(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.
(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.
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 10P: At the beginning of 2020, Tanham Company discovered the following errors made in the preceding 2...
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(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
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
(c) Compute the total effect of the errors on the balance of Henning’s
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