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 from Percentage-of-Completion Completed-Contract Prior to 2020 $450,000 $315,000 2020 180,000 60,000 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. Instructions Prepare the journal entries necessary at December 31, 2020, to record the above corrections and changes. The books are still open for 2020. The income tax rate is 20%. Wangerin has not yet recorded its 2020 income tax expense and payable amounts so current-year tax effects may be ignored. Prior-year tax effects must be considered in item 2

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 from Percentage-of-Completion Completed-Contract Prior to 2020 $450,000 $315,000 2020 180,000 60,000 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. Instructions Prepare the journal entries necessary at December 31, 2020, to record the above corrections and changes. The books are still open for 2020. The income tax rate is 20%. Wangerin has not yet recorded its 2020 income tax expense and payable amounts so current-year tax effects may be ignored. Prior-year tax effects must be considered in item 2

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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Instructions

Prepare the journal entries necessary at December 31, 2020, to record the above corrections and changes. The books are still open for 2020. The income tax rate is 20%. Wangerin has not yet recorded its 2020 income tax expense and payable amounts so current-year tax effects may be ignored. Prior-year tax effects must be considered in item 2

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	Pretax Income from
	Percentage-of-Completion	Completed-Contract
Prior to 2020	$450,000	$315,000
2020	180,000	60,000