Question

Before making the year end adjustments to the company's December 31, 2017 financial new accountant of Phoenix Corporation discovered the following errors made statements, the by the previous accountant: 1. A property acquisition made on July 1, 2014 in the amount of $260,000 was recorded entirely to the Land account, instead of being of allocated between Land at $60,000 and Building at $200,000. The company's practice is to depreciate buildings straight line over 40 years with a full year's depreciation being taken in the first year. 2. At the end of 2016, salaries had been accrued at $325,000 but should have only been accrued at $278,000. Required: a. Assuming that the depreciation entry for 2017 has not been recorded yet, provide the appropriate correcting entry(ies). The company's tax rate is 30% (8 marks) b. Ater completing the December year end for 2017, the company had revenues of $1,365,000, net income after tax of $955,500, and paid dividends of $275,000 The retained eamings balance from December 31, 2017 was $4,827.300. Prepare the retained earnings reconailiation that would appear in Phoenix Corporation's 2017 staterment of changes of equity. (6 marks)

Answer 1

a.) Depreciation entry for 2017 is

Depreciation a/c .....Dr. $ 5,000

To Building a/c $ 5,000

Computation of depreciation is given as = $ 200,000 / 40 years

= $ 5,000.

b.) more information is required for preparing reconciliation if it is a part of this same question.