The before-tax income for Kingbird Co. for 2020 was $665,600 and $525,600 for 2021. However, the accountant noted that the following errors had been made: 1. 2. 3. 4. The bookkeeper in recording interest income for both years on an investment in 4% bonds with a par value of $100,700 made the following entry for each year: Cash Interest Income 4,028 4,028 The bonds were purchased at a discount of $8,100 on January 1, 2020, to yield an effective interest rate of 5%. (Assume that the effective-yield method should be used.) Sales for 2021 included amounts of $66,100 which were delivered in 2020 and paid for in 2021. Title passed to the purchaser upon delivery. Interest of $75,800 related to the construction of a manufacturing facility had been erroneously charged to the expense during 2020 instead of being capitalized as part of the facility's cost. The facility was completed and occupied on January 1. 2021. The company applies a rate of 5% to the balance in the building account at the end of the year in its determination of depreciation charges. The inventory on December 31, 2020, was overstated by $17,200. D

The before-tax income for Kingbird Co. for 2020 was $665,600 and $525,600 for 2021. However, the accountant noted that the following errors had been made: 1. 2. 3. 4. The bookkeeper in recording interest income for both years on an investment in 4% bonds with a par value of $100,700 made the following entry for each year: Cash Interest Income 4,028 4,028 The bonds were purchased at a discount of $8,100 on January 1, 2020, to yield an effective interest rate of 5%. (Assume that the effective-yield method should be used.) Sales for 2021 included amounts of $66,100 which were delivered in 2020 and paid for in 2021. Title passed to the purchaser upon delivery. Interest of $75,800 related to the construction of a manufacturing facility had been erroneously charged to the expense during 2020 instead of being capitalized as part of the facility's cost. The facility was completed and occupied on January 1. 2021. The company applies a rate of 5% to the balance in the building account at the end of the year in its determination of depreciation charges. The inventory on December 31, 2020, was overstated by $17,200. D

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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