In 2021, Winslow International, Inc.'s controller discovered that ending inventories for 2019 and 2020 were overstated by $220,000 and $520,000, respectively. Determine the effect of the errors on retained earnings at January 1, 2021. (Ignore income taxes.) Retained earnings would be overstated

In 2021, Winslow International, Inc.'s controller discovered that ending inventories for 2019 and 2020 were overstated by $220,000 and $520,000, respectively. Determine the effect of the errors on retained earnings at January 1, 2021. (Ignore income taxes.) Retained earnings would be overstated

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 16E: Dudley Company failed to recognize the following accruals. It also recorded the prepaid expenses and...

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Dudley Company failed to recognize the following accruals. It also recorded the prepaid expenses and unearned revenues as expenses and revenues, respectively', in the following year when paid or collected. The reported pretax income was 20,000 in 2018, 25,000 in 2019, and 23,000 in 2020. Required: 1. Compute the correct pretax income for 2018, 2019, and 2020. 2. Prepare the journal entries necessary in 2020 if the errors are discovered at the end of that year. Ignore income taxes. 3. Prepare the journal entries necessary in 2021 if the errors are discovered at the end of that year. Ignore income taxes.
Shannon Corporation began operations on January 1, 2019. Financial statements for the years ended December 31, 2019 and 2020, contained the following errors: In addition, on December 31, 2020, fully depreciated machinery was sold for 10,800 cash, but the sale was not recorded until 2021. There were no other errors during 2019 or 2020, and no corrections have been made for any of the errors. Refer to the information for Shannon Corporation above. Ignoring income taxes, what is the total effect of the errors on the amount of working capital (current assets minus current liabilities) at December 31, 2020? a. working capital overstated by 4,200 b. working capital understated by 5,800 c. working capital understated by 6,000 d. working capital understated by 9,800
In 2021, Winslow International, Inc.’s controller discovered that ending inventories for 2019 and 2020 were overstated by $220,000 and $520,000, respectively.Determine the effect of the errors on retained earnings at January 1, 2021. (Ignore income taxes.)
In 2018, Winslow International, Inc.’s controller discovered that ending inventories for 2016 and 2017 wereoverstated by $200,000 and $500,000, respectively. Determine the effect of the errors on retained earnings atJanuary 1, 2018. (Ignore income taxes.)
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During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:2019 understated by $120,0002020 overstated by 150,000WMC uses the periodic inventory system and the FIFO cost method.Required:1. Determine the effect of these errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.)2. Prepare a journal entry to correct the error in 2021.3. Will WMC account for the error (a) retrospectively or (b) prospectively?
During 2021, WMC Corporation discovered that its ending Inventories reported on Its financial statements were misstated by the following amounts: 2019 understated by 2020 overstated by WMC uses the periodic Inventory system and the FIFO cost method. Required: 1-a. Determine the effect of 2019 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore Income taxes.) 1-b. Determine the effect of 2020 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore Income taxes.) 2. Prepare a journal entry to correct the error in 2021. 3. Will WMC account for the error (a) retrospectively or (b) prospectively? Complete this question by entering your answers in the tabs below. Req 1A Req 18 Determine the effect of 2019 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.) (If the answers is no effect then select "No effect" in the dropdown.) 2019 Beginning inventory Plus: net purchases $146,000 202,000 Less:…
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During 2020, Wagner Converting discovers that a computational error was made on its 2019 financial statements. The error resulted in a $150,000 understatement of 2019 net income. Upon discovering the error, Wagner's accountant promptly adds $150,000 to the company's 2020 beginning Retained Earnings balance. What impact will this have on Wagner's Retained Earnings and why will it have that impact? O It will correctly raise Retained Earnings because the error should affect the Retained Earnings account, not an income account. O It will incorrectly raise Retained Earnings because an error that impacts income must always be corrected in an income statement account. O It will correctly raise Retained Earnings; however the error should first be recorded to Income Summary which is then posted to Retained Earnings. O It will incorrectly raise Retained Earnings because such errors must be recorded to the year in which they were made, not the year in which they were discovered.
During 2021, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts: understated by overstated by $128,000 158,000 2019 2020 WMC uses a periodic inventory system and the FIFO cost method. Required: 1. Determine the effect of these errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.) 2. Prepare a journal entry to correct the errors. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the effect of these errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.) Retained earnings would be Required 1 Required 2
The before-tax income for Blossom Co. for 2020 was $98,000 and $80,800 for 2021. However, the accountant noted that the following errors had been made: 1. Sales for 2020 included amounts of $40,700 which had been received in cash during 2020, but for which the related products were delivered in 2021. Title did not pass to the purchaser until 2021. 2. The inventory on December 31, 2020, was understated by $8,100. 3. The bookkeeper in recording interest expense for both 2020 and 2021 on bonds payable made the following entry on an annual basis. Interest Expense 16,800 Cash 16,800 The bonds have a face value of $280,000 and pay a stated interest rate of 6%. They were issued at a discount of $16,000 on January 1, 2020, to yield an effective-interest rate of 7%. (Assume that the effective-yield method should be used.) 4. Ordinary repairs to equipment had been erroneously charged to the Equipment account during 2020 and…
The before-tax income for Lonnie Holdiman Co. for 2020 was $101,000 and $77,400 for 2021. However, the accountant noted that the following errors had been made: 1. Sales for 2020 included amounts of $38,200 which had been received in cash during 2020, but for which the related products were delivered in 2021. Title did not pass to the purchaser until 2021. 2. The inventory on December 31, 2020, was understated by $8,640. 3. The bookkeeper in recording interest expense for both 2020 and 2021 on bonds payable made the following entry on an annual basis. Interest Expense 15,000 Cash 15,000 The bonds have a face value of $250,000 and pay a stated interest rate of 6%. They were issued at a discount of $15,000 on January 1, 2020, to yield an effective-interest rate of 7%. (Assume that the effective-yield method should be used.) 4. Ordinary repairs to equipment had been erroneously charged to the Equipment account during 2020 and 2021. Repairs in the amount of…