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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Wangerin Company is in the process of adjusting and correcting its books at the end of 2020. In reviewing its records, the following information is compiled.
- 1. At December 31, 2020, Wangerin decided to change the
depreciation method on its office equipment from double-declining-balance to straight-line. The equipment had an original cost of $200,000 when purchased on January 1, 2018. It has a 10-year useful life and no salvage value. Depreciation expense recorded prior to 2020 under the double-declining-balance method was $72,000. Wangerin has already recorded 2020 depreciation expense of $25,600 using the double-declining-balance method. - 2. Before 2020, Wangerin accounted for its income from long-term construction contracts on the completed-contract basis. Early in 2020, Wangerin changed to the percentage-of-completion basis for accounting purposes. It continues to use the completed-contract method for tax purposes. Income for 2020 has been recorded using the percentage-of-completion method. The following information is available.
Pretax Income fromPercentage-of-CompletionCompleted-ContractPrior to 2020$450,000$315,0002020180,00060,000
- 3. Insurance for a 12-month period purchased on November 1 of this year was charged to insurance expense in the amount of $3,300 because “the amount of the check is about the same every year.”
- 4. Reported sales revenue for the year is $1,908,000. This includes all sales taxes collected for the year. The sales tax rate is 6%. Because the sales tax is forwarded to the state's Department of Revenue, the Sales Tax Expense account is debited. The bookkeeper thought that “the sales tax is a selling expense.” At the end of the current year, the balance in the Sales Tax Expense account is $103,400.
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