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The before-tax income for Maxx Inc. was $630,100 for 2025 and $491,500 for 2026 . However, the accountant noted that the following errors had been
The before-tax income for Maxx Inc. was $630,100 for 2025 and $491,500 for 2026 . However, the accountant noted that the following errors had been made: 1. The bookkeeper in recording interest income for both years on an investment in 4% bonds with a par value of $108,000 made the following entry for each year: Cash 4,320 Interest Income 4,320 The bonds were purchased at a discount of $7,800 on January 1,2025 , to yield an effective interest rate of 5\%. (Assume that the effective-yield method should be used.) 2. Sales for 2026 included amounts of $63,500 which were delivered in 2025 and paid for in 2026 . Title passed to the purchaser upon delivery. 3. Interest of $74,400 related to the construction of a manufacturing facility had been erroneously charged to expense during 2025 instead of being capitalized as part of the facility's cost. The facility was completed and occupied on January 1,2026. The company applies a rate of 5% to the balance in the building account at the end of the year in its determination of depreciation charges. 4. The inventory on December 31,2025 , was overstated by $18,000. Prepare a schedule showing the determination of corrected income before taxes for 2025 and 2026. (Enter negative amounts us. either a negative sign preceding the number e.g. -15,000 or parentheses e.g. (15,000). Round answers to 0 decimal places, e.g. 25,000 .)
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