FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:The errors below were noted after the books of CalMart Corporafion were audited at the close of 2021 Indicate the effects of each of the following errors with an O for Overstatement, U for understatement and N for no effect in the appropriate column.
2020
2021
Earnings Retained Eamings after Net Income
Asset
Eamings Retained Earnings after
closing
Liability
Retained
before closing
Net Income
Asset
Liability
Retained
before dosing
closing
Failure to record purchases of
merchandise on account of
P2,000 at the end of 2020.
Sale of merchandise on account
on December 30,2020 amounting
to P2,000 was not recorded until
the customer paid his account on
January 2021.
Depreciation expense
equipment in 2020
overstated by P1.000.
Paidone year insurance premium
of P2,000 effective April 1,2020.
on
was
The entire amount was debited to
expense account and no
adjustment was made at the end
of 2020.
On December 31,2020, the
Company acquired a parcel of
land and a building at a total cost
of P5,000,000. The entire amount
paid was debited to land account.
A reasonable estimate of the cost
по
that should have been allocated
to the building was P,2000,000.
The building has an estimated life
of 20 years
Failure to record supplies on
hand at the end of 2020. The
supplies on hand amounted to
P6,000.
Understatement of 2020 ending
inventory worth P2,000.
Failure to record accrued interest
on notes payable at the end of
2020.Notes payable, principal
amount P10,000; interest rate,
10%; acquired March 31,2020.
Falure to recognize uneamed
rent at the end of 2020 worth
P1,000.
Goods received in December
2020 were recorded as
purchases when paid in 2021.
The goods were excluded from
the 2020 ending inventory.
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- During your audit of the books of Antigua Corporation for the year ended December 31, 2021, you discovered the following errors during the years 2019, 2020 and 2021. Errors 2019 2020 2021 Understatement of ending inventory 25,000 30,000 Overstatement of ending inventory 16,000 Omission of the following: Prepaid insurance 7,500 10,000 Unearned rent income 8,000 Accrued salaries expense 12,000 10,000 Accrued interest revenue 2,000 3,000 Erroneous capitalization of machinery repairs 15,000 Overstatement of machinery depreciation 1,500 1,500 Erroneous charging to expense of equipment cost 25,000 Understatement of equipment depreciation 2,500 2,500 2,500 Net income for the year 1,500,000 2,000,000 2,250,000 Retained earnings at year-end 7,500,000 8,750,000 9,250,000 Machinery has an estimated useful life of 10 years while equipment is 5 years. REQUIRED: Compute the corrected balances of the…arrow_forwardThe following information is presented for Marigold Corporation. The net income figures were computed without knowledge of the errors in ending inventory. Assume that there was no error in the 2016 ending inventory. Year Net Incomeper Books Error in EndingInventory 2017 $ 180,000 Overstated $ 23,000 2018 93,000 Overstated 35,000 2019 108,000 No error - 2020 218,000 Understated 6,200 2021 97,000 Understated 19,500 Prepare a worksheet to show the adjusted net income figure for each year from 2017 to 2021 after taking into account the inventoryarrow_forward#26 While examining the December 31, 2018 financial statements of Sydney company, the following errors are discovered: *Inventory on January 1 had been overstated by P30,000. *Inventory on December 31 was understated by P60,000. During 2018, Donna received a P120,000 cash advance from customer for merchandise to be manufactured and shipped during 2019. The amount was credited to sales revenue. *The net income reported on the 2018 income statement before reflecting any adjustment is P3,000,000. What is the corrected net income for the year ended December 31, 2018? ANSWER: 2,970,000 Pls provide solution and explanation for the answer abovearrow_forward
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