The reported net incomes for the first 2 years of Sandra Gustafson Products, Inc., were as follows: 2020, $147,000; 2021, $185,000. Early in 2022, the following errors were discovered. 1. Depreciation of equipment for 2020 was overstated $17,000. 2. Depreciation of equipment for 2021 was understated $38,500. 3. December 31, 2020, inventory was understated $50,000. 4. December 31, 2021, inventory was overstated $16,200. Instructions Prepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income tax considerations.)
The reported net incomes for the first 2 years of Sandra Gustafson Products, Inc., were as follows: 2020, $147,000; 2021, $185,000. Early in 2022, the following errors were discovered. 1. Depreciation of equipment for 2020 was overstated $17,000. 2. Depreciation of equipment for 2021 was understated $38,500. 3. December 31, 2020, inventory was understated $50,000. 4. December 31, 2021, inventory was overstated $16,200. Instructions Prepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income tax considerations.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The reported net incomes for the first 2 years of Sandra Gustafson Products, Inc., were as follows: 2020, $147,000; 2021, $185,000. Early in 2022, the following errors were discovered.
- 1.
Depreciation of equipment for 2020 was overstated $17,000. - 2. Depreciation of equipment for 2021 was understated $38,500.
- 3. December 31, 2020, inventory was understated $50,000.
- 4. December 31, 2021, inventory was overstated $16,200.
Instructions
Prepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income tax considerations.)
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