AccountingThe before-tax income for EnvironmentalistsCorp. for 2021 was $295,000; for 2020, it was$320.000. You have spent considerable timereviewing the accounts and have noted thefollowing:Sales for 2020 included $72,000 that had beenreceived in cash during 202O, but for which therelated products were delivered in 202Performance was considered complete ondelivery.Ending inventory on December 31, 2021, wasunderstated by $6,500. The December 31, 2020ending inventory was overstated by $3,300.In January 2021,Environmentalists reviewedits recycling machinery.The machine waspurchased in January 2018for $250,000 with aresidual value of $30,000and a useful life of 10years. Environmentalistshas determined theremaining useful life is now5 years with no residualvalue.Ordinary repairs to equipment had been chargedin error to the Equipment account during2021,2020 and 2019. In total, repairs in the amountof $7,500 in 2021, $8,400 in 2020 and $9,000 in2019 were charged in this way. The company usesthe declining balance method and applies a rateof 10% in determining its depreciation charges.Assume that Environmentalists Corp. appliesASPE.Required:i. Prepare a schedule showing thecalculation of corrected income before taxfor 2021 and 2020.ii. Prepare the journal entries that thecompany's accountant would prepare in2021, assuming the errors are discoveredwhile the 2020 books are still open. Ignoreincome tax effects.iii. Prepare the Statement of RetainedEarnings for December 31, 2021, Thecompany reported Retained Earnings of$300,000 at the beginning of 2019.

W.N.1) If closing inventory is overstated, the profit or income is also overstated and if it is…

i. Prepare a schedule showing the calculation of corrected income before tax for 2021 and 2020. ii. Prepare the journal entries that the company's accountant would prepare in 2021, assuming the errors are discovered while the 2020 books are still open. Ignore income tax effects. iii. Prepare the Statement of Retained Earnings for December 31, 2021, The company reported Retained Earnings of $300,000 at the beginning of 2019.

i. Prepare a schedule showing the calculation of corrected income before tax for 2021 and 2020. ii. Prepare the journal entries that the company's accountant would prepare in 2021, assuming the errors are discovered while the 2020 books are still open. Ignore income tax effects. iii. Prepare the Statement of Retained Earnings for December 31, 2021, The company reported Retained Earnings of $300,000 at the beginning of 2019.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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