PROBLEM 3: Effects of errors to retained earnings. While preparing the 2019 financial statements, Amber Company discovered computational errors in the 2017 and 2018 depreciation expense. These errors resulted in overstatement of each year's income by P100, 000, net of income tax. The following amounts were reported in the previously issued financial statements: 2017 2018 Retained earnings, January 1 2,000,000 800,000 Retained earnings, December 31 2,800,000 2,800,000 600,000 3,400,000 Net Income The net income for 2019 is correctly reported at P700, 000. Requirement: Compute the correct balance of retained earnings on December 31, 2019.

PROBLEM 3: Effects of errors to retained earnings. While preparing the 2019 financial statements, Amber Company discovered computational errors in the 2017 and 2018 depreciation expense. These errors resulted in overstatement of each year's income by P100, 000, net of income tax. The following amounts were reported in the previously issued financial statements: 2017 2018 Retained earnings, January 1 2,000,000 800,000 Retained earnings, December 31 2,800,000 2,800,000 600,000 3,400,000 Net Income The net income for 2019 is correctly reported at P700, 000. Requirement: Compute the correct balance of retained earnings on December 31, 2019.

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 10MC: Shannon Corporation began operations on January 1, 2019. Financial statements for the years ended...

See similar textbooks

Similar questions

Abrat Company failed to accrue an allowance for doubtful accounts of 13,500 in 2019. Upon discovery of this error in 2020 prior to making its estimate of doubtful accounts, what correcting journal entry should Abrat make? Ignore income taxes.
Dudley Company failed to recognize the following accruals. It also recorded the prepaid expenses and unearned revenues as expenses and revenues, respectively', in the following year when paid or collected. The reported pretax income was 20,000 in 2018, 25,000 in 2019, and 23,000 in 2020. Required: 1. Compute the correct pretax income for 2018, 2019, and 2020. 2. Prepare the journal entries necessary in 2020 if the errors are discovered at the end of that year. Ignore income taxes. 3. Prepare the journal entries necessary in 2021 if the errors are discovered at the end of that year. Ignore income taxes.
Noren Company uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable debt for 2019. To manage earnings more favorably, Noren Company considers changing the past-due categories as follows. A. Complete each table by filling in the blanks. B. Determine the difference between totals uncollectible. C. Complete the following 2019 comparative income statements for 2019, showing net income changes as a result of the changes to the balance sheet aging method categories. D. Describe the categories change effect on net income and accounts receivable.
Shannon Corporation began operations on January 1, 2019. Financial statements for the years ended December 31, 2019 and 2020, contained the following errors: In addition, on December 31, 2020, fully depreciated machinery was sold for 10,800 cash, but the sale was not recorded until 2021. There were no other errors during 2019 or 2020, and no corrections have been made for any of the errors. Refer to the information for Shannon Corporation above. Ignoring income taxes, what is the total effect of the errors on the amount of working capital (current assets minus current liabilities) at December 31, 2020? a. working capital overstated by 4,200 b. working capital understated by 5,800 c. working capital understated by 6,000 d. working capital understated by 9,800
1. What is the total effect of the errors on the 2020 net income? a. Overstated by P80,400b. Understated by P775,800c. none of the choicesd. Understated by P1,236,600e. Overstated by P165,000 2. What is the total effect of the errors on the balance of the company's retained earnings at December 31. 20217 a. Understated by P155,100b. none of the choicesc. Understated by P265,800d. Overstated by P930,900e. Overstated by P885,900
Title The before-tax income for Hawks Corp. for 2019 was $101,000; for 2020, it was $77,400. However, the. Description The before-tax income for Hawks Corp. for 2019 was $101,000; for 2020, it was $77,400. However, the accountant noted that the following errors had been made: 1. Sales for 2019 included $38,200 that had been received in cash during 2019, but for which the related products were delivered in 2020. Title did not pass to the purchaser until 2020.2. Ending inventory on December 31, 2019, was understated by $8,640. The December 31, 2020 ending inventory has not yet been adjusted to the Inventory account. Assume that Hawks has a periodic inventory system and that no adjustment has been made to the opening balance of the Inventory account.3. The bookkeeper, in recording interest expense for both 2019 and 2020 on bonds payable, made the following entry each year:The bonds have a face value of $250,000 and pay a stated interest rate of 6%. They were issued at a…
Bol Company's December 31 year-end financial statements had the following errors: December 31, 2020 December 31, 2021 Prepaid insurance 16,000 understated Unearned rental 10,000 understated Depreciation expense 7,200 understated Ending inventory 27,000 understated 39,600 overstated There were no other errors during the year 2020 or 2021 and no corrections have been made for any of the errors. (Ignore income tax considerations) 1. What is the net effect of the errors on Bols 2021 net income? 2. What is the net effect of the errors in Bols December 31, 2021 retained earnings? 3. What is the net effect of the errors in Bol's December 31, 2021 working capital (current assets less current liabilities)?
4) Accrued taxes payable of $150,000 were not recorded at December 31, 2020. Office supplies on hand of $95,000 at December 31, 2021 were erroneously treated as expense instead of supplies inventory. Neither of these errors was discovered nor corrected. The effect of these two errors would cause retained earnings at December 31, 2021 to be in error by what amount?
What is the net effect of the errors on the December 31, 2021 retained earnings?( Leave the numerical figure positive, put a dash then identify if OVERSTATED or UNDERSTATED, example: 25000-OVERSTATED)
You discovered the following errors in connection with your examination of the Chapter 6 - Correction of Errors PROBLEM 6-2 Counterbalancing Errors You discovered the following errors in connection with your examination of the financial statements of Jane Corporation: Accrued rent expense of P10,000 was not recorded at the end of 2020. 2) Accrued interest receivable of P15.000 was not recorded at the end of 2020. 3) 1) S) The company paid one-year insurance premium of P24,000 effective April 1 2020. The entire amount was debited to expense account and no adjustment was made at the end of 2020. 4) The company leased a portion of its building for P48,000. The term of the lease is one year ending April 30, 2021. Collection of rent was credited to rent revenue account. At the end of 2020, no entry was made to take up the unearned portion of the amount collected. The following data were extracted from the financial statements of Jane Corporation: 2020 2021 100,000 300,000 100,000 Net income…
PROBLEM 1 (ERROR CORRECTION) Koshu Co., a calendar year entity, contained the following independent errors at the end of each reporting period: (Amounts in thousands) 2020 50 under 2019 40 under 12 under 68 under 25 under 2018 Accounts Payable Depreciation Expense Merchandise Inventory 20 over 16 under 33 over 45 under 97 over Accrued Income 33 over 56 under Unearned Income 14 under 85 over 27 over 45 under Advances to Suppliers 105 under Advances from Customers Accounts Receivable Accrued Expense Prepaid Expense 82 over 71 under 68 under 85 under 92 over 78 under 27 under 17 over 19 over 18 under 12 under Compute for the following: a. Net adjustments on 2018 and 2020 Profits b. Effects of errors on the 2019 and 2020 Accumulated Profits c. Net adjustments to 2018 and 2019 Working Capital d. Adjusted total 2018 and 2020 Total Assets assuming unadjusted balances of total assets of 2018 and 2020 were P890 and P920, respectively e. Effects of errors on 2018 and 2019 Total Liabilities
1. During 2014, Gambler Company discovered that the ending inventories on its financialstatements were incorrect by the following amounts:2012 P120,000 understated2013 150,000 overstatedGambler uses the periodic system to ascertain year-end quantities that are converted to pesoamounts using FIFO cost method.Prior to any adjustments for these errors and ignoring income taxes, how much would be theaccumulated profits and losses of Gambler at January 1, 2014? 2. Market Corporation failed to recognize accruals and prepayments since the inception of itsbusiness three years ago. The accruals and prepayments at the end of 2014 are given below:Prepaid insurance P60,000Accrued wages 75,000Rent revenue collected in advance 96,000Interest receivable 81,000What is the net effect of the above errors in the 2014 net income?