Question

Tack, Inc., reported a Retained earnings balance of $150,000 at December 31, 2016. In June 2017, Tack's internal audit staff discovered two errors that were made in preparing the 2016 financial statements that are considered material: a. Merchandise costing $40,000 was mistakenly omitted from the 2016 ending inventory. b. Equipment purchased on July 1, 2016, for $70,000 was mistakenly charged to a repairs expense account. The equipment should have been capitalized and depreciated using straight-line depreciation, a 10-year useful life, and $10,000 salvage value. Required: 1. Prepare the journal entry Tack would make in 2017 to correct the errors made in 2016. Assume depreciation for 2017 is made as a year-end adjusting entry. (Ignore taxes.) 2. Describe the content of the comparative periods in Bettner's 2017 financial statements. That is, how is the correction reflected in the 2017 financial report?

How would I prepare the journal entry's using only part B?

Answer 1

Chty that made by co (uirong Gnhay) Drf to,00s Repans cash ale To Chung mistakuly changud ho) repairs & eupene c Debit Cred! Correct Entry Dr alc Machinany To Repairs& Gpen CBung retifaton of Enbyl done) to poo. Hotu 4 O8ine the Repans & enpense ale is Debiled 4 40,000 mistakenly, In ordey amount to dectify the lame amount Should be the to reverse Credited in order transaction comety deb, 70,000 it nerd not Note -2: The carh auount is Credited with to be effected. 3) Given, that Equipment has layars 1ife . depredated SLM ¿ usafe $ 10,000 Salvage Valie

Gome Machinany s purchared shaight line methad. pepreciation- Cost of machinay Osal wye val $ t0,0000 10,000 160,000 1 6000 10 Sle for year endring silie/2016. partiudan pate Debit, dedil shebade Depreciation de To Acudepreahs (oince depreciaton is aumulakd DY 3000 3000 is considered or 6 months, 2 3000 only 3/12/2017 Ie for quar Endry 3l12/2012 partiulan L7Debit, credit Dale 6000 /204 Deprevaton To pUrdep is made GooD (Barg depr Jt continues for hent yrar