Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are the accountant for Hannah Floors Ltd., and you are preparing adjustments prior to the presentation of year-end financial statements of December 31.

image text in transcribed

You are the accountant for Hannah Floors Ltd., and you are preparing adjustments prior to the presentation of year-end financial statements of December 31. Patrice Monty, the bookkeeper, has a habit of recording items in a suspense account if he is unsure about proper classification. He is also prone to making errors himself as he is often distracted by social media interactions. For the year 2018, your analysis of the 'Suspense Account' shows the following: Debit Credit Balance March 31 $270,000 Debit $270,000 April 22 170,000 Debit $440,000 July 1 710,000 Debit $1,150,000 November 2 $430,000 Debit $720,000 The entry on March 31 for $270,000 represents a write-down of inventory. The items had been purchased two years ago at a cost of $270,000, but the market price steadily declined this year. This adjustment correctly reduced inventory to the "lower of cost or market." The debit on April 22 is a payment made to Revenue Canada as a result of a tax audit that covered the years 2014-2017. The entry on July 1 represents the cost to rebuild and repair plant assets damaged by a flash flood. Some of the older employees at the plant remember the last time it happened, 2006, but the damage was not as extensive then. The cost of the fully depreciated plant assets damaged was $500,000. Plant assets are usually depreciated straight-line over 10 years. Finally, Patrice was checking the Pension expense calculation from 2017 and noticed $265,000 of expected return on plan assets was added rather than deducted from the total pension expense schedule. Patrice recorded a $430,000 credit on November 2 to the Suspense Account and a debit to Pension expense to adjust for this discovery. Required: To analyse each of the above items & prepare a correcting journal entry for each one to reallocate the suspense account. The books have not been closed for 2018. Ignore income tax effects.

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

Introduction to Managerial Accounting

Authors: Peter Brewer, Ray Garrison, Eric Noreen

5th edition

73527076, 978-0077386214, 77386213, 978-0073527079

More Books

Students also viewed these Accounting questions

Question

What are the eight types of intelligence? (p. 65)

Answered: 1 week ago

Question

What is Accounting?

Answered: 1 week ago

Question

Define organisation chart

Answered: 1 week ago

Question

What are the advantages of planning ?

Answered: 1 week ago

Question

Explain the factors that determine the degree of decentralisation

Answered: 1 week ago

Question

What Is acidity?

Answered: 1 week ago

Question

Using Exhibit 3-8, explain how a culture is formed and maintained.

Answered: 1 week ago