The controller for Grant Corporation is concerned about certain business transactions that the

The controller for Grant Corporation is concerned about certain business transactions that the

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
company experienced during 2008. (a) Reported net income $1,000,000 1. Additional charge for bad debts 2007 debts written off in 2008 $ 12,000 2008 debts to be written off in 2009 (54,000) (42,000) 2. Consignment—(20% × $400,000) (80,000) 3. Gross profit— Recognized 180,000 Should be (30% × $172,000) (51,600) (128,400) Corrected net income $749,600 (b) 1. Retained Earnings. ................................................................. 65,400 Allowance for Doubtful Accounts. ................................ 65,400 2. Consignment Out (Inventory). ................................................. 320,000 Retained Earnings. ................................................................. 80,000 Accounts Receivable. .................................................. 400,000 3. Retained Earnings. ................................................................. 128,400 Deferred Gross Profit. ................................................. 128,400 Unruh Company reported net incomes for a three-year period as follows: 2006, $186,000; 2007, $189,000; 2008, $180,000. (a) 2006 2007 2008 Net income (unadjusted) $186,000 $189,000 $180,000 Overstatement of ending inventory—2006 (42,000) 42,000 Overstatement of ending inventory—2007 (51,000) 51,000 Overstatement of ending inventory—2008 (24,000) Understatement of accrued advertising expense—2006 (6,600) 6,600 Understatement of accrued advertising expense—2007 (12,000) 12,000 Understatement of accrued advertising expense—2008 (7,200 ) Net income (corrected) $137,400 $174,600 $211,800 (b) Retained Earnings. ........................................................................ 31,200 Advertising Expense. ........................................................... 7,200 Inventory. ............................................................................. 24,000 Redman Co. began operations on January 1, 2007. Financial statements for 2007 and 2008 2007 ending inventory $ (90,000) 2008 ending inventory 114,000 Insurance expense 42,000 Unrecorded gain (58,000) Overstatement of 2008 income $ 8,000 1. Pack bought a truck on January 1, 2006 for $196,000 with a $16,000 estimated (a) Equipment. ......................................... 196,000 Depreciation Expense. .............................. 30,000 Accumulated Depreciation (4 years, 06-09). ... 120,000 Retained Earnings. ........................................... 106,000 (b) 2007: $360,000 – $30,000 = $330,000. 2008: $450,000 – $30,000 = $420,000. 2009: $480,000 – $30,000 = $450,000. (c) Retained earnings (unadjusted) $1,260,000 Correction of 2006 error ($196,000 – $30,000) 166,000 Retained earnings (adjusted) $1,426,000 (d) Retained earnings (unadjusted) $1,800,000 Correction of error ($196,000 – $90,000) 106,000 Retained earnings (adjusted) $1,906,000 Jenks, Inc. enters into a lease agreement as lessor on January 1, 2008 (a) The lease is a direct-financing type lease from the lessor's point of view or a capital lease from the lessee's point of view. The lease
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/02/2011 for the course ACCOUNTING Engl1102 taught by Professor Tom during the Spring '11 term at Prince George's Community College, Largo.

Page1 / 5

The controller for Grant Corporation is concerned about certain business transactions that the

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online