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Error Example SOLN

Error Example SOLN - Error Example#1 Sales Less...

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Error Example #1 2007 2008 2009 2010 2011 Sales 20,000 25,000 30,000 35,000 40,000 Less: Depreciation Exp. (3,000) (8,000) (10,000) (14,000) (15,000) Income before taxes 17,000 17,000 20,000 21,000 25,000 Less: Tax Expense (6,800) (8,000) (9,200) (9,600) (10,000) Net Income 10,200 9,000 10,800 11,400 15,000 BRE 4,000 14,200 23,200 34,000 54,400 Add: Net Income 10,200 9,000 10,800 11,400 15,000 ERE 14,200 23,200 34,000 45,400 69,400 Cash 3,000 13,000 26,000 31,000 66,000 PP&E 30,000 37,000 45,000 65,000 60,000 Less: Accum, Depreciation (3,000) (11,000) (21,000) (35,000) (41,000) Total Assets 30,000 39,000 50,000 61,000 85,000 Current Liabilities 1,800 1,800 2,000 1,600 1,600 Long term debt 4,000 4,000 4,000 4,000 4,000 Common Stock 10,000 10,000 10,000 10,000 10,000 ERE 14,200 23,200 34,000 45,400 69,400 Total Liabilities & Equity 30,000 39,000 50,000 61,000 85,000 In late December 2007 Example Company purchased for cash and put into service a new depreciable asset. The asset cost $15,000 and had an expected life of 5 years and residual value of zero. Straight line depreciation was to be used. Example neglected to record the asset acquisition and subsequent depreciation expense for the asset. Required : Ignore income tax effects. Identify the errors in the 2007-2010 statements and record a journal entry at January 1, 2011 to adjust the accounts to their proper balances.
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