The first audit of the books of Whispering Company was made for the year ended December...

The first audit of the books of Whispering Company was made for the year ended December 31, 2018. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are:

1.		At the beginning of 2016, the company purchased a machine for $483,000 (salvage value of $48,300) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years.
2.		At the end of 2017, the company failed to accrue sales salaries of $43,000 which was paid in 2018 and was debited to Salaries and Wages Expense.
3.		A tax lawsuit that involved the year 2016 was settled late in 2018. It was determined that the company owed an additional $89,000 in taxes related to 2016. The company did not record a liability in 2016 or 2017 because the possibility of loss was considered remote, and charged the $89,000 to a loss account in 2018.
4.		Whispering Company purchased a copyright from another company early in 2016 for $46,000. Whispering had not amortized the copyright because its value had not diminished. The copyright has a useful life at purchase of 20 years.
5.		In 2018, the company wrote off $86,000 of inventory considered to be obsolete; this loss was charged directly to Retained Earnings.

Prepare the journal entries necessary in 2018 to correct the books, assuming that the books have not been closed. Disregard effects of corrections on income tax.

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

The first audit of the books of Carla Company was made for the year ended December...

The first audit of the books of Carla Company was made for the year ended December 31, 2021. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are 1. At the beginning of 2019, the company purchased a machine for $561,000 (salvage value of $56,100) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in...

The first audit of the books of Fenimore Company was made for the year ended December...

The first audit of the books of Fenimore Company was made for the year ended December 31, 2018. In examining the books, the auditor found that certain items that resulted from changes in accounting policies, accounting estimates and errors had been overlooked or incorrectly handled in the last 3 years. Instructions 1. Describe the types of accounting changes. 2. Explain the accounting procedures for changes in accounting policies and estimates and the correction of errors. 3. Assuming that the...

An audit of the books of Grinch company was conducted for the year ending December 31,...

An audit of the books of Grinch company was conducted for the year ending December 31, 2018. In examining the books, the auditor found that certain items had been overlooked or incorrectly recorded. These items are: The company purchased a copyright in early 2016 for $60,000. The bookkeeper has not amortized the copyright. The useful life at purchase was 10 years. During 2018, the company sold fully depreciated equipment that originally cost $25,000 (no salvage value). The company incorrectly recorded...

Mike and Dan CPAs, provided the following audit report. The audit for the year ended December...

Mike and Dan CPAs, provided the following audit report. The audit for the year ended December 31, 2019 was completed on March 1, 2020, and the report was issued to Jain Corporation, a private company, on March 13, 2020. List at least 7 deficiencies in this report. Do not rewrite the report. We have examined the accompanying financial statements of Jain Corporation as of December 31, 2019. These financial statements are the responsibility of the company's management. Management's Responsibility for...

JRM Co. is in the process of closing its books for the year ended December 31,...

JRM Co. is in the process of closing its books for the year ended December 31, year 2. The following business events are not properly reflected in JRM’s December 31, year 2, unadjusted trial balance: The controller determined that half of the recorded rent expense is attributed to year 3. JRM depreciates its property, plant and equipment using the straight-line method over 10 years. The property, plant and equipment had an original cost of $20,000 and a salvage value...

The financial year of your audit client Pickles Ltd ended on 31 December 2019. Your audit...

The financial year of your audit client Pickles Ltd ended on 31 December 2019. Your audit report was signed on 20 February 2020 and the financial statements were issued on 5 March 2020. Each of the following independent events, which the auditors have discovered after the end of the financial year, have a material effect on the financial statements: 14 February 2020 You found that the audit client had lost a court case for breaching a contract with a supplier....

) York Company reported the following results for the year ended December 31, 2021, its first...

) York Company reported the following results for the year ended December 31, 2021, its first year of operations: 2021 Income (per books before income taxes) $ 1,800,000 Taxable income 3,400,000 The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2022. What should York record as a net deferred tax asset or liability for the year ended December 31, 2021, assuming that the enacted tax rates in effect...

- During the year ended 31 December, the business made sales of merchandises of £45,000 and...

- During the year ended 31 December, the business made sales of merchandises of £45,000 and purchases of merchandises of £25,000. The inventory of merchandises at the beginning of the year was valued at £8,000 and, at 31 December, £4,500. The gross profit for the year was: a) £16,500. b) £23,500. c). £20,000. d) None of these amounts - If a firm purchases an Equipment (Fixed assets), net income decreases by the amount of the equipment purchase a)True b)False -...

You are engaged to audit the Ferrick Corporation for the year ended December 31, 2018. Only...

You are engaged to audit the Ferrick Corporation for the year ended December 31, 2018. Only merchandise shipped by the Ferrick Corporation to customers up to and including December 30, 2018, has been eliminated from inventory. The inventory as determined by physical inventory count has been recorded on the books by the company’s controller. No perpetual inventory records are maintained. All sales are made on an FOB–shipping point basis. You are to assume that all purchase invoices have been correctly...

Ice Cube, CPA was conducting the audit of Snoop Dogg, Inc. for the year ended December...

Ice Cube, CPA was conducting the audit of Snoop Dogg, Inc. for the year ended December 31, 2019. Ice Cube evaluated the accounts receivable of Snoop Dogg and determined that there is a 95% probability that the true population misstatement is less than or equal to $384,415. Ice Cube decided that he should conclude that accounts receivable is not materially misstated, since the upper misstatement limit of $384,415 is less than the tolerable misstatement of $400,000. Ice Cube also concluded...

Subjects