In 2018, Meg Inc, discovered a n error in its 2015 financial statements. The firm recorded $11,000,000
Question:
In 2018, Meg Inc, discovered a n error in its 2015 financial statements. The firm recorded $11,000,000 of depreciation expense on its equipment instead of recording $10,000,000. Meg has a constant tax rate of 40% and reports 3 years of comparative income statements and 2 years of comparative balance sheets with its financial reports. Assume that Meg uses the same depreciation method for tax and financial reporting. Retained earnings and accumulated depreciation as of December 31, 2017, were $12,075,000 and $5,400,000, respectively.
Required
a. What is the necessary journal entry to record the prior-period adjustment?
b. How would Meg report its accumulated depreciation and retained earnings balances in the restated balance sheet dated December 31, 2017?
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a If the error had been found in 2015 net income would have been 600000 higher There is a ...View the full answer
Intermediate Accounting
ISBN: 978-0134730370
2nd edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
