Do not give image format As at December 31, 2023, Oriole Corporation is having its financial statements audited for the first time ever. The auditor has foundthe following items that might have an effect on previous years.1.2.3.4.Oriole purchased equipment on January 2, 2020, for $106,600. At that time, the equipment had an estimated useful life of 10years, with a $8,200 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2023, as a result ofadditional information, the company determined that the equipment had a total useful life of seven years with a $4,920residual value.During 2023, Oriole changed from the double-declining-balance method for its building to the straight-line method becausethe company thinks the straight-line method now more closely follows the benefits received from using the assets. Thecurrent-year depreciation was calculated using the new method following straight-line depreciation. In case the followinginformation was needed, the auditor provided calculations that present depreciation on both bases. The building hadoriginally cost $0.98 million when purchased at the beginning of 2021 and has a residual value of $98,000. It is depreciatedover 20 years. The original estimates of useful life and residual value are still accurate.Straight-lineDouble-declining-balance2023$44,10079,3802022$44,10088,2002021$44,10098,000Oriole purchased a machine on July 1, 2020, at a cost of $140,000. The machine has a residual value of $14,000 and a usefullife of eight years. Oriole's bookkeeper recorded straight-line depreciation during each year but failed to consider theresidual value.Prior to 2023, development costs were expensed immediately because they were immaterial. Due to an increase indevelopment phase projects, development costs have now become material and management has decided to capitalize anddepreciate them over three years. The development costs meet all six specific conditions for capitalization of developmentphase costs. Amounts expensed in 2020, 2021, and 2022 were $300, $800, and $800, respectively. During 2023, $4,500 wasspent and the amount was debited to Deferred Development Costs (an asset account). (a)Prepare the necessary journal entries to record each of the changes or errors. The books for 2023 have been adjusted but notclosed. Ignore income tax effects. (List all debit entries before credit entries. Round answers to O decimal places, e.g. 5,275. Creditaccount titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" forthe account titles and enter O for the amounts.)No. Account Titles and Explanation1.2.3.4.DebitCredit

A journal entry is a basic accounting record that is used to chronologically track financial…

at December 31, 2023, Oriole Corporation is having its financial statements audited for the first time ever. The auditor has found e following items that might have an effect on previous years. C. Oriole purchased equipment on January 2, 2020, for $106,600. At that time, the equipment had an estimated useful life of 10 years, with a $8,200 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2023, as a result of additional information, the company determined that the equipment had a total useful life of seven years with a $4,920 residual value. During 2023, Oriole changed from the double-declining-balance method for its building to the straight-line method because the company thinks the straight-line method now more closely follows the benefits received from using the assets. The current-year depreciation was calculated using the new method following straight-line depreciation. In case the following

at December 31, 2023, Oriole Corporation is having its financial statements audited for the first time ever. The auditor has found e following items that might have an effect on previous years. C. Oriole purchased equipment on January 2, 2020, for $106,600. At that time, the equipment had an estimated useful life of 10 years, with a $8,200 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2023, as a result of additional information, the company determined that the equipment had a total useful life of seven years with a $4,920 residual value. During 2023, Oriole changed from the double-declining-balance method for its building to the straight-line method because the company thinks the straight-line method now more closely follows the benefits received from using the assets. The current-year depreciation was calculated using the new method following straight-line depreciation. In case the following

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 18P: Soon after December 31, 2019, the auditor requested a depreciation schedule for trucks of Jarrett...

See similar textbooks

Similar questions

Soon after December 31, 2019, the auditor requested a depreciation schedule for trucks of Jarrett Trucking Company, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period 2016 to 2019, inclusive. The following data were in the Trucks account as of January 1, 2016: The Accumulated DepreciationTrucks account, previously adjusted to January 1,2016, and duly entered in the ledger, had a balance on that date of 16,460. This amount represented the straight-line depreciation on the four trucks from the respective dates of purchase, based on a 5-year life and no residual value. No debits had been made to this account prior to January 1, 2016. Transactions between January 1,2017, and December 31, 2019, and their record in the ledger were as follows: 1. July 1, 2016: Truck no. 1 was sold for 1,000 cash. The entry was a debit to Cash and a credit to Trucks, 1,000. 2. January 1, 2017: Truck no. 3 was traded for a larger one (no. 5) with a 5-year life. The agreed purchase price was 12,000. Jarrett paid the other company 1,780 cash on the transaction. The entry was a debit to Trucks, 1,780, and a credit to Cash, 1,780. 3. July 1, 2018: Truck no. 4 was damaged in a wreck to such an extent that it was sold as junk for 50 cash. Jarrett received 950 from the insurance company. The entry made by the bookkeeper was a debit to Cash, 1,000, and credits to Miscellaneous Revenue, 50, and Trucks, 950, 4. July 1, 2018: A new truck (no. 6) was acquired for 20,000 cash and debited at that amount to the Trucks account. The truck has a 5-year life. Entries for depreciation had been made at the close of each year as follows: 2016, 8,840; 2017, 5,436; 2018, 4,896; 2019, 4,356. Required: 1. Next Level For each of the 4 years, calculate separately the increase or decrease in earnings arising from the companys errors in determining or entering depreciation or in recording transactions affecting trucks. 2. Prove your work by one compound journal entry as of December 31, 2019; the adjustment of the Trucks account is to reflect the correct balances, assuming that the books have not been closed for 2019.
The first audit of the books of Ivanhoe Company was made for the year ended December 31, 2022. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: At the beginning of 2020, the company purchased a machine for $620,000 (residual value of $62,000) that had a useful life of 5 years. The bookkeeper used straight-line depreciation but failed to deduct the residual value in computing the depreciation base for the 3 years. 1. 2. At the end of 2021, the company failed to accrue sales salaries of $45,000. A tax lawsuit that involved the year 2020 was settled late in 2022. It was determined that the company owed an additional $65,000 in taxes related to 2020. The company did not record a liability in 2020 or 2021 because the possibility of loss was considered remote, Ivanhoe debited the $65,000 to a loss account in 2022 and credited Cash for the same amount. 3. Ivanhoe Company purchased a copyright from…
The first audit of the books of Concord Company was made for the year ended December 31, 2021. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: 1. At the beginning of 2019, the company purchased a machine for $516,000 (salvage value of $51,600) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years. 2. At the end of 2020, the company failed to accrue sales salaries of $41,000. 3. A tax lawsuit that involved the year 2019 was settled late in 2021. It was determined that the company owed an additional $87,000 in taxes related to 2019. The company did not record a liability in 2019 or 2020 because the possibility of loss was considered remote, and charged the $87,000 to a loss account in 2021. 4. Concord Company purchased a copyright from another company early in…
The first audit of the books of Windsor Company was made for the year ended December 31, 2021. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: 1. At the beginning of 2019, the company purchased a machine for $528,000 (salvage value of $52,800) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years. 2. At the end of 2020, the company failed to accrue sales salaries of $49,000. 3. A tax lawsuit that involved the year 2019 was settled late in 2021. It was determined that the company owed an additional $81,000 in taxes related to 2019. The company did not record a liability in 2019 or 2020 because the possibility of loss was considered remote, and charged the $81,000 to a loss account in 2021. 4. Windsor Company purchased a copyright from another company early in…
The first audit of the books of Swift Limited was recently carried out for the year ended December 31, 2021. Swift follows IFRS. In examining the books, the auditor found that certain items had been overlooked or might have been incorrectly handled in the past: 1. At the beginning of 2019, the company purchased a machine for $480,000 (residual value of $30,000) that had a useful life of six years. The bookkeeper used straight-line depreciation but failed to deduct the residual value in calculating the depreciation base for the three years. 2. Swift purchased another company early in 2017 and recorded goodwill of $450,000 Swift amortized $20,000 of goodwill in 2017, and $40,000 in each subsequent year. The tax treatment for goodwill was properly applied. Assuming the company has a tax rate of 20% Instructions a. Prepare the journal entries in 2021 to correct the books where necessary, assuming that the 2021 books have not been closed. b. Identify the type of change for each of the…
The first audit of the books of Splish Company was made for the year ended December 31, 2026. In examining the books, the auditor found that certain items had been overlooked or incorrectl handled in the last 3 years. These items are: 1. 2. 3. 4. 5. At the beginning of 2024, the company purchased a machine for $483,000 (salvage value of $48,300) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years. At the end of 2025, the company failed to accrue sales salaries of $41,000. A tax lawsuit that involved the year 2024 was settled late in 2026. It was determined that the company owed an additional $82,000 in taxes related to 2024. The company did not record a liability in 2024 or 2025 because the possibility of loss was considered remote, and charged the $82,000 to a loss account in 2026. Splish Company purchased a copyright from another company early in 2024 for $50,000.…
The first audit of the books of Sweet Company was made for the year ended December 31, 2021. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: 1. At the beginning of 2019, the company purchased a machine for $534,000 (salvage value of $53,400) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years. 2. At the end of 2020, the company failed to accrue sales salaries of $42,000. 3. A tax lawsuit that involved the year 2019 was settled late in 2021. It was determined that the company owed an additional $90,000 in taxes related to 2019. The company did not record a liability in 2019 or 2020 because the possibility of loss was considered remote, and charged the $90,000 to a loss account in 2021. 4. Sweet Company purchased a copyright from another company early in 2019…
The first audit of the books of Headland Company was made for the year ended December 31, 2021. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: 1. At the beginning of 2019, the company purchased a machine for $555,000 (salvage value of $55,500) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years. 2. At the end of 2020, the company failed to accrue sales salaries of $49,000. 3. A tax lawsuit that involved the year 2019 was settled late in 2021. It was determined that the company owed an additional $87,000 in taxes related to 2019. The company did not record a liability in 2019 or 2020 because the possibility of loss was considered remote, and charged the $87,000 to a loss account in 2021. 4. Headland Company purchased a copyright from another company early in…
The first audit of the books of Ayayai Company was made for the year ended December 31, 2021. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: 1. At the beginning of 2019, the company purchased a machine for $468k (salvage value of $46,800) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years. 2. At the end of 2020, the company failed to accrue sales salaries of $50k. 3. A tax lawsuit that involved the year 2019 was settled late in 2021. It was determined that the company owed an additional $80k in taxes related to 2019. The company did not record a liability in 2019 or 2020 because the possibility of loss was considered remote, and charged the $80k to a loss account in 2021. 4. Ayayai Company purchased the copyright from another company early in 2019 for $51k. Ayayai had not…
The first audit of the books of Bruce Gingrich Company was made for the year ended December 31, 2021. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: 1. At the beginning of 2019, the company purchased a machine for $510,000 (salvage value of $51,000) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years. 2. At the end of 2020, the company failed to accrue sales salaries of $45,000. 3. A tax lawsuit that involved the year 2019 was settled late in 2021. It was determined that the company owed an additional $85,000 in taxes related to 2019. The company did not record a liability in 2019 or 2020 because the possibility of loss was considered remote, and charged the $85,000 to a loss account in 2021. 4. Gingrich Company purchased a copyright from another company early in 2019 for…
The accountant of Swift Inc. was preparing for the audit of its financial statements for the year ended December 31, 2022, and discovered that an automobile was being incorrectly depreciated. The automobile was purchased on January 1, 2021, for $50,000 and the estimated residual value after five years was expected to be $5,000. The company uses the straight-line basis for depreciating vehicles, but the residual value was not considered when determining the depreciation amount. The financial controller informed the accountant that the company was switching to the double- declining balance method of depreciation for the current and future years, as it was believed this method would more accurately portray the consumption of benefits received from the asset's use. Required: State whether it is a change in accounting estimate/policy or an accounting error. Prepare the journal entries required on December 31, 2022. Ignore income tax effects. Show all workings
Eight Incorporated reported net income of 5,300,000 in 2021. The following were determined after the audit was conducted: a. The company paid rent amounting 630,000 which would cover May 1, 2021 to October 31, 2024. The company uses the asset method in recording prepayments. No adjustment was made at the end of the year. b. At the beginning of the year, a fully depreciated equipment was sold for 320,000. This machine was originally acquired for 10 million and was depreciated using the straight-line method over a ten-year useful without salvage value. The company recorded the sale by debiting cash of and crediting sales c. Acquisition of land on June 5, 2021 amounting to 1,500,000 was debited to machinery. Equipment and machineries are depreciated over a ten-year useful life without salvage value using the straight-line method. Since this was originally recorded as a machinery, depreciation was recognized. d. Salaries expense of 200,000 was recorded as maintenance expense of 20,000. e.…