Below are three independent and unrelated errors. On December 31, 2020, Wolfe-Bache Corporation failed to accrue salaries expense of $1,450. In January 2021, when it paid employees for the December 27–January 2 workweek, Wolfe-Bache made the following entry Salaries expense1,450 Cash 1,450 On the last day of 2020, Midwest Importers received an $83,000 prepayment from a tenant for the 2021 rent of a building. Midwest recorded the receipt as rent revenue. The error was discovered midway through 2021.At the end of 2020, Dinkins-Lowery Corporation failed to accrue interest of $7,300 on a note receivable. At the beginning of 2021, when the company received the cash, it was recorded as interest revenue.Required:For each error:1. What would be the effect of each error on the income statement and the balance sheet in the 2020 financial statements?2. Prepare any journal entries each company should record in 2021 to correct the errors.

Answer 1) Error a Income Statement - Income will be shown at a higher side by $ 1450. Balance…

Answered: On December 31, 2020, Wolfe-Bache…

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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Below are three independent and unrelated errors.

On December 31, 2020, Wolfe-Bache Corporation failed to accrue salaries expense of $1,450. In January 2021, when it paid employees for the December 27–January 2 workweek, Wolfe-Bache made the following entry
1. Salaries expense 1,450
  
  Cash 1,450
  
  On the last day of 2020, Midwest Importers received an $83,000 prepayment from a tenant for the 2021 rent of a building. Midwest recorded the receipt as rent revenue. The error was discovered midway through 2021.
2. At the end of 2020, Dinkins-Lowery Corporation failed to accrue interest of $7,300 on a note receivable. At the beginning of 2021, when the company received the cash, it was recorded as interest revenue.
Required:
For each error:

1. What would be the effect of each error on the income statement and the balance sheet in the 2020 financial statements?
2. Prepare any journal entries each company should record in 2021 to correct the errors.

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