Goldfinch Inc. reported net incomes for the last three years as follows:

2018, $ 62,000; 2019, $ 63,000; 2020, $ 60,000

In reviewing the accounts in 2021 (after the books for the prior year had been closed), you find that the

following errors have been made:

2018 2019 2020

Overstatement of ending inventory ........................................ $ 7,000 $ 8,500 $ 4,000

Understatement of accrued advertising expense................... 1,100 2,000 1,200

Instructions

a) Calculate corrected net incomes for 2018, 2019, and 2020.

b) Prepare the entry required in 2021 to correct the books. Ignore income taxes.

Show any calculations.

Statement of Cash Flows (Indirect Method)

White Horse Ltd. has prepared the following comparative statements of financial position at December

31, 2019 and 2020: White Horse adheres to ASPE.

2020 2019

Cash................................................................................................. $ 99,000 $ 51,000

Accounts receivable ....................................................................... 53,000 39,000

Inventory......................................................................................... 50,000 60,000

Prepaid expenses ........................................................................... 6,000 9,000

Property, plant & equipment......................................................... 420,000 350,000

Accumulated depreciation............................................................. (150,000). (125,000)

Goodwill.......................................................................................... 51,000 58,000

$ 529,000 $ 442,000

Accounts payable ........................................................................... $ 51,000 $ 56,000

Accrued liabilities ........................................................................... 20,000 14,000

Mortgage payable........................................................................... 150,000

Preferred shares ............................................................................. 215,000.

Common shares.............................................................................. 200,000 200,000

Retained earnings........................................................................... 43,000 22,000

$ 529,000 $ 442,000

1. The Accumulated Depreciation account has been credited only for the depreciation expense for

the year. There were no disposals of property, plant and equipment, but new equipment was

purchased during 2020.

2. Depreciation expense and a charge for impairment of goodwill have both been included in

operating expenses.

3. The Retained Earnings account was debited for cash dividends declared and paid of $ 46,000, and

credited for the net income for the year.

The condensed income statement for 2020 is as follows:

Sales..................................................................................... $ 660,000

Cost of sales ......................................................................... 363,000

Gross profit .......................................................................... 297,000

Operating expenses............................................................. 230,000

Net income........................................................................... $ 67,000

Instructions

From the information above, Prepare a statement of cash flows (indirect method) for calendar 2020.