Answered: A business has a non- current asset…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Altima Corporation discovered an error in its 2020 financial statements. The firm recorded $4,200,000 in depreciation expense instead of record $4,500,000. Altima has a constant tax rate of 40% and reports 3 years of comparative income statements and 2 years of comparative balance sh- in its annual report. Ignoring the income tax effect, what is the correct journal entry to record the prior-period adjustment? O Depreciation expense Accumulated Depreciation O Retained Earnings 300,000 Income Tax Payable Accumulated Depreciation Retained Earnings O Accumulated Depreciation 300,000 Retained Earnings Accumulated Depreciation 300.000 estion 22 300,000 300,000 120.000 180,000 300,000 300,000
The reported net incomes for the fırst 2 years of Pina Products, Inc., were as follows: 2021, $133,000; 2022, $184,000. Early in 2023, the following errors were discovered. 1. Depreciation of equipment for 2021 was overstated $18,000. 2. Depreciation of equipment for 2022 was understated $32,500. 3. December 31, 2021, inventory was understated $55,000. 4. December 31, 2022, inventory was overstated $14,200. Prepare the correcting entry necessary when these errors are discovered. Assume that the books for 2022 are closed. (Ignore income tax considerations.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit
In 2021, internal auditors discovered that PKE Displays, Inc. had debited an expense account for the $356,000 cost of equipment purchased on January 1, 2018. The equipment’s life was expected to be five years with no residual value. Straight-line depreciation is used by PKE. Required:1. Determine the cumulative effect of the error on net income over the three-year period from 2018 through 2020, and on retained earnings by the end of 2020.2. Prepare the correcting entry assuming the error was discovered in 2021 before the adjusting and closing entries. (Ignore income taxes.)3. Assume instead that the equipment was disposed of in 2022 and the original error was discovered in 2023 after the 2022 financial statements were issued. Prepare the correcting entry in 2023.

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