On December 12, 2018, an investment costing $88,000 was sold for $116,000. The total of the sale proceeds was credited to the investment account. Required: 1. Prepare the journal entry to correct the error assuming it is discovered before the books are adjusted or closed in 2018. (Ignore income taxes.) 2. Prepare the journal entry to correct the error assuming it is not discovered until early 2019. (Ignore income taxes.)

On December 12, 2018, an investment costing $88,000 was sold for $116,000. The total of the sale proceeds was credited to the investment account. Required: 1. Prepare the journal entry to correct the error assuming it is discovered before the books are adjusted or closed in 2018. (Ignore income taxes.) 2. Prepare the journal entry to correct the error assuming it is not discovered until early 2019. (Ignore income taxes.)

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 12RE: Abrat Company failed to accrue an allowance for doubtful accounts of 13,500 in 2019. Upon discovery...

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On December 12, 2021, an investment in equity securities costing $80,000 was sold for $100,000. The total of the sale proceeds was credited to the investment in equity securities account.Required:1. Prepare the journal entry to correct the error, assuming it is discovered before the books are adjusted or closed in 2021. (Ignore income taxes.)2. Prepare the journal entry to correct the error assuming it is not discovered until early 2022. (Ignore income taxes.)
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It is February 16, 2020, and you are auditing Davenport Corporation's financial statements for 2019 (which will be issued in March 2020). You read in the newspaper that Travis Corporation, a major customer of Davenport, is in financial difficulty. Included in Davenports accounts receivable is 50,000 (a material amount) owed to it by Travis. You approach Jim Davenport, president, with this information and suggest that a reduction of accounts receivable and recognition of a loss for 2019 might be appropriate. Jim replies, Why should we make an adjustment? Ted Travis, the president of Travis Corporation, is a friend of mine; he will find a way to pay us, one way or another. Furthermore, this occurred in 2020, so lets wait and see what happens; we can always make an adjustment later this year. Our 2019 income and year-end working capital are not that high; our creditors and shareholders wouldnt stand for lower amounts than they already are. Required: From financial reporting and ethical perspectives, prepare a response to Jim Davenport regarding this issue.
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