10 On May 5, 2021, you were hired by Gavin Inc , a closely held company that follows ASPE, as a staff member of its newly created internal auditing department While reviewing the companys records for 2019 and 2020, you discover that no adjustments have yet been made for the items listed below 1 Interest income of $ 22,560 was not accrued at the end of 2019 It was recorded when received in February 2020 2 Equipment costing $ 21,600 was expensed when purchased on July 1, 2019 It is expected to have a four year life with no residual value The company typically uses straight line depreciation for all fixed assets 3 Research costs of $ 43,200 were incurred early in 2019 They were capitalized and were to be amortized over a three year period Amortization of $ 14,400 was recorded for 2019 and $ 14,400 for 2020 For tax purposes, the research costs were expensed as incurred 4 On January 2, 2019, Gavin leased a building for five years at a monthly rental of $ 10,800 On that date, Gavin paid the following amounts, which were expensed when paid for both financial reporting and tax purposes Security deposit $ 42,000 First months rent 10,800 Last months rent 10,800 $ 63,600 5 The company received $ 50,400 from a customer at the beginning of 2019 for services that it is to perform evenly over a three year period beginning in 2019 None of the amount received was reported as unearned revenue at the end of 2019 The $ 50,400 was included in taxable income in 2019 6 Merchandise inventory costing $ 20,160 was in the warehouse on December 31, 2019, but was incorrectly omitted from the physical count at that date The company uses the periodic inventory method Gavin follows the taxes payable method of accounting for income taxes Enter the appropriate dollar amounts in the appropriate columns to indicate the effect of any errors on the net income figure reported on the income statement for the year ended December 31, 2019, and the retained earnings figure reported on the statement of financial position at December 31, 2020 Assume that all amounts are material and that an income tax rate of 25 is appropriate for all years Assume also that each item is independent of the other items It is not necessary to total the columns on the grid

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10. On May 5, 2021, you were hired by Gavin Inc., a closely held company that follows ASPE, as a staff member of its newly

10. On May 5, 2021, you were hired by Gavin Inc., a closely held company that follows ASPE, as a staff member of its newly created internal auditing department. While reviewing the companys records for 2019 and 2020, you discover that no adjustments have yet been made for the items listed below.

Interest income of $ 22,560 was not accrued at the end of 2019. It was recorded when received in February 2020.

Equipment costing $ 21,600 was expensed when purchased on July 1, 2019. It is expected to have a four-year life with no residual value. The company typically uses straight-line depreciation for all fixed assets.

Research costs of $ 43,200 were incurred early in 2019. They were capitalized and were to be amortized over a three-year period. Amortization of $ 14,400 was recorded for 2019 and $ 14,400 for 2020. For tax purposes, the research costs were expensed as incurred.

On January 2, 2019, Gavin leased a building for five years at a monthly rental of $ 10,800. On that date, Gavin paid the following amounts, which were expensed when paid for both financial reporting and tax purposes:

Security deposit		$ 42,000
First months rent		10,800
Last months rent		10,800
		$ 63,600

The company received $ 50,400 from a customer at the beginning of 2019 for services that it is to perform evenly over a three-year period beginning in 2019. None of the amount received was reported as unearned revenue at the end of 2019. The $ 50,400 was included in taxable income in 2019.

Merchandise inventory costing $ 20,160 was in the warehouse on December 31, 2019, but was incorrectly omitted from the physical count at that date. The company uses the periodic inventory method.

Gavin follows the taxes payable method of accounting for income taxes. Enter the appropriate dollar amounts in the appropriate columns to indicate the effect of any errors on the net income figure reported on the income statement for the year ended December 31, 2019, and the retained earnings figure reported on the statement of financial position at December 31, 2020. Assume that all amounts are material and that an income tax rate of 25% is appropriate for all years. Assume also that each item is independent of the other items. It is not necessary to total the columns on the grid.