Required: 1-a. Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.) 1-b. Determine the effect of 2023 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.) 2. Prepare a journal entry to correct the error in 2024. 3. Will Lipe and Lipe account for the error (a) retrospectively or (b) prospectively?
Required: 1-a. Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.) 1-b. Determine the effect of 2023 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.) 2. Prepare a journal entry to correct the error in 2024. 3. Will Lipe and Lipe account for the error (a) retrospectively or (b) prospectively?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter6: Cost Of Goods Sold And Inventory
Section: Chapter Questions
Problem 59E: Effects of an Error in Ending Inventory Waymire Company prepared the partial income statements...
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Question
![During 2024, Lipe and Lipe Corporation discovered that its ending inventories reported on its financial statements were misstated by
the following amounts:
understated by $ 120,000
overstated by
150,000
Lipe and Lipe uses the periodic inventory system and the FIFO cost method.
2022
2023
Required:
1-a. Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.)
1-b. Determine the effect of 2023 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.)
2. Prepare a journal entry to correct the error in 2024.
3. Will Lipe and Lipe account for the error (a) retrospectively or (b) prospectively?
Complete this question by entering your answers in the tabs below.
Req 18
Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.)
Note: If the answers is no effect then select "No effect" in the dropdown.
Req 1A
2022
Beginning inventory
Plus: net purchases
Less: ending inventory
Cost of goods sold
Revenues
Less: cost of goods sold
Less: other expenses
Net income
Req 2
Req 3
2022 effect on 2024
Beginning inventory
Plus: net purchases
Less: ending inventory
Cost of goods sold
Revenues
Less: cost of goods sold
Less: other expenses
Net income](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F04bc15b8-63e9-49c2-b472-3749881dec3d%2Fa99e832b-3fdc-4731-bfd1-a4c249c1e8a4%2F4nt7w6n_processed.jpeg&w=3840&q=75)
Transcribed Image Text:During 2024, Lipe and Lipe Corporation discovered that its ending inventories reported on its financial statements were misstated by
the following amounts:
understated by $ 120,000
overstated by
150,000
Lipe and Lipe uses the periodic inventory system and the FIFO cost method.
2022
2023
Required:
1-a. Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.)
1-b. Determine the effect of 2023 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.)
2. Prepare a journal entry to correct the error in 2024.
3. Will Lipe and Lipe account for the error (a) retrospectively or (b) prospectively?
Complete this question by entering your answers in the tabs below.
Req 18
Determine the effect of 2022 errors on retained earnings at January 1, 2024, before any adjustments. (Ignore income taxes.)
Note: If the answers is no effect then select "No effect" in the dropdown.
Req 1A
2022
Beginning inventory
Plus: net purchases
Less: ending inventory
Cost of goods sold
Revenues
Less: cost of goods sold
Less: other expenses
Net income
Req 2
Req 3
2022 effect on 2024
Beginning inventory
Plus: net purchases
Less: ending inventory
Cost of goods sold
Revenues
Less: cost of goods sold
Less: other expenses
Net income
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