2.2. During 2021, Gamma Ltd discovered that some of their products sold during 2020 were incorrectly included in inventory as31 December 2020 at R6 500. Assume a tax rate of 30%.Assume that the prior period error effect is considered to be material.Gamma Ltd.'s accounting records are as follows:2021SalesCost of salesProfit before tax208 000(173 500)35 000(10 500)24 5002020147 000(107 000)40 000(12 000)28 000TaxationProfitThe profit for 2021 includes R13 500 for the error made in opening inventoryAdditional information:2020 opening retained earnings was R40 000 and closing retained earnings was R68 000.Gamma's income tax rate was 30% in 2021 as well as in 2020. It had no other income or expenses.Gamma Ltd has R10 000 of share capital throughout 2020 and 2021, as well as retained earnings.REQUIRED:Disclose the effect of the error in the financial statements for the year ended 31 December 2021

Financial statements refers to the written documents of a company that reflects the financial…

ing 2021, Gamma Ltd discovered that some of their products sold during ember 2020 at R6 500. Assume a tax rate of 30%. that the prior period error effect is considered to be material. Ltd.'s accounting records are as follows: sales fore tax 1 2021 208 000 (173 500) 35 000 (10 500) 24 500 2020 147 000 (107 000) 40 000 (12 000) 28 000 fit for 2021 includes R13 500 for the error made in opening inventory

ing 2021, Gamma Ltd discovered that some of their products sold during ember 2020 at R6 500. Assume a tax rate of 30%. that the prior period error effect is considered to be material. Ltd.'s accounting records are as follows: sales fore tax 1 2021 208 000 (173 500) 35 000 (10 500) 24 500 2020 147 000 (107 000) 40 000 (12 000) 28 000 fit for 2021 includes R13 500 for the error made in opening inventory

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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During 2021, Gamma Ltd discovered that some of their products sold during 2020 were incorrectly included in inventory as 31 December 2020 at R6 500. Assume a tax rate of 30%.Assume that the prior period error effect is considered to be material.Gamma Ltd.’s accounting records are as follows:2021 2020Sales 208 000 147 000Cost of sales (173 500) (107 000)Profit before tax 35 000 40 000Taxation (10 500) (12 000)Profit 24 500 28 000The profit for 2021 includes R13 500 for the error made in opening inventoryAdditional information:• 2020 opening retained earnings was R40 000 and closing retained earnings was R68 000.• Gamma’s income tax rate was 30% in 2021 as well as in 2020. It had no other income or expenses.• Gamma Ltd has R10 000 of share capital throughout 2020 and 2021, as well as retained earnings.REQUIRED:Disclose the effect of the error in the financial statements for the year ended 31 December 2021
McLelland Inc. reported net income of $150,000 for 2019 and $165,000 for 2020. Early in 2020, McLelland discovers that the December 31, 2019 ending inventory was overstated by $7,700. For simplicity, ignore taxes. Required: 1. What is the correct net income for 2019? For 2020? Net Income 2019 2020 2. Assuming the error was not corrected, what is the effect on the balance sheet at December 31, 2019? At December 31, 2020? December 31, 2019 December 31, 2020
Ignoring income taxes, what is the total effect of the errors on 2021 net income? ( Leave the numerical figure positive, put a dash then identify if OVERSTATED or UNDERSTATED, example: 25000-OVERSTATED)
The before-tax income for Bramble Co. for 2020 was $90,000 and $73,100 for 2021. However, the accountant noted that the following errors had been made: 2 E Sales for 2020 included amounts of $41,300 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. The inventory on December 31, 2020, was understated by $7,900. 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 696. They were issued at a discount of $14,000 an 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 $8,500 in 2020 and $9,800 in 2021 were so…
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 adjusted (audited) income statement of Alex Kwon Corp. shows a net income of P175,000 for the year ended December 31, 2020. Adjustments were made for the following errors: • December 31, 2019, inventory overstated by P22,500 • December 31, 2020, inventory understated by P37,500 • A P10,000 customer's deposit received in December 2020, was credited to sales in 2020. The goods were actually shipped in January 2021. What is the unadjusted net income of Alex Kwon Corp. for the year ended December 31, 2020? A. P234,000 B. P125,000 C. P170,000 D. P200,000
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Wilamill Company showed pre-tax income of P2,500,000 for the year ended December 31, 2025. On your year-end verification of the transactions of the Company, you discovered the following errors P1,000,000 worth of merchandise was purchased in 2025 and included in the ending inventory. However, the purchase was recorded only in 2026. A merchandise shipment valued at P1,500,000 was properly recorded as purchases at year-end. The merchandise was inadvertently omitted from the physical count, since it has not arrived by December 31, 2025. Value added tax for the fourth quarter of 2025, amounting to P500,000, was included in the Sales account. Rental of P300,000 on an equipment, applicable for six months, was received on November 1, 2025. The entire amount was reported as revenue upon receipt. Rent paid on building covering the period from July 1, 2025 to July 1, 2026, amounting to P1,200,000, was paid and recorded as expense on July 1, 2025. The company did not make any adjustment at the…
Willamill Company showed pre-tax income of P2,500,000 for the year ended December 31, 2025. On your year-end verification of the transactions of the Company, you discovered the following errors: P1,000,000 worth of merchandise was purchased in 2025 and included in the ending inventory. However, the purchase was recorded only in 2026. A merchandise shipment valued at P1,500,000 was properly recorded as purchases at year-end. The merchandise was inadvertently omitted from the physical count, since it has not arrived by December 31, 2025. Value added tax for the fourth quarter of 2025, amounting to P500,000 was included in the Sales account. Rental of P300,000 on an equipment, applicable for six months, was received on November 1, 2025. The entire amount was reported as revenue upon receipt. Rent paid on building covering the period from July 1, 2025 to July 1, 2026, amounting to P1,200,000, was paid and recorded as expense on July 1, 2025. The company did not make any adjustment at the…
ABC Company showed pre-tax income of P2, 500,000 for the year ended December 31, 2025. On your year-end verification of the transactions of the Company, you discovered the following errors: P1,000,000 worth of merchandise was purchased in 2025 and included in the ending inventory. However, the purchase was recorded only in 2026. A merchandise shipment valued at P1,500,000 was properly recorded as purchase at year-end. The merchandise was inadvertently omitted from the physical count, since it has not arrived by December 31, 2025. , Value added tax for the fourth quarter of 2025, amounting to P500,000, was included in the Sales account. Rental of P300,000 on equipment, applicable for six months, was received on November 1, 2025. The entire amount was reported as revenue upon receipt. Rent paid on building covering the period from July 1. 2025 to July 1, 2026, amounting to P1,200,000, was paid and recorded as an expense on July 1, 2025. The company did not make any adjustment at the end…
am . 222.
Ignoring income taxes, what is the total effect of the errors on the beginning balance of retained earnings for the year 2023? ( Leave the numerical figure positive, put a dash then identify if OVERSTATED or UNDERSTATED, example: 25000-OVERSTATED)