A, B and C were partners sharing profits and losses equally. Their respective fixed capitals were $ 30,000, $ 20,000 and $ 10,000. After closing the accounts for the year 2014 it was discovered that the interest on capital at the rate 10% p.a. was omitted before distributing the profits. The profits for the year 2014 were $ 9,000. Instead of changing the audited balance sheet it was decided to pass a single adjusting entry in the beginning of the year, so that the accounts of the previous years can be rectified. Show the Journal Entries and provide working note.

A, B and C were partners sharing profits and losses equally. Their respective fixed capitals were $ 30,000, $ 20,000 and $ 10,000. After closing the accounts for the year 2014 it was discovered that the interest on capital at the rate 10% p.a. was omitted before distributing the profits. The profits for the year 2014 were $ 9,000. Instead of changing the audited balance sheet it was decided to pass a single adjusting entry in the beginning of the year, so that the accounts of the previous years can be rectified. Show the Journal Entries and provide working note.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Consultex, Inc., was founded in 2015 as a small financial consulting business. The company had done reasonably well in 2015-2017 but started noticing its cash dwindle early in 2018. In January 2018, Consultex had paid $16,500 to purchase land and repaid $2,000 principal on an existing promissory note. In March, the company paid $2,100 cash for dividends and $1,100 to repurchase and eliminate Consultex stock that had previously been issued for $1,100. To improve its cash position, Consultex borrowed $5,100 by signing a new promissory note in May and also issued stock to a new private investor for $12,100 cash. Year-end comparative balance sheets and income statements are presented below. CONSULTEX, INc. Balance Sheet October 31 2018 2017 Assets Cash $ 9,850 $13,300 12,100 3,100 11,000 $53,600 $39,500 Accounts Receivable 14,200 2,050 Prepaid Rent Land et al 27,500 Total Assets Liabilities and Stockholders' Equity Salaries and Wages Payable Income Taxes Payable Notes Payable (long-term) $…
audit is scheduled to begin in one weck. With respcct to past duc audit fccs, Alma 1. Alma, CPA, had not been paid yet her prior year's audit fee. The current year', audit is scheduled to begin in one weck. With respect to past duc audit fccs, Alm should a. Perform the scheduled audit and allow the company to pay when cash flow difficulties are alleviated. b. Perform the scheduled audit only after arranging a definite payment schedule and securing notes signed by the company. C. Inform management that the past due audit fees may be considered a loan on which interest must be computed for financial statement purposes. d. Inform management that the past-due audit fees are considered an impairment of auditor's independence. 2. Without the consent of the client. a CPA should not disclose confidential information contained in working papers to a a, Court that has issued a valid subpoena. b. Disciplinary body created under state statute. c. Voluntary quality control review board. d. CPA firm…
Consultex, Incorporated, was founded in 2018 as a small financial consulting business. The company had done reasonably well from 2018 through 2020 but started noticing its cash dwindle early in 2021. In January 2021, Consultex had paid $16,000 to purchase land and repaid $2,000 principal on an existing promissory note. In March, the company paid $2,000 cash for dividends and $1,000 to repurchase and eliminate Consultex stock that had previously been issued for $1,000. To improve its cash position, Consultex borrowed $5,000 by signing a new promissory note in May and also issued stock to a new private investor for $12,000 cash. Year-end comparative balance sheets and income statements are presented below. Assets Cash Accounts Receivable. Prepaid Rent Land Total Assets CONSULTEX, INCORPORATED Balance Sheet October 31 Liabilities and Stockholders' Equity Salaries and Wages Payable Income Taxes Payable Notes Payable (long-term) Common Stock Retained Earnings Total Liabilities and…
You are the manager responsible for the audit of Lamia Ltd, a manufacturing company with a year ended 30 September 2011. The audit work has been completed and reviewed and you are due to issue the audit report in three days. The draft audit opinion is unmodified. The financial statements show turnover for the year ended 30 September 2011 of Tk.15 million, net profit of Tk.3 million, and total assets at the yearend are Tk.80 million. The finance director of Lamia Ltd telephoned you this morning to tell you about the announcement yesterday, of a significant restructuring of Lamia Ltd, which will take place over the next six months. The restructuring will involve the closure of a factory, and its relocation to another part of the country. There will be some redundancies and the estimated cost of closure is Tk.250,000. The financial statements have not been amended in respect of this matter. Required: In respect of the announcement of the restructuring: (hint: Audit Report) (i) Comment on…
Whispering Mining Company declared, on April 20, a dividend of $466,000 payable on June 1. Of this amount, $128,000 is a return of capital. Prepare the April 20 and June 1 entries for Whispering. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Date Account Titles and Explanation Apr. 20 June 1 Debit Credit
S1-9 Brazos Medical, Inc., ended 2019 with cash of $24,000. During 2020, Brazos earned net income of $120,000 and had adjustments to reconcile net income to net cash provided by operations totalling $20,000 (this is a negative amount). Brazos paid $300,000 for equipment during 2020 and had to borrow half of this amount on a long-term note. During the year, the company paid dividends of $15,000 and sold old equipment, receiving cash of $60,000. Prepare Brazos's statement of cash flows with its appropriate heading for the year ended December 31, 2020. Follow the format in the summary problem on pages 31-32. Learning Objective 3 Prepare a statement of cash flows
You have been the auditor of Data Ltd for two years. Your auditor’s report for Data for the year ended30 June 2018 was unmodified, indicating that in your opinion the financial report gave a true and fairview. In August 2018, Data obtained a large loan from Better Bank Ltd, to provide additional workingcapital. Subsequently Data suffered severe trading difficulties and was placed into liquidation in lateDecember 2018, with insufficient funds to repay the loan to Better Bank.Required:Outline a defense for your audit firm to any legal action taken by Better Bank to recover its loss. ( maximum 600 words)
You are currently planning the audit of your client, DEF plc. Its year end is 31 December 2019 and the forecast profit before tax is £15.5 million. DEF has a small internal audit (IA) department. During the year, IA started a programme of physically verifying the company's assets and comparing the results to the non-current assets register, as this type of reconciliation had not occurred for some time. To date only 15% of assets have had their existence confirmed as IA has experienced significant staff shortages and several members of the current IA team are new to DEF plc. Inventory is held in six locations and on 25 and 26 December a full inventory count will be held with adjustments for movements to the year end. This is due to a lack of available staff on 31 December. The number of audit team members are not enough to attend the counts in all the locations. In November, there was a fire in one of the inventory warchouses; inventory of £5 million was damaged and this has been…
Q16 :-A,B and C were partners sharing profits and losses equally. Their respective capitals were $30,000, $ 20,000 and $ 10,000. After closing the accounts for the year 2014-15, it was discovered that the interest on capital at the rate 10%p.a. was omitted before distributing the profits. Instead of changing the audited balance sheet it was decided to pass a single adjusting entry in the beginning of the year, so that the accounts of the previous years can be rectified. Show journal entries.
Brown Investments Ltd, is a company based in East London. It has a financial year end of 30 April.At its annual general meeting (that took place in March 2023), the shareholders of Brown Investments Ltd appointed Eagle-Eye Inc. as its external auditor. During the current audit of Brown Investments Ltd.’s financial statements one of the audit team members discovered that taxable income is understated by the Senior Accountant Mr. Hustler, due to a certain amount of the sales having been fraudulently not recorded. Further investigations conducted pointed out that Mr. Hustler deliberately failed to report output tax and he was also underreporting input tax.Mr Hustler was also in the habit of underpaying tax as he thought the government was corrupt and paying tax was a waste of valuable company resources, he opted to increase the salaries of his employees as he felt it was the moral thing to do. The auditors felt that Mr. Hustler’s actions resulted in material understating of the VAT…