12. Casillas, Inc. is a calendar-year corporation. Its financial statements for the years 2011 and2010 contained errors as follows:2010Ending Inventory$3,000 overstated$8,000 overstated$2,000 understated$6,000 overstated2011Depreciation ExpenseAssume that no correcting entries were made at December 31, 2010, or December 31, 2011 andthat no additional errors occurred in 2012. Ignoring income taxes, by how much will workingcapital at December 31, 2012 be overstated or understated?a. $0b. $2,000 overstatedc. $2,000 understatedd. $5,000 understated

Step1: Calculating the value from which working capital shall be overstated or understated. We…

Answered: 12. Casillas, Inc. is a calendar-year…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Willamill Company showed pre-tax income of P2,500,000 for the year ended December 31, 2025. On your year-end verification of the transactions of the Company, you discovered the following errors: P1,000,000 worth of merchandise was purchased in 2025 and included in the ending inventory. However, the purchase was recorded only in 2026. A merchandise shipment valued at P1,500,000 was properly recorded as purchases at year-end. The merchandise was inadvertently omitted from the physical count, since it has not arrived by December 31, 2025. Value added tax for the fourth quarter of 2025, amounting to P500,000 was included in the Sales account. Rental of P300,000 on an equipment, applicable for six months, was received on November 1, 2025. The entire amount was reported as revenue upon receipt. Rent paid on building covering the period from July 1, 2025 to July 1, 2026, amounting to P1,200,000, was paid and recorded as expense on July 1, 2025. The company did not make any adjustment at the…
Company X failed to record (accrue) $5,000,000 of vendor invoices and warranty liability at year-end. As a result of this omission, the company's summary financial statements were stated as follows: Summarized Income Statement Sales $50,000,000 All Cost (incl. Interest & Taxes) $40,000,000 Net Income $10,000,000 Summarized Balance Sheet This Year Last Year Assets: All Current Assets combined $50,000,000 $40,000,000 All Long-Term Assets combined $50,000,000 $40,000,000 Total Assets: $100,000,000 $80,000,000 Liabilities & Stockholders Equity All Current Liabilities combined $30,000,000 $25,000,000 All Long-Term Liabilities combined $25,000,000 $20,000,000 Stockholders Equity $45,000,000 $35,000,000 Total…
During 20x3, Pryor Company changed its inventory method from the LIFO to FIFO. The beginning inventory under FIFO is $20,000 higher than under LIFO. Prepare the journal entry to record this accounting change. Ignore income tax.
If Soda Popinski's Company's ending inventory was actually $86,000 but was adjusted at year end to a balance of $68,000 in error, what would be the impact on the presentation of the balance sheet and income statement for the year that the error occurred, if any?
A company failed to record unrealized gains of $38 million on its debt investments classified as trading securities. Its tax rate is 25%. As a result of this error, total shareholders' equity would be:
6. On January 1, 2011, Folk Company changed from the average cost method to the FIFO method to account for its inventory. Ending inventory for each method was given below. Folk Company accrues tax expense on December 31 of each year and pays the tax in April of the following year. The income tax rate is 30%. What is the net income to be reported in 2011 after the change to the FIFO inventory method? a. 1,610,000 b. 2,300,000 c. 1,750,000 d. 1,890,000
23
During the audit of BAC Company's 2029 financial statements, the auditors discovered that the 2029 ending inventory had been understated by $12,000 and that the 2029 beginning inventory was overstated by $9,000. Before the effect of these errors, 2029 pretax income had been computed as $115,000. What should be reported as the correct 2029 pretax income? A) $112,000 B) $94,000 C) $118,000 D) $136,000 E) $103,000
On December 31, 20x2, Grayson Inc. changed its inventory valuation method to FIFO from weighted-average. The change will result in an $800,000 increase in the beginning inventory at January 1, 20x2. Assume a 30% income tax rate. The cumulative effect of this accounting change on prior periods that will be reported as an adjustment to the beginning balance of retained earnings is O $560,000 O $800,000 0$-0- O $40,000
26. Jethroe Co. reported a retained earnings balance of $200,000 at December 1, year 4. In June year 5, Jethroe discovered that merchandise costing $50,000 had not been included in inventory in its year 4 financial statements. Jethroe has a 21% tax rate. What amount should Jethroe report as adjusted beginning retained earnings in its statement of retained earnings at December 31, year 5?
Bananas, Inc. is a calendar-year corporation. Its financial statements for the years ended December 31, 2019 and 2020 contained the following errors: Ending Inventory Depreciation expense 2019 $25,000 overstatement 10,000 understatement 2020 $40,000 understatement 20,000 overstatement Assume that no correcting entries were made in 2019 or 2020 and that no errors existed in 2018. Ignoring income taxes, by how much will retained earnings at December 31, 2020 be overstated or understated? Enter an overstatement as a positive number and an understatement as a negative number.
While examining the December 31, 2010 financial statements of Dawn Company, the following errors are discovered:  Inventory at January 1 had been overstated by P50,000.;  Inventory at December 31 was understated by P100,000.;  During 2010, Dawn received a P200,000 cash advance from customer for merchandise to be manufactured and shipped during 2011. The collection was credited to sales revenue.;  The net income reported on the 2010 income statement before reflecting any adjustments for the above items is P5,000,000. What is the corrected net income for the year ended December 31, 2010? Choices; 4,950,000 5,150,000 5,100,000 4,850,000

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