Jason Co. began operations on January 1, 2023. Financial statements for 2023 and 2024 contained the following errors:Ending inventoryDepreciation expenseDec. 31, 2023$75,500 overstated48,500 understatedDec. 31, 2024$105,500 overstatedAccumulated depreciation.48,500 understated48,500 understatedInsurance expense43,500 overstated43,500 understatedPrepaid expense43,500 understatedIn addition, on December 26, 2024, fully depreciated equipment was sold for $58,000, but the sale was not recorded until 2025. Nocorrections have been made for any of the errors.Ignoring income taxes, calculate the total effect of the errors on 2024 net income.Total effect of the errors on 2024 net income$

The image presents a financial scenario involving Jason Co. which began operations on January 1,…

Answered: Jason Co. began operations on January…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 59E: Effects of an Error in Ending Inventory Waymire Company prepared the partial income statements...

See similar textbooks

Similar questions

Aljohn Company's year-end financial statements contained the following errors: 12.31.2021 12.31.2022 Ending inventory P95,000 understated P800,000 overstated Depreciation P250,000 understated An insurance premium of P600,000 was prepaid in 2021 covering the years 2021, 2022, and 2023. The entire amount was charged to expense in 2021. In addition, on December 31, 2022, fully depreciated machinery was sold for P150,000 cash, but the entry was not recorded until 2022. No corrections have been made for any of the errors. Ignore income tax. What was the total effect of the errors on retained earnings on December 31, 2022?
Bonghill Company’s December 31 year-end financial statements had the following error: December 31, 2019 December 31, 2020 Ending Inventory P13,500 understated P19,800 overstated Depreciation expense 3,600 understated - Unearned rental 5,000 understated - Prepaid insurance - 8,000 understated There were no other errors during the years 2019 or 2020 and no corrections have been made for any of the errors. (Ignore income tax considerations) What is the net effect of the errors in Bonghill’s December 31, 2020 accumulated profits balance? A.Understated by P20,300 B.verstated by P11,800 C.Overstated by P20,300 D.Overstated by P15,400
Cromwell Company began operations on January 1, 20x1. Financial statements for the years ended December 31, 20x1 and 20x2 contained the following errors:20x1 20x2Ending inventory P320,000 understated P300,000 overstatedDepreciation expense 120,000 understatedInsurance expense 200,000 overstated 200,000 understatedPrepaid insurance 100,000 understatedThe reported net income for 20x1 is P648,000 and P894,000 for 20x2. In addition, on December 31, 20x2, a fully depreciated machinery was sold for P216,000 cash, but the sale was not recorded until 20x3. There were no other errors during 20x1 and 20x2, and no corrections have been made for any of the errors. Ignore income tax effects.REQUIRED: Compute the total effects of errors and indicate whether overstated or understated.5. Total effect of the errors on Elizabeth’s 20x1 net income _____________6. Total effect of the errors on Elizabeth’s 20x2 net income _____________7. Total effect of the errors on Elizabeth’s working capital on December…
Bonghill Company’s December 31 year-end financial statements had the following error: December 31, 2019 December 31, 2020 Ending Inventory 13,500 understated 19,800 overstated Depreciation expense 3,600 understated - Unearned rental 5,000 understated - Prepaid insurance - 8,000 understated There were no other errors during the years 2019 or 2020 and no corrections have been made for any of the errors. (Ignore income tax considerations) What is the net effect of the errors in Bonghill’s December 31, 2020 accumulated profits balance?
(Error Analysis) Peter Henning Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2017 December 31, 2018 Ending inventory $9,600 understated $8,100 overstated Depreciation expense $2,300 understated — An insurance premium of $66,000 was prepaid in 2017 covering the years 2017, 2018, and 2019. The entire amount was charged to expense in 2017. In addition, on December 31, 2018, fully depreciated machinery was sold for $15,000 cash, but the entry was not recorded until 2019. There were no other errors during 2017 or 2018, and no corrections have been made for any of the errors. (Ignore income tax considerations.)Instructions(a) Compute the total effect of the errors on 2018 net income.(b) Compute the total effect of the errors on the amount of Henning’s working capital at December 31, 2018.(c) Compute the total effect of the errors on the balance of Henning’s retained earnings at December 31, 2018.
Sheridan Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2020 December 31, 2021 Ending inventory $9,600 understated $7,600 overstated Depreciation expense $2,100 understated — An insurance premium of $62,100 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $16,300 cash, but the entry was not recorded until 2022. There were no other errors during 2020 or 2021, and no corrections have been made for any of the errors. (Ignore income tax considerations.)(a) Compute the total effect of the errors on 2021 net income. Total effect of errors on net income $Enter the total effect of errors on net income in dollars (b) Compute the total effect of the errors on the amount of Sheridan’s working capital…
Teal Tool Company's December 31 year-end financial statements contained the following errors. Ending inventory Depreciation expense December 31, 2020 $10,500 understated $2,400 understated Total effect of errors on net income $ An insurance premium of $69,000 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $16,000 cash, but the entry was not recorded until 2022. There were no other errors during 2020 or 2021, and no corrections have been made for any of the errors. (Ignore income tax considerations.) (a) Compute the total effect of the errors on 2021 net income. Total effect on working capital $ December 31, 2021 understated overstated (b) Compute the total effect of the errors on the amount of Teal's working capital at December 31, 2021. $8,200 overstated Total effect on retained earnings (c) Compute the total effect of the errors on the balance of…
Buffalo Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2020 December 31, 2021 Ending inventory $9,100 understated $7,800 overstated Depreciation expense $2,300 understated — An insurance premium of $67,200 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $13,700 cash, but the entry was not recorded until 2022. There were no other errors during 2020 or 2021, and no corrections have been made for any of the errors. (Ignore income tax considerations.)(a) Compute the total effect of the errors on 2021 net income. Total effect of errors on net income $Enter the total effect of errors on net income in dollars (b) Compute the total effect of the errors on the amount of Buffalo’s working capital at…
Company started operations on January 1, 2019. Financial Statements for 2019 and 2020 contained the following errors: December 31, 2019 December 31, 2020 Ending inventory P55,000 overstated P65,000 understated Depreciation expense 35,000 overstated - Insurance expense 25,000 understated 25,000 overstated Prepaid insurance 25,000 overstated - Additionally, a fully depreciated equipment was sold for P12,000 on December 31, 2020. The sale was not recorded until 2021. No corrections have been made for any of the errors. (Ignore income tax considerations) How much would be the total effect of the errors in company's 2020 net income? A.Overstated by P83,000 B.Understated by P157,000 C.Overstated by P48,000…
Shockley Co. reported the following amounts in its financial statements: (a) Cost of goods sold (b) Profit (c) Total current assets (d) Equity a. Cost of goods sold: Reported Adjustments: Dec. 31, 2020 error Dec. 31, 2021 error In making the physical counts of inventory, the following errors were made: • Inventory on December 31, 2020: understated $80,000 • Inventory on December 31, 2021: overstated $22,000 Corrected b. Profit: Required: For each of the preceding financial statement items-(a), (b), (c), and (d)-prepare a schedule similar to the following and show the adjustments that would have been necessary to correct the reported amounts. (Negative answers should be indicated by a min sign.) Reported Adiustments: Dec. 31. 2020 error $ $ $ $ 2020 Financial Statements for Year Ended December 31. 2022 820,000 281,000 2020 2021 765,000 $ 897,000 $ 270,000 325,000 1,255,000 1,365,000 1,387,000 1,530,000 270,000 $ 80.0001 2021 1,200,000 1,332,000 2022 765,000 $ 897,000 $ 820,000 (80,000)…
PROBLEM 1: Identifying effects of common errors Requirement: Complete the schedule below by entering an Q to indicate overstatement, a I to indicate understatement, and NE if no effect. Effect of Error On: Net income Assets Liabilities Capital a. Ending inventory for 2020 understated: 2020 financial statements 2021 financial statements b. Ending inventory for 2021 overstated: 2020 financial statements 2021 financial statements c. Failed to record depreciation in 2020: 2020 financial statements 2021 financial statements d. Failed to record accrued salaries payable in 2020: 2020 financial statements 2021 financial statements e. Overstatement of accrued rent revenue in 2020: 2020 financial statements 2021 financial statements f. Failed to record a liability resulting from revenue collected in advance at end of 2020; instead, credited revenue in full erroneously: 2020 financial statements 2021 financial statements g. Failed to record an asset resulting from expenses paid in advance at end…
Wildhorse Tool Corporation's December 31 year-end financial statements contained the following errors: December 31, 2022 December 31, 2023 Ending inventory $10,900 overstated $10,200 understated Depreciation expense $3,500 overstated An insurance premium of $50,400 covering the years 2022, 2023, and 2024 was prepaid in 2022, with the entire amount charged to expense that year. In addition, on December 31, 2023, fully depreciated machinery was sold for $15,400 cash, but the entry was not recorded until 2024. There were no other errors during 2022 or 2023, and no corrections have been made for any of the errors. Wildhorse follows ASPE. Answer the following, ignoring income tax considerations. (a) Calculate the total effect of the errors on 2023 net income. Effect of errors on 2023 net income: $

SEE MORE QUESTIONS

Recommended textbooks for you

Cornerstones of Financial Accounting

Accounting

ISBN:

9781337690881

Author:

Jay Rich, Jeff Jones

Publisher:

Cengage Learning

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

Intermediate Accounting: Reporting And Analysis

Accounting

ISBN:

9781337788281

Author:

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

Publisher:

Cengage Learning

Cornerstones of Financial Accounting

Accounting

ISBN:

9781337690881

Author:

Jay Rich, Jeff Jones

Publisher:

Cengage Learning

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

Intermediate Accounting: Reporting And Analysis

Accounting

ISBN:

9781337788281

Author:

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

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS