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Assignment #C Chapter#21 For three years the Sandy Caven Company failed to recognize accruals, prepayments, and other transactions in its accounts. Reported net income
Assignment #C Chapter#21 For three years the Sandy Caven Company failed to recognize accruals, prepayments, and other transactions in its accounts. Reported net income and a listing of the errors appear below. 20X3 20X2 20X1 1. Reported net income (loss)... $ (1,000) $ 4,000 $ 12,000 23456 Failed to record accrued revenues 4,800 2,500 2,000 Failed to record uncollectible accounts expense 200 800 600 Failed to record accrued salaries Understated depreciation expense Goodwill purchased and expensed (Should be Reviewed for Impairment) nil 1,800 1,300 1,500 1,500 1,200 1,000 nil 5,000 nil 2,800 3,600 7. Overstated ending inventories 8. Failed to record purchase on account; merchandise properly included in ending inventory. 4,000 nil nil 9. Failed to recognize unused supplies as an asset (expensed them instead) 400 nil 300 10. Failed to recognize gain on sale of land; 11. Failed to recognize unearned land credited for amount of proceeds revenue at end of year nil nil 600 900 500 nil Note: Goodwill was Impaired by 10.0% Each Year! Required: 1. Recalculate the correct/adjusted net income for each year. 2. Prepare the compound entry, if necessary, to correct the books at the end of 20X3, assuming that the books have not been closed. Ignore taxes. 3. Prepare the compound entry, if necessary, to correct the books at the end of 20X3, assuming that the books have been closed. Ignore taxes.
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