Below are three independent and unrelated errors. a. On December 31, 2020, Wolfe-Bache Corporation failed to accrue salaries expense of $1,800. In January 2021, when it paid employees for the December 27-January 2 workweek, Wolfe-Bache made the following entry: Salaries expense Cash 2,520 2,520 b. On the last day of 2020, Midwest Importers received a $90,000 prepayment from a tenant for 2021 rent of a building. Midwest recorded the receipt as rent revenue. The error was discovered midway through 2021. c. At the end of 2020, Dinkins-Lowery Corporation failed to accrue interest of $8,000 on a note receivable. At the beginning of 2021, when the company received the cash, it was recorded as interest revenue. Required: For each error: 1. What would be the effect of each error on the income statement and the balance sheet in the 2020 financial statements? 2. Prepare any journal entries each company should record in 2021 to correct the errors. Complete this question by entering your answers in the tabs below. Required 1 Required 2 What would be the effect of each error on the income statement and the balance sheet in the 2020 financial statements? Error a Income Statement: Balance Sheet: Error b Income Statement: Balance Sheet: Error c Income Statement: Balance Sheet: < Required 1 Required 2 >
Below are three independent and unrelated errors. a. On December 31, 2020, Wolfe-Bache Corporation failed to accrue salaries expense of $1,800. In January 2021, when it paid employees for the December 27-January 2 workweek, Wolfe-Bache made the following entry: Salaries expense Cash 2,520 2,520 b. On the last day of 2020, Midwest Importers received a $90,000 prepayment from a tenant for 2021 rent of a building. Midwest recorded the receipt as rent revenue. The error was discovered midway through 2021. c. At the end of 2020, Dinkins-Lowery Corporation failed to accrue interest of $8,000 on a note receivable. At the beginning of 2021, when the company received the cash, it was recorded as interest revenue. Required: For each error: 1. What would be the effect of each error on the income statement and the balance sheet in the 2020 financial statements? 2. Prepare any journal entries each company should record in 2021 to correct the errors. Complete this question by entering your answers in the tabs below. Required 1 Required 2 What would be the effect of each error on the income statement and the balance sheet in the 2020 financial statements? Error a Income Statement: Balance Sheet: Error b Income Statement: Balance Sheet: Error c Income Statement: Balance Sheet: < Required 1 Required 2 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Income Statement Column 1, Row 1 Options: Expenses understated, Expenses overstated, Revenue understated, or Revenue overstated.
Income Statement Column 2, Row 1 Options: Net income understated or Net income overstated
Balance Sheet Column 2, Row 2 Options:
Transcribed Image Text:Below are three independent and unrelated errors.
a. On December 31, 2020, Wolfe-Bache Corporation failed to accrue salaries expense of $1,800. In January 2021, when it paid
employees for the December 27-January 2 workweek, Wolfe-Bache made the following entry:
Salaries expense
Cash
2,520
2,520
b. On the last day of 2020, Midwest Importers received a $90,000 prepayment from a tenant for 2021 rent of a building. Midwest
recorded the receipt as rent revenue. The error was discovered midway through 2021.
c. At the end of 2020, Dinkins-Lowery Corporation failed to accrue interest of $8,000 on a note receivable. At the beginning of 2021,
when the company received the cash, it was recorded as interest revenue.
Required:
For each error:
1. What would be the effect of each error on the income statement and the balance sheet in the 2020 financial statements?
2. Prepare any journal entries each company should record in 2021 to correct the errors.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
What would be the effect of each error on the income statement and the balance sheet in the 2020 financial statements?
Error a
Income Statement:
Balance Sheet:
Error b
Income Statement:
Balance Sheet:
Error c
Income Statement:
Balance Sheet:
< Required 1
Required 2 >
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