ACCT 403 Prior Period Adjustment / Error Analysis Assignment Fall 2021 Complete the following problem.

You must show all supporting computations to receive full credit. Make sure all computations are labeled. Your supporting computations should allow someone to understand what and why did.

Hints: Analyze each error separately.

T- accounts can be helpful.

Prepare separate journal entries to correct each error.

After you have prepared the correcting entries show how each affects net income and arrive at the adjusted net income.

Work in groups of 3 and turn in one group assignment. T

his assignment involves critical analysis of the effects of the errors and how to correct them.

Discussion among group members can help you better understand. 30 points possible _____________________________________________________________________________________

The Big Company reported the following: Net Income 2019: $382,000; 2020: $398,000; 2021: $360,000. In reviewing the accounts in 2022 after the books for the prior year have been closed for 2021 , you find the following errors: 2019 2020 2021

a. Understatement of accrued salary expense 13,200 24,000 14,400

b. Understatement of ending inventory $84,000 $102,000 $58,000

c. Big also bought equipment on January 1, 2019 for $588,000 with a $48,000 estimated salvage value and a six-year life. The company debited an expense account and credited cash on the purchase date for the entire cost of the asset. Big uses the Straight-line method for depreciation.

1. Calculate the corrected net incomes for 2019, 2020, and 2021.

2. Prepare all necessary correcting entries that should be made when the errors are discovered in 2022, assuming that the books have been closed for 2021.