During the audit of Montane Company's 2016 financial statements, theauditors discovered that the 2016 ending inventory had been overstated by$9,600 and that the 2016 beginning inventory was overstated by $5,800.Before the effect of these errors, 2016 pretax income had been computed as$104,000.What should be reported as the correct 2016 pretax income before taxes?A. $109,800B. $119,400C. $100,200D. $88,600

Step 1:The 2016 overstated beginning inventory results in an overstated cost of goods sold by…

Answered: During the audit of Montane Company's…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 15EB: Tanke Company reported net income on the year-end financial statements of $850,200. However, errors...

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Tanke Company reported net income on the year-end financial statements of $850,200. However, errors in inventory were discovered after the reports were issued. If inventory was overstated by $21,000, how much net income did the company actually earn?
While examining the December 31, 2010 financial statements of Dawn Company, the following errors are discovered:  Inventory at January 1 had been overstated by P50,000.;  Inventory at December 31 was understated by P100,000.;  During 2010, Dawn received a P200,000 cash advance from customer for merchandise to be manufactured and shipped during 2011. The collection was credited to sales revenue.;  The net income reported on the 2010 income statement before reflecting any adjustments for the above items is P5,000,000. What is the corrected net income for the year ended December 31, 2010? Choices; 4,950,000 5,150,000 5,100,000 4,850,000
In 2016, the internal auditors of Development Technologies, Inc. discovered that a $4 million purchase of merchandise in 2016 was recorded in 2015 instead. The physical inventory count at the end of 2015 was correct. Required: Prepare the journal entry needed in 2016 to correct the error. Also, briefly describe any other measures Development Technologies would take in connection with correcting the error. (Ignore income taxes.)
The following inventory valuation errors have been discovered for Knox Corporation: The 2015 year-end inventory was overstated by $23,000 The 2016 year-end inventory was understated by $61,000 The 2017 year-end inventory was understated by $17,000 The reported income before taxes for Knox was: Year: Income before Taxes: 2015 $138,000 2016 $254,000 2017 $168,000 Required: 1. Compute what income before taxes for 2015, 2016, and 2017 should have been after correcting for the errors.
The Mike Tomlin Company has a calendar-year accounting period. The following error was discovered in April of 2019. This error would have affected the financial statements for 2017 and 2018. The ending balance in the inventory had been overstated at 12/31/2017 by $100,000. INSTRUCTIONS: Compute the effect this error had on the 2017 net income. Compute the effect, if any, each error had on the December 31, 2017 balance sheet items. Hint: be very careful about the time period!
During 2016, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: 2014 understated by $120,000 2015 overstated by 150,000 WMC uses the periodic inventory system and the FIFO cost method. Required: 1. Determine the effect of these errors on retained earnings at January 1, 2016, before any adjustments. Explain your answer. (Ignore income taxes.) 2. Prepare a journal entry to correct the error. 3. What other step(s) would be taken in connection with the error?
In 2021, the internal auditors of Development Technologies, Inc., discovered that (a) 2020 accrued salaries of $2 million were not recognized until they were paid in 2021 and (b) a $3 million purchase of merchandise in 2021 was recorded as a debit to Purchases in 2020 instead. The physical inventory count at the end of 2020 was correct. Ignoring income taxes, what journal entries are needed in 2021 to correct each error? Also, briefly describe any other measures Development Technologies would take in connection with correcting the errors.
The accountant for Angie Company made the following errors related to purchases of merchandise and ending inventory in 2016: 1. A $2,200 purchase of merchandise on credit was not recorded or included in ending inventory. 2. A $3,180 purchase of merchandise on credit was recorded, but it was inadvertently omitted from the end-of-year physical inventory count. Assuming a periodic inventory system, Angie's Company's 2016 net income will be a. overstated by $5,380. b. overstated by $3,180. c. understated by $2,380. d. understated by $3,180.
During 2011, Paul discovered that the ending inventories reported on its financial statements were incorrect by the following amounts: 2009 P60,000 understated; 2010 P75,000 overstated. Paul uses the periodic inventory system to ascertain year-end quantities that are converted to peso amounts using the FIFO cost method. Prior to any adjustments for these errors and ignoring income tax, Paul’s retained earnings at January 1, 2011 would be Choices; Correct 15,000 overstated 75,000 overstated 135,000 overstated
A company’s beginning inventory for 2005 was overstated by $37,000, and the endinginventory for 2005 was understated by $16,000. The income tax rate for the company is 30%.These errors will cause the 2006 net income to bea. Understated by $11,200.b. Understated by $25,900.c. Overstated by $11,200.d. Overstated by $25,900.
Headlands Industries reports net income of $86,320 in 2017. However, ending inventory was understated by $6,990. What is the correct net income for 2017? The correct net income List of Accounts What effect, if any, will this error have on total assets as reported in the balance sheet at December 31, 2017? in the balance sheet will be v by the amount that ending inventory is $ List of Accounts %24
As a result of taking a physical inventory count on December 31, 2016, the Mona Lisa Company inventory was determined to be $61,500. The auditors for Mona Lisa suspected an inventory shortage and used the gross profit method to estimate the ending inventory. The accounting records for the company contained the following information: Inventory (1/1/16) $ 130,000 Purchases (2016) 760,000 Sales (2016) 1,020,000 Sales returns (2016) 60,000 Gross profit ratio 25% of sales Using the gross profit method, what did the auditors estimate as the amount of the inventory that should have been on hand at December 31, 2016? a. $170,000 b. $ 61,500 c. $125,000 d. $240,000

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