Below are three Independent and unrelated errors. a. On December 31, 2020, Wolfe-Bache Corporation failed to accrue salaries expense of $1,550. In January 2021, when It pald employees for the December 27-January 2 workweek, Wolfe-Bache made the following entry: Salaries expense Cash b. On the last day of 2020, Midwest Importers received a $85,000 prepayment from a tenant for 2021 rent of a building. Midwest recorded the receipt as rent revenue. The error was discovered midway through 2021. Required: For each error: 1,550 c. At the end of 2020, Dinkins-Lowery Corporation failed to accrue Interest of $7,500 on a note receivable. At the beginning of 2021, when the company received the cash, It was recorded as interest revenue. 1,550 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. Error b Income Statement: Balance Sheet: 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 c Income Statement: Balance Sheet:
Below are three Independent and unrelated errors. a. On December 31, 2020, Wolfe-Bache Corporation failed to accrue salaries expense of $1,550. In January 2021, when It pald employees for the December 27-January 2 workweek, Wolfe-Bache made the following entry: Salaries expense Cash b. On the last day of 2020, Midwest Importers received a $85,000 prepayment from a tenant for 2021 rent of a building. Midwest recorded the receipt as rent revenue. The error was discovered midway through 2021. Required: For each error: 1,550 c. At the end of 2020, Dinkins-Lowery Corporation failed to accrue Interest of $7,500 on a note receivable. At the beginning of 2021, when the company received the cash, It was recorded as interest revenue. 1,550 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. Error b Income Statement: Balance Sheet: 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 c Income Statement: Balance Sheet:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![### Explanation of Text and Content
**Independent and Unrelated Errors**
Below are three independent and unrelated errors.
**a. Salaries Expense Error (Wolfe-Bache Corporation)**
- **Situation**: On December 31, 2020, Wolfe-Bache Corporation failed to accrue a salaries expense of $1,550. In January 2021, when it paid employees for the December 27–January 2 workweek, Wolfe-Bache made the following entry:
```
Salaries expense 1,550
Cash 1,550
```
**b. Prepayment Error (Midwest Importers)**
- **Situation**: On the last day of 2020, Midwest Importers received an $85,000 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. Interest Accrual Error (Dinkins-Lowery Corporation)**
- **Situation**: At the end of 2020, Dinkins-Lowery Corporation failed to accrue interest of $7,500 on a note receivable. At the beginning of 2021, when the company received the cash, it was recorded as interest revenue.
**Required:**
1. For each error:
- 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.
**Task Tab Details:**
- **Required 1**: Enter effect of each error on income statement and balance sheet for 2020.
- **Required 2**: Prepare correction entries for 2021.
**Input Areas:**
- **Error a:**
- **Income Statement**: [Input Box]
- **Balance Sheet**: [Input Box]
- **Error b:**
- **Income Statement**: [Input Box]
- **Balance Sheet**: [Input Box]
- **Error c:**
- **Income Statement**: [Input Box]
- **Balance Sheet**: [Input Box]
### Instructional Focus
This exercise helps to understand the impact of accounting errors on financial statements and the importance of correcting them. It highlights key accounting principles like accruals and prepayments, and the necessity of accurate records.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1de229ca-d610-4e0a-8ba8-f4b8dab4ff7a%2Fe1376b54-d83e-4d16-81a2-8c62487486f3%2Fgp2qwl_processed.png&w=3840&q=75)
Transcribed Image Text:### Explanation of Text and Content
**Independent and Unrelated Errors**
Below are three independent and unrelated errors.
**a. Salaries Expense Error (Wolfe-Bache Corporation)**
- **Situation**: On December 31, 2020, Wolfe-Bache Corporation failed to accrue a salaries expense of $1,550. In January 2021, when it paid employees for the December 27–January 2 workweek, Wolfe-Bache made the following entry:
```
Salaries expense 1,550
Cash 1,550
```
**b. Prepayment Error (Midwest Importers)**
- **Situation**: On the last day of 2020, Midwest Importers received an $85,000 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. Interest Accrual Error (Dinkins-Lowery Corporation)**
- **Situation**: At the end of 2020, Dinkins-Lowery Corporation failed to accrue interest of $7,500 on a note receivable. At the beginning of 2021, when the company received the cash, it was recorded as interest revenue.
**Required:**
1. For each error:
- 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.
**Task Tab Details:**
- **Required 1**: Enter effect of each error on income statement and balance sheet for 2020.
- **Required 2**: Prepare correction entries for 2021.
**Input Areas:**
- **Error a:**
- **Income Statement**: [Input Box]
- **Balance Sheet**: [Input Box]
- **Error b:**
- **Income Statement**: [Input Box]
- **Balance Sheet**: [Input Box]
- **Error c:**
- **Income Statement**: [Input Box]
- **Balance Sheet**: [Input Box]
### Instructional Focus
This exercise helps to understand the impact of accounting errors on financial statements and the importance of correcting them. It highlights key accounting principles like accruals and prepayments, and the necessity of accurate records.
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