Accounting Errors

Shannon Corporation began operations on January 1, 2016. Financial statements for the years ended December 31, 2016 and 2017, contained the following errors:

In addition, on December 31, 2017, fully depreciated machinery was sold for $10,800 cash, but the sale was not recorded until 2018. There were no other errors during 2016 or 2017, and no corrections have been made for any of the errors.

Ignoring income taxes, what is the total effect of the errors on 2017 net income?

a.Net income overstated by $5,800

b.Net income overstated by $11,000

c.Net income overstated by $14,200

d.Net income understated by $1,800

• Assume you are working on budgeting for the room department of your hotel.
• Assume the hotel’s ‘Room Revenue (Sales)’ was $1,640,000 during 2016. Based on the lodging forecast report, you expect the ‘Room Revenue (Sales)’ to increase by 3.7% next year.
• Assume the ‘Guest Supplies’ expenses (variable costs) from the room department was $250,000 during 2016. For 2017, this variable cost will remain at the same percentage of the Room Revenue (Sales) as experienced in 2016.
• Assume the ‘Salaries’ expenses (fixed costs) from the room department was $280,000 during 2016. For 2017, this fixed cost will increase by 2% due to the expected increase in living expenses in this area.

1. What will be the budgeted ‘Room Revenue (Sales)’ for 2017?

2. What will be the budgeted ‘Guest Supplies’ expenses for 2017?

3. What will be the budgeted ‘Salaries’ expenses for 2017?

On October 1, 2016, Indigo Corp. issued $960,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2016, and pay interest annually on October 1. Financial statements are prepared annually on December 31.

Prepare the journal entry to record the issuance of the bonds.

Prepare the adjusting entry to record the accrual of interest on December 31, 2016.

Show the balance sheet presentation of bonds payable and bond interest payable on December 31, 2016.

Prepare the journal entry to record the payment of interest on October 1, 2017.

Prepare the adjusting entry to record the accrual of interest on December 31, 2017.

Assume that on January 1, 2018, Indigo pays the accrued bond interest and calls the bonds. The call price is 104. Record the payment of interest and redemption of the bonds.

On January 1, 2016, Flash and Dash Company adopted a healthcare plan for its retired employees. To determine eligibility for benefits, the company retroactively gives credit to the date of hire for each employee. The following information is available about the plan: Service cost $30,000 Accumulated postretirement benefit obligation (1/1/16) 120,000 Expected return on plan assets 0 Amortization of Prior service cost 10,000 Payments to retired employees during 2016 5,000 Interest rate 10% Average remaining service period of active plan participants (1/1/16) 12 years Required: 1. Compute the OPRB expense for 2016 if the company uses the average remaining service life to amortize the prior service cost. 2. Prepare all the required journal entries for 2016 if the plan is not funded.

On January 1, 2016, Flash and Dash Company adopted a healthcare plan for its retired employees. To determine eligibility for benefits, the company retroactively gives credit to the date of hire for each employee. The following information is available about the plan:

Required:

Financial information related to the proprietorship of Ebony Interiors for February and March 2016 is as follows:

I want to know the relationship between inventory turnover ratio and allowance for obsolescence in inventory.

Basically, I am analyzing a company's financial statement, and this company is in bad position, high leverage (borrowed 1B last year), one of the sector filled chapter 11, and there are many other bad signs. Therefore, I thought the inventory turnover ratio in 2016 would be better than 2017's, however, it came out to be 2017's inventory turnover ratio was little bit higher than 2016's.

In this company's 10-k report, it says that "allowance for obsolescence in inventory from 2016 to 2017, which was 221.70%." is this the reason for higher inventory turnover ratio in 2016 than 2017? Or is it just irrelevant to the inventory turnover ratio? Can someone explain this?

During 2016, the following events and transactions occurred: 1. JR recognized sales revenues of $108,000. It incurred cost of goods sold of $62,000 and operating expenses of $12,000. 2. JR issued 1,000 shares of its $5 par common stock for $14 per share. 3. JR invested $30,000 in available-for-sale securities. At the end of the year, the securities had a fair value of $35,000. 4. JR paid dividends of $6,000. The income tax rate on all items of income is 30%. Required: 1. Prepare a 2016 income statement for JR which includes net income and comprehensive income (ignore earnings per share). 2. Prepare (a) a 2016 income statement (ignore earnings per share) and (b) a separate 2016 statement of comprehensive income.