Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

PROBLEM 1 Upon inspection of the records of Sevirous Company, the following facts were discovered for the year-ended December 31, 2017. A fire insurance premium

PROBLEM 1

Upon inspection of the records of Sevirous Company, the following facts were discovered for the year-ended December 31, 2017.

A fire insurance premium of $120,000 was paid and charged as insurance expense for 2017. The fire insurance policy covers one year from April 1, 2017.

Inventory on January 1, 2017 was overstated by $80,000. Inventory on December 31, 2017 was overstated by $120,000. Taxes of $60,000 for the fourth quarter of 2017 were paid on January 20, 2018 and charged as expense of 2018.

On December 5, 2017, a cash advance of $100,000 by a customer was received for goods to be delivered in January 2018. The amount of $100,000 was credited to sales.

The gross profit on sales is 40%.

Net Income for the year before any adjustments is $1,550,000.

REQUIRED:

If the errors were discovered in January 2018, what must be the credit to adjust 2017 Net Income/ Retained Earnings? (WRITE THE JOURNAL ENTRY)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles

Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso

11th Edition

111856667X, 978-1118566671

More Books

Students also viewed these Accounting questions

Question

Define Administration?

Answered: 1 week ago

Question

Define Decision making

Answered: 1 week ago

Question

What are the major social responsibilities of business managers ?

Answered: 1 week ago