How do I correct the answers?
WestCo reported the following in its December 31 financial statements: 2017 2016 2015 $95,300 $94,700 $94,000 1,211,400 1,205,500 1,196,900 Income Statement Depreciation expense (all assets) Balance Sheet Equipments (net) Retained earnings statement Opening retained earnings Net income (loss) Dividends Closing retained earnings 939,400 (126,500) (60,300) $752,600 955,800 43,900 (60,300) $939,400 700,700 315,400 (60,300) $955,800 After the draft 2017 financial statements were prepared but before they were issued, WestCo discovered that a piece of equipment was incorrectly accounted for in 2012. In early 2012, a piece of equipment was purchased for $233,000, and it should have been depreciated using the straight line method over 12 years with a $17,000 residual value. Instead, it was written off to expense. The error was made on the books, but the piece of equipment was accounted correctly for tax purposes. The tax rate was 25%. a) For 2017, prepare the journal entry on December 31 to correct the error and to record depreciation. 1. Initial calculation. Please make sure your final answer(s) are accurate to the nearest whole number. Annual depreciation of the equipment $18,000 Accumulated depreciation to January 1, 2017 $90,000 Adjustment to retained earnings $125,000 Marking: Annual depreciation of the equipment Your answer was: $18,000 Congratulations! You have entered the correct answer. Accumulated depreciation to January 1, 2017 Your answer was: $90,000 Congratulations! You have entered the correct answer. Adjustment to retained earnings Your answer was: $125,000 The correct answer was: $107,250 Adjustment to retained earnings = (Equipment - Depreciation) (100% - Tax Rate) = ($233,000 - $90,000) * (100% - 25%) = $107,250 You will lose 1 mark for this part. 2. Give the year end journal entry to correct the error. Enter an appropriate description, and enter the date in the format dd/mmm (ie. 15/Jan). Please make sure your final answer(s) are accurate to 2 decimal places. General Journal Page G8 Date Account/Explanation PR Debit Credit 31/Dec Equipment 233,000 Retained earnings 125,000 Accumulated depreciation, equipment 108,000 correction to error Marking: You have not included the 'Depreciation expense, equipment' account in this journal entry. This will cost you 2 marks. "Retained earnings' should be credited for the amount of $107,250, however, what you have entered is consistent with your earlier entries so you will not lose any marks. You have not included the 'Deferred tax liability' account in this journal entry. This will cost you 2 marks. You have not included the 'Income tax expense' account in this journal entry. This will cost you 2 marks. WestCo reported the following in its December 31 financial statements: 2017 2016 2015 $95,300 $94,700 $94,000 1,211,400 1,205,500 1,196,900 Income Statement Depreciation expense (all assets) Balance Sheet Equipments (net) Retained earnings statement Opening retained earnings Net income (loss) Dividends Closing retained earnings 939,400 (126,500) (60,300) $752,600 955,800 43,900 (60,300) $939,400 700,700 315,400 (60,300) $955,800 After the draft 2017 financial statements were prepared but before they were issued, WestCo discovered that a piece of equipment was incorrectly accounted for in 2012. In early 2012, a piece of equipment was purchased for $233,000, and it should have been depreciated using the straight line method over 12 years with a $17,000 residual value. Instead, it was written off to expense. The error was made on the books, but the piece of equipment was accounted correctly for tax purposes. The tax rate was 25%. a) For 2017, prepare the journal entry on December 31 to correct the error and to record depreciation. 1. Initial calculation. Please make sure your final answer(s) are accurate to the nearest whole number. Annual depreciation of the equipment $18,000 Accumulated depreciation to January 1, 2017 $90,000 Adjustment to retained earnings $125,000 Marking: Annual depreciation of the equipment Your answer was: $18,000 Congratulations! You have entered the correct answer. Accumulated depreciation to January 1, 2017 Your answer was: $90,000 Congratulations! You have entered the correct answer. Adjustment to retained earnings Your answer was: $125,000 The correct answer was: $107,250 Adjustment to retained earnings = (Equipment - Depreciation) (100% - Tax Rate) = ($233,000 - $90,000) * (100% - 25%) = $107,250 You will lose 1 mark for this part. 2. Give the year end journal entry to correct the error. Enter an appropriate description, and enter the date in the format dd/mmm (ie. 15/Jan). Please make sure your final answer(s) are accurate to 2 decimal places. General Journal Page G8 Date Account/Explanation PR Debit Credit 31/Dec Equipment 233,000 Retained earnings 125,000 Accumulated depreciation, equipment 108,000 correction to error Marking: You have not included the 'Depreciation expense, equipment' account in this journal entry. This will cost you 2 marks. "Retained earnings' should be credited for the amount of $107,250, however, what you have entered is consistent with your earlier entries so you will not lose any marks. You have not included the 'Deferred tax liability' account in this journal entry. This will cost you 2 marks. You have not included the 'Income tax expense' account in this journal entry. This will cost you 2 marks
