HW_7 Accounting Changes

HW_7 Accounting Changes - 2010-2011, the results would have...

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Homework #7: Accounting changes/errors (Ch 22), due on March 24. Problem 1: Red Inc. began operations January 1, 2010. In 2012 it changed its method of accounting for inventories from the average cost method to first-in, first-out (FIFO). If ending inventory had been determined under each of these two methods for both years, the results would have been: The company's income for 2011 and 2010 under average cost was $83,500 and $78,600, respectively. The income tax rate for Red is 30%. Required : Determine restated net income for Red Inc. for 2011 and 2010, after retrospectively applying the change in accounting principle.
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Problem 2: Black Corporation began operations January 1, 2010, purchasing equipment for $200,000. The equipment is estimated to have a five year useful life with no residual value. In 2012, Black changed its method of depreciating equipment from double-declining balance to straight-line. If depreciation expense had been computed under each of these two methods for
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Unformatted text preview: 2010-2011, the results would have been: Required : Compute the depreciation expense that Black would report for 2012. Problem 3: Early in January 2011, the internal auditors for Green Inc. discovered these errors and omissions in their review of the 2010 financial records. Green Inc. has not yet closed its books for 2010. 1. A $1,600 sale made to Ed's Automotive in December, 2010 was incorrectly charged to the account of Ed's Upholstery. 2. A $21,000 premium for a one-year fire and extended coverage insurance policy covering the policy period May 1, 2010 to April 30, 2011, was initially recorded as expense and has not been adjusted. 3. The December 31, 2009, balance of accounts receivable was materially overstated by $18,000 as a result of an error. Required : Prepare any necessary entries required for the above items. Ignore income taxes....
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HW_7 Accounting Changes - 2010-2011, the results would have...

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