The reported net incomes for the first 2 years of Coronado
Products, Inc., were as follows: 2020, $147,800; 2021, $202,000.
Early in 2022, the following errors were discovered.
1. | Depreciation of equipment for 2020 was overstated $15,900. | |
2. | Depreciation of equipment for 2021 was understated $38,300. | |
3. | December 31, 2020, inventory was understated $49,500. | |
4. | December 31, 2021, inventory was overstated $14,900. |
Prepare the correcting entry necessary when these errors are
discovered. Assume that the books are closed. (Ignore income tax
considerations.) (Credit account titles are
automatically indented when amount is entered. Do not indent
manually. If no entry is required, select "No Entry" for the
account titles and enter 0 for the
amounts.)
Account Titles and Explanation |
Debit |
Credit |
---|---|---|
Enter an account title | Enter a debit amount | Enter a credit amount |
Enter an account title | Enter a debit amount | Enter a credit amount |
Enter an account title | Enter a debit amount | Enter a credit amount |
Answer:
Account Titles and Explanation | Debit | Credit |
---|---|---|
Retained Earnings ($38,300 - $15,900) | 22,400 | |
Accumulated Depreciation—Equipment | 22,400 | |
(To record rectification of net depreciation error in 2020 & 2021) | ||
Retained Earnings | 14,900 | |
Inventory | 14,900 | |
(To record rectification of overstated inventory error in 2021) |
Note : Understatement of December 31, 2020, inventory does not need any rectification entry in 2021 as it is auto balanced by the understatement of beginning inventory on January 01, 2021.
The reported net incomes for the first 2 years of Coronado Products, Inc., were as follows:...
The reported net incomes for the first 2 years of Larkspur Products, Inc., were as follows: 2017, $146,000; 2018, $191,100. Early in 2019, the following errors were discovered. 1. Depreciation of equipment for 2017 was overstated $16,400. 2. Depreciation of equipment for 2018 was understated $36,700. 3. December 31, 2017, inventory was understated $52,600. 4. December 31, 2018, inventory was overstated $14,600. Prepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income...
The reported net incomes for the first 2 years of Larkspur Products, Inc., were as follows: 2017, $134,900; 2018, $177,700. Early in 2019, the following errors were discovered. 1. Depreciation of equipment for 2017 was overstated $18,600. 2. Depreciation of equipment for 2018 was understated $36,200. 3. December 31, 2017, inventory was understated $45,100. 4. December 31, 2018, inventory was overstated $17,600. Prepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income...
The reported net incomes for the first 2 years of Larkspur Products, Inc., were as follows: 2017, $146,000; 2018, $191,100. Early in 2019, the following errors were discovered. 1. Depreciation of equipment for 2017 was overstated $16,400. 2. Depreciation of equipment for 2018 was understated $36,700. 3. December 31, 2017, inventory was understated $52,600. 4. December 31, 2018, inventory was overstated $14,600. Prepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income...
Presented below is information related to equipment owned by Coronado Company at December 31, 2020. Cost $10,080,000 Accumulated depreciation to date 1,120,000 Expected future net cash flows 7,840,000 Fair value 5,376,000 Assume that Coronado will continue to use this asset in the future. As of December 31, 2020, the equipment has a remaining useful life of 5 years. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2020. (If no entry is required,...
On December 31, 2020, Coronado Inc. has a machine with a book value of $1,052,800. The original cost and related accumulated depreciation at this date are as follows. Machine $1,456,000 Less: Accumulated depreciation 403,200 Book value $1,052,800 Depreciation is computed at $67,200 per year on a straight-line basis. Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update...
In 2021, internal auditors discovered that PKE Displays, Inc. had debited an expense account for the $362,000 cost of equipment purchased on January 1, 2018. The equipment’s life was expected to be five years with no residual value. Straight-line depreciation is used by PKE. Required: 1. Determine the cumulative effect of the error on net income over the three-year period from 2018 through 2020, and on retained earnings by the end of 2020. 2. Prepare the correcting entry assuming the...
The information that follows relates to equipment owned by Waterway Limited at December 31, 2020: Cost $8,550,000 Accumulated depreciation to date 950,000 Expected future net cash flows (undiscounted) 6,650,000 Expected future net cash flows (discounted, value in use) 6,032,500 Fair value 5,890,000 Costs to sell (costs of disposal) 47,500 At December 31, 2020, Waterway discontinues use of the equipment and intends to dispose of it in the coming year by selling it to a competitor. It is expected that the...
On January 2, 2020, Coronado Company sells production equipment to Fargo Inc, for $48,000. Coronado includes a 2-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on January 2, 2020. During 2020, Coronado incurs costs related to warranties of $900. At December 31, 2020, Coronado estimates that $620 of warranty costs will be incurred in the second year of the warranty. Prepare the journal entry to record this transaction on January...
Presented below is information related to equipment owned by Metlock Company at December 31, 2020. Cost $9,900,000 Accumulated depreciation to date 1,100,000 Expected future net cash flows 7,700,000 Fair value 5,280,000 Assume that Metlock will continue to use this asset in the future. As of December 31, 2020, the equipment has a remaining useful life of 5 years. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2020. (If no entry is required,...
Presented below is information related to equipment owned by Sheffield Company at December 31, 2020. Cost $10,530,000 Accumulated depreciation to date 1,170,000 Expected future net cash flows 8,190,000 Fair value 5,616,000 Assume that Sheffield will continue to use this asset in the future. As of December 31, 2020, the equipment has a remaining useful life of 4 years. Partially correct answer iconYour answer is partially correct. Prepare the journal entry (if any) to record the impairment of the asset at...