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.
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.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter6: Cost Of Goods Sold And Inventory
Section: Chapter Questions
Problem 59E: Effects of an Error in Ending Inventory Waymire Company prepared the partial income statements...
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![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 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb7e32729-94d8-46a0-927e-66c0c1310ed7%2F818402e2-83d6-469b-8162-2b10e4d0d3a8%2Ffzdw8x_processed.png&w=3840&q=75)
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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