In: Accounting
1) The net income per books of Bramble Industries Limited was determined without any knowledge of the following errors. The 2019 year was Bramble’s first year in business. No dividends have been declared or paid.
Year |
Net Income |
Error in |
|||||||
2015 |
$51,800 |
Overstated |
$4,500 |
||||||
2016 |
54,200 |
Overstated |
8,700 |
||||||
2017 |
55,300 |
Understated |
12,000 |
||||||
2018 |
56,000 |
No error |
|||||||
2019 |
59,100 |
Understated |
1,600 |
||||||
2020 |
62,000 |
Overstated |
10,400 |
a) Prepare a work sheet to show the adjusted net income figure for each of the six years after taking the inventory corrections into account.
b) Prepare a schedule that shows both the original retained earnings balance reported at the end of each year and the corrected amount.
Year | Net Income as per Books | Adjustment of | Adjustment of | Adjusted |
Error in Ending Inventory | Error in Beginning Inventory | Net Income | ||
2015 | $ 51,800 | $ -4,500 | $ - | $ 47,300 |
2016 | $ 54,200 | $ -8,700 | $ 4,500 | $ 50,000 |
2017 | $ 55,300 | $ 12,000 | $ 8,700 | $ 76,000 |
2018 | $ 56,000 | $ - | $ -12,000 | $ 44,000 |
2019 | $ 59,100 | $ 1,600 | $ - | $ 60,700 |
2020 | $ 62,000 | $ -10,400 | $ -1,600 | $ 50,000 |
Year | Original Retained Earnings | Corrected Retained Earnings | ||
2015 | $ 51,800 | $ 47,300 | ||
2016 | $ 1,06,000 | $ 97,300 | ||
2017 | $ 1,61,300 | $ 1,73,300 | ||
2018 | $ 2,17,300 | $ 2,17,300 | ||
2019 | $ 2,76,400 | $ 2,78,000 | ||
2020 | $ 3,38,400 | $ 3,28,000 | ||
Retained Earnings is the Accumulated Net Income | ||||