last longer than six years from the date of acquisition....