Question
For each of the following, prepare the appropriate correcting journal entries in 2020. You can use one General Journal to record the transactions. In 2020,
For each of the following, prepare the appropriate correcting journal entries in 2020. You can use one General Journal to record the transactions.
In 2020, assume an error was discovered: land costing $80,000 (net of tax) was charged to maintenance and repairs expense in 2019
Depreciation expense on Equipment of $55,000 omitted by accident in 2019 assuming a 20% tax rate.
Understatement of 2018 depreciation expense (before taxes) of $25,000 assuming a tax rate of 20%
Cumulative decrease in income from change in inventory methods (before taxes) of $35,000 assuming a tax rate of 20%
At the beginning of 2018, the corporation purchased a machine for $54,000 (salvage value of $9,000) that had a useful life of 6 years. The bookkeeper used straight-line depreciation for 2018, 2019, and 2020, but failed to deduct the salvage value in computing the depreciation base.
The corporation decided to change its method of inventory pricing from average-cost to the FIFO method. The effect of this change on prior years is to increase 2018 income by $60,000 and decrease 2019 income by $20,000 before taxes. The FIFO method has been used for 2020. The tax rate on these items is 30%.
An internal audit discovered that amortization of intangible assets was understated by $35,000 (net of tax) in a prior period.
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