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Accounting Errors 8-9 (Answers)

Here are the correcting entries for 2020: Dr. Accrued Expenses 43,000 Dr. Inventories 36,000 Dr. Interest Receivable 8,000 Dr. Unearned Rent 18,000 Dr. Depreciation Expense 80,000 Dr. Prepaid Insurance 7,800 Cr. Cash 192,800 To record accruals, adjustments to inventory, and prepaids not previously recorded.

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1K views

Accounting Errors 8-9 (Answers)

Here are the correcting entries for 2020: Dr. Accrued Expenses 43,000 Dr. Inventories 36,000 Dr. Interest Receivable 8,000 Dr. Unearned Rent 18,000 Dr. Depreciation Expense 80,000 Dr. Prepaid Insurance 7,800 Cr. Cash 192,800 To record accruals, adjustments to inventory, and prepaids not previously recorded.

Uploaded by

angela pajel
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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For three consecutive years, the Soy Company failed to recognize accruals, prepayments,

and other transactions in its records. Reported net income and a listing of the errors
appear below:
2018 2019 2020
Reported profit (loss) 490,000 670,000 (320,000)
a. Failed to record accrued expenses 34,000 28,000 43,000
b. Overstated ending inventories 63,000 28,000 36,000
c. Failed to record accrued interest
on notes receivable 12,000 6,000 8,000
d. Failed to recognize unearned rent 24,000 20,000 18,000
e. Failed to record purchases on account,
purchases were recorded when paid
in the subsequent year, merchandise
properly included in ending inventory
f. Repairs and maintenance incurred during
the year capitalized as part of asset
cost. Full year depreciation at an
annual rate of 10% is provided in the
year that the asset is recognized. 120,000 80,000
g. Failed to recognize prepaid insurance at
year-end 4,800 6,200 7,800

Required:
a. Prepare a schedule to correct the reported profit for each year.
b. Prepare the necessary correcting entries in 2020, assuming that the books
for 2020 are still open.
2018 2019 2020
Profit (Loss) 490,000 670,000 (320,000)
a. (34,000) 34,000
(28,000) 28,000
(43,000)

b. (63,000) 63,000
(28,000) 28,000
(36,000)
c. 12,000 (12,000)
6,000 (6,000)
8,000
d. (24,000) 24,000
(20,000) 20,000
(18,000)
e.

f.

g. 4,800 (4,800)
6,200 (6,200)
7,800

Corrected Profits/Loss 385,800 710,400 (337,400)

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