Jason Co. began operations on January 1, 2023. Financial statements for 2023 and 2024 contained the following errors:Ending inventoryDepreciation expenseDec. 31, 2023$75,500 overstated48,500 understatedDec. 31, 2024$105,500 overstatedAccumulated depreciation.48,500 understated48,500 understatedInsurance expense43,500 overstated43,500 understatedPrepaid expense43,500 understatedIn addition, on December 26, 2024, fully depreciated equipment was sold for $58,000, but the sale was not recorded until 2025. Nocorrections have been made for any of the errors.Ignoring income taxes, calculate the total effect of the errors on 2024 net income.Total effect of the errors on 2024 net income$

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Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 14EA: If Wakowski Companys ending inventory was actually $86,000 but was adjusted at year end to a balance...

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What is the net effect of the errors in FIERY’s December 31 retained earnings balance? A. Overstated by ₱ 15,400 B. Overstated by ₱ 11,800 C. Understated by ₱ 20,300 D. Overstated by ₱ 20,300
Cromwell Company began operations on January 1, 20x1. Financial statements for the years ended December 31, 20x1 and 20x2 contained the following errors:20x1 20x2Ending inventory P320,000 understated P300,000 overstatedDepreciation expense 120,000 understatedInsurance expense 200,000 overstated 200,000 understatedPrepaid insurance 100,000 understatedThe reported net income for 20x1 is P648,000 and P894,000 for 20x2. In addition, on December 31, 20x2, a fully depreciated machinery was sold for P216,000 cash, but the sale was not recorded until 20x3. There were no other errors during 20x1 and 20x2, and no corrections have been made for any of the errors. Ignore income tax effects.REQUIRED: Compute the total effects of errors and indicate whether overstated or understated.5. Total effect of the errors on Elizabeth’s 20x1 net income _____________6. Total effect of the errors on Elizabeth’s 20x2 net income _____________7. Total effect of the errors on Elizabeth’s working capital on December…
(Error Analysis) Peter Henning Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2017 December 31, 2018 Ending inventory $9,600 understated $8,100 overstated Depreciation expense $2,300 understated — An insurance premium of $66,000 was prepaid in 2017 covering the years 2017, 2018, and 2019. The entire amount was charged to expense in 2017. In addition, on December 31, 2018, fully depreciated machinery was sold for $15,000 cash, but the entry was not recorded until 2019. There were no other errors during 2017 or 2018, and no corrections have been made for any of the errors. (Ignore income tax considerations.)Instructions(a) Compute the total effect of the errors on 2018 net income.(b) Compute the total effect of the errors on the amount of Henning’s working capital at December 31, 2018.(c) Compute the total effect of the errors on the balance of Henning’s retained earnings at December 31, 2018.
PLease show the complete solution Cromwell Company began operations on January 1, 20x1. Financial statements for the years ended December 31, 20x1 and 20x2 contained the following errors: 20x1 20x2 Ending inventory P320,000 understated P300,000 overstated Depreciation expense 120,000 understated Insurance expense 200,000 overstated 200,000 understated Prepaid insurance 100,000 understated The reported net income for 20x1 is P648,000 and P894,000 for 20x2. In addition, on December 31, 20x2, a fully depreciated machinery was sold for P216,000 cash, but the sale was not recorded until 20x3. There were no other errors during 20x1 and 20x2, and no corrections have been made for any of the errors. Ignore income tax effects. REQUIRED: Compute the total effects of errors and indicate whether overstated or understated. Total effect of the errors on Elizabeth’s 20x1 net income Total effect of the errors on Elizabeth’s 20x2 net income Total effect…
Requirements: a. What are the net effects of the errors on Rodney's 20x1 and 20x2 profit or loss, repesctively? b. What is the effect of the errors on Rodney's December 31, 20x2 retained earnings?
Teal Tool Company's December 31 year-end financial statements contained the following errors. Ending inventory Depreciation expense December 31, 2020 $10,500 understated $2,400 understated Total effect of errors on net income $ An insurance premium of $69,000 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $16,000 cash, but the entry was not recorded until 2022. There were no other errors during 2020 or 2021, and no corrections have been made for any of the errors. (Ignore income tax considerations.) (a) Compute the total effect of the errors on 2021 net income. Total effect on working capital $ December 31, 2021 understated overstated (b) Compute the total effect of the errors on the amount of Teal's working capital at December 31, 2021. $8,200 overstated Total effect on retained earnings (c) Compute the total effect of the errors on the balance of…
If Wakowski Companys ending inventory was actually $86,000 but was adjusted at year end to a balance of $68,000 in error, what would be the impact on the presentation of the balance sheet and income statement for the year that the error occurred, if any?
Assuming a companys year-end inventory were overstated by $5,000, indicate the effect (overstated/understated/no effect) of the error on the following balance sheet and income statement accounts. A. Income Statement: Cost of Goods Sold B. Income Statement: Net Income C. Balance Sheet: Assets D. Balance Sheet: Liabilities E. Balance Sheet: Equity
The following are independent errors made by a company that uses the periodic inventory system: a. Goods in transit, purchased on credit and shipped FOB destination, 10,000, were included in purchases but not in the physical count of ending inventory. b. Purchase of a machine for 2,000 was expensed. The machine has a 4-year life, no residual value, and straight-line depreciation is used. c. Wages payable of 2,000 were not accrued. d. Payment of next years rent, 4,000, was recorded as rent expense. e. Allowance for doubtful accounts of 5,000 was not recorded. The company normally uses the aging method. f. Equipment with a book value of 70,000 and a fair value of 100,000 was sold at the beginning of the year. A 2-year, non-interest-bearing note for 129,960 was received and recorded at its face value, and a gain of 59,960 was recognized. No interest revenue was recorded and 14% is a fair rate of interest. Required: 1. Next Level Indicate the effect of each of the preceding errors on the companys assets, liabilities, shareholders equity, and net income in the year in which the error occurs. State whether the error causes an overstatement (+), an understatement (), or no effect (NE). 2. Prepare the correcting journal entry or entries required at the beginning of the year for each of the preceding errors, assuming the company discovers the error in the year after it was made. Ignore income taxes.
Effects of an Error in Ending Inventory Waymire Company prepared the partial income statements presented below for 2019 and 2018. During 2020, Waymires accountant discovered that ending inventory for 2018 had been understated by $6,500. Required: 1. Prepare corrected income statements for 2019 and 2018. 2. Prepare a schedule showing each financial statement item affected by the error and the amount of the error for that item (ignore the effect of income taxes). Indicate whether each error is an overstatement (+) or an understatement (-).
The inventory at the end of the year was understatedby $14,750. (a) Did the error cause an overstatementor an understatement of the gross profit forthe year? (b) Which items on the balance sheet atthe end of the year were overstated or understatedas a result of the error?
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