Question

Problem 22-9 Your answer is partially correct. Try again. Whispering Corporation has used the accrual basis of accounting for several years. A review of the records, however, indicates that some expenses and revenues have been handled on a cash basis and $40,300 net income for or errors made by an nexperienced bookkeepe.Income statements prepared by the bookkeeper reported $31,000 net income for 2016 Further examination of the records reveals that the following items were handled improperly. 1. Rent was received from a tenant in December 2016. The amount, $1,070, was recorded as revenue at that time even though the rental pertained to 2017. 2. Salaries and wages payable on December 31 have be consistently omitted following year. The amounts of the accruals recorded in this manner were from the records of that date and have been entered as expenses when paid in the December 31, 2015 $1,130 December 31, 2016 1,320 December 31, 2017 1,020 3. Invoices for supplies purchased have been charged to expense accounts when received. Inventories of supplies on hand at the end of each year have been ignored, and no entry has been made for them December 31, 2015 $1,410 December 31, 2016 1,010 December 31, 2017 1,510 Prepare a schedule that will show the corrected net income for the years 2016 and 2017. All items listed should be labeled clearly. (Iqnore income tax considerations.) (Enter negative amounts using either negative sign preceding the number e.g. -15,000 or parentheses e.g. (15,000).)

Answer 1

	2016	2017
Net Income	31000	40300
Rent received in 2016, earned in 2017	-1070	1070
Salaries and wages not accrued,12/31/15	1130	0
Salaries and wages not accrued,12/31/16	-1320	1320
Salaries and wages not accrued,12/31/17	0	-1020
Inventory supplies 12/31/15	-1410
Inventory supplies 12/31/16	1010	-1010
Inventory supplies 12/31/17	0	1510
Corrected Net income	29340	42170

Explanation

Salaries of 2015 are recorded as expense in 2016 of $1130, so it will added to the net income of 2016 as it is not the actual expense of 2016. whereas salary of 2016 $1320 should be deducted from net income of 2016.

salaries of 2017 $1020 should be deducted from 2017 income and salary of 2016 $1320 which is recorded as expenses in 2017 should be added back to income.

Ending inventory of 2015 will be beginning inventory for 2016 $1410 , It is cost and should be deducted.

ending inventory of 2016 increase net income.

ending inventory of 2016 is beginning inventory for 2017 should be deducted from 2017 income.

ending inventory of 2017 increases its net income.