Culver Company is in the process of adjusting and correcting its books at the end of 2020. In reviewing its records, the following information is compiled.

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Chapter1: Financial Statements And Business Decisions
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Prepare the journal entries necessary at December 31, 2020 to record the above corrections and changes. The books are still open for 2020. The income tax rate is 20%. Culver has not yet recoeded its 2020 income tax expense and payable amounts so current-year tax effects may be ignored. Prior-year tac effects must be considered in item 4.

Culver has already made an entry that established the incorrect December 31, 2020, inventory amount.
3.
4.
At December 31, 2020, Culver decided to change the depreciation method on its office equipment from double-declining-
balance to straight-line. The equipment had an original cost of $108,000 when purchased on January 1, 2018. It has a 10-year
useful life and no salvage value. Depreciation expense recorded prior to 2020 under the double-declining-balance method
was $37,200. Culver has already recorded 2020 depreciation expense of $13,400 using the double-declining-balance
method.
Before 2020, Culver accounted for its income from long-term construction contracts on the completed-contract basis. Early
in 2020, Culver changed to the percentage-of-completion basis for accounting purposes. It continues to use the completed-
contract method for tax purposes. Income for 2020 has been recorded using the percentage-of-completion method. The
following information is available.
Prior to 2020
2020
Pretax Income
Percentage-of-Completion
$138,400
66,000
Completed-Contract
$109,800
20,200
Transcribed Image Text:Culver has already made an entry that established the incorrect December 31, 2020, inventory amount. 3. 4. At December 31, 2020, Culver decided to change the depreciation method on its office equipment from double-declining- balance to straight-line. The equipment had an original cost of $108,000 when purchased on January 1, 2018. It has a 10-year useful life and no salvage value. Depreciation expense recorded prior to 2020 under the double-declining-balance method was $37,200. Culver has already recorded 2020 depreciation expense of $13,400 using the double-declining-balance method. Before 2020, Culver accounted for its income from long-term construction contracts on the completed-contract basis. Early in 2020, Culver changed to the percentage-of-completion basis for accounting purposes. It continues to use the completed- contract method for tax purposes. Income for 2020 has been recorded using the percentage-of-completion method. The following information is available. Prior to 2020 2020 Pretax Income Percentage-of-Completion $138,400 66,000 Completed-Contract $109,800 20,200
Culver Company is in the process of adjusting and correcting its books at the end of 2020. In reviewing its records, the following
information is compiled.
1. Culver has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows.
December 31, 2019
December 31, 2020
2.
$3,400
$2,300
In reviewing the December 31, 2020, inventory, Culver discovered errors in its inventory-taking procedures that have caused
inventories for the last 3 years to be incorrect, as follows.
December 31, 2018
December 31, 2019
December 31, 2020
Understated
$17,400
Understated $18,600
Overstated
$7,000
Transcribed Image Text:Culver Company is in the process of adjusting and correcting its books at the end of 2020. In reviewing its records, the following information is compiled. 1. Culver has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows. December 31, 2019 December 31, 2020 2. $3,400 $2,300 In reviewing the December 31, 2020, inventory, Culver discovered errors in its inventory-taking procedures that have caused inventories for the last 3 years to be incorrect, as follows. December 31, 2018 December 31, 2019 December 31, 2020 Understated $17,400 Understated $18,600 Overstated $7,000
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