Question

Question 1 of 1 -/1 View Policies Current Attempt in Progress 2. The accountant preparing the income statement for Pharoah, Inc. had some doubts about the appropriate accounting treatment of the seven items listed below during the fiscal year ending December 31, 2020. Assume a tax rate of 20 percent. 1. Office equipment purchased January 1, 2020 for $51,000 was incorrectly charged to Supplies Expense at the time of purchase. The office equipment has an estimated three-year service life with no expected salvage value. Pharoah uses the straight-line method to depreciate office equipment for financial reporting purposes. This error has not been corrected. The corporation disposed of its sporting goods division during 2020. This disposal meets the criteria for discontinued operations. The division correctly calculated income from operating this division of $103,000 before taxes and a loss of $13,900 before taxes on the disposal of the division. All of these events occurred in 2020 and have not been recorded. The company recorded advances of $11,300 to employees made December 31, 2020 as Salaries and Wages Expense. Dividends of $11.300 during 2020 were recorded as an operating expense. In 2020, Pharoah changed its method of accounting for inventory from the first in-first-out method to the average cost method. Inventory in 2020 was correctly recorded using the average cost method. The new inventory method would have resulted in an additional $123,000 of cost of goods sold (before taxes) being reported on prior years' income statement On January 1, 2016, Pharoah bought a building that cost $88,400, had an estimated useful life of ten years, and had a salvare value of $400. Pacobuses the strishtalinadaintenmathaddeneinto the buildi2020 O 3. 5. 6. to search BI

Answer 1

No.	Description	Increase(Decrease) to Income from Continuing Operations
1.	Purchase price of equipment - Depreciation for 2020 = $51000 - ($51000/3) = $34000	$34000
2.	The profit/loss from discontinued operations will not affect the Continuing Operations.	$0
3.	The advance has been charged as an expenses which has icreased the expenses	$11300
4.	Dividend is not an operating item but a financing item.	$11300
5.	It will have the effect on decreasing the retained earnings and will not be recorded in the income statement.	$0
6.	No requiremnet for adjustment for prior years depreciation	$0