During 2024, Lipe and Lipe Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: 2022 2023 understated by overstated by $ 146,000 202,000 Lipe and Lipe uses the periodic inventory system and the FIFO cost method. Required: 1-a. Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.) 1-b. Determine the effect of 2023 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.) 2. Prepare a journal entry to correct the error in 2024. 3. Will Lipe and Lipe account for the error (a) retrospectively or (b) prospectively? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3 Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.) Note: If the answers is no effect then select "No effect" in the dropdown. 2022 Beginning inventory Plus: net purchases Less: ending inventory Cost of goods sold Revenues 2022 effect on 2024 Beginning inventory Understated lus: net purchases ess: ending inventory cost of goods sold evenues ess: cost of goods sold ess: other expenses Net income Retained earnings Overstated Less: cost of goods sold No effect Less: other expenses Net income Retained earnings < Req 1A Req 1B >
During 2024, Lipe and Lipe Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: 2022 2023 understated by overstated by $ 146,000 202,000 Lipe and Lipe uses the periodic inventory system and the FIFO cost method. Required: 1-a. Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.) 1-b. Determine the effect of 2023 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.) 2. Prepare a journal entry to correct the error in 2024. 3. Will Lipe and Lipe account for the error (a) retrospectively or (b) prospectively? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3 Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.) Note: If the answers is no effect then select "No effect" in the dropdown. 2022 Beginning inventory Plus: net purchases Less: ending inventory Cost of goods sold Revenues 2022 effect on 2024 Beginning inventory Understated lus: net purchases ess: ending inventory cost of goods sold evenues ess: cost of goods sold ess: other expenses Net income Retained earnings Overstated Less: cost of goods sold No effect Less: other expenses Net income Retained earnings < Req 1A Req 1B >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:During 2024, Lipe and Lipe Corporation discovered that its ending inventories reported on its financial statements were
misstated by the following amounts:
2022
2023
understated by
overstated by
$ 146,000
202,000
Lipe and Lipe uses the periodic inventory system and the FIFO cost method.
Required:
1-a. Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income
taxes.)
1-b. Determine the effect of 2023 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income
taxes.)
2. Prepare a journal entry to correct the error in 2024.
3. Will Lipe and Lipe account for the error (a) retrospectively or (b) prospectively?
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Req 2
Req 3
Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.)
Note: If the answers is no effect then select "No effect" in the dropdown.
2022
Beginning inventory
Plus: net purchases
Less: ending inventory
Cost of goods sold
Revenues
2022 effect on 2024
Beginning inventory
Understated
lus: net purchases
ess: ending inventory
cost of goods sold
evenues
ess: cost of goods sold
ess: other expenses
Net income
Retained earnings
Overstated
Less: cost of goods sold
No effect
Less: other expenses
Net income
Retained earnings
< Req 1A
Req 1B >
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