Megan Company was careless about its financial records during its first year of operations, 2013. It is
Question:
Megan Company was careless about its financial records during its first year of operations, 2013. It is December 31, 2013, the end of the company€™s fiscal year. An external auditor examined the records and discovered numerous errors, all of which are described below. Assume that each error is independent of the others.
Required: Analyze each error and indicate its effect on 2013 and 2014 net earnings, assets, and liabilities if not corrected. Do not assume any other errors. Use these codes to indicate the effect of each dollar amount: O = overstated, U = understated, and N = no effect. Write an explanation of your analysis of each transaction to support your response. A sample explanation of analysis of errors that are not corrected is provided below, using the first error as an example:
Failure to record depreciation in 2013 caused depreciation expense to be too low; therefore, net earnings was overstated by $ 950. Accumulated depreciation is also too low by $ 950, which causes assets to be overstated by $ 950 until the error is corrected.
Transcribed Image Text:
Effect on Assets 2013 20142013 2014 20132014 Net Earnings Liabilitios Independent Errors (a) Depreciation expense for 2013, not recorded in 2013, $950 (b) Wages eamed by employees during 2013, not recorded in 2013, but O $950N $50 O $950 N will be paid in 2014, $500 (c) Revenue eamed during 2013 but not collected or recorded until (d) Amount paid in 2013 and recorded as expense in 2013, but it is (e) Revenue collected in 2013 and recorded as revenue in (t) Sale of services for cash in 2013, Recorded as a debit to cash and (g) On December 31, 2013, bought land on credit for $8,000, but did not not an expense until 2014, $200 2013, but it is not earned until 2014, $900. as a credit to trade receivables, $300
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 66% (12 reviews)
Net Earnings Assets Liabilities Error 2013 2014 2013 2014 2013 2014 1 O 950 N O 950 O 950 N N 2 O 500 U 500 N N U 500 N 3 U 600 O 600 U 600 N N N 4 U ...View the full answer
Answered By
Ashington Waweru
I am a lecturer, research writer and also a qualified financial analyst and accountant. I am qualified and articulate in many disciplines including English, Accounting, Finance, Quantitative spreadsheet analysis, Economics, and Statistics. I am an expert with sixteen years of experience in online industry-related work. I have a master's in business administration and a bachelor’s degree in education, accounting, and economics options.
I am a writer and proofreading expert with sixteen years of experience in online writing, proofreading, and text editing. I have vast knowledge and experience in writing techniques and styles such as APA, ASA, MLA, Chicago, Turabian, IEEE, and many others.
I am also an online blogger and research writer with sixteen years of writing and proofreading articles and reports. I have written many scripts and articles for blogs, and I also specialize in search engine
I have sixteen years of experience in Excel data entry, Excel data analysis, R-studio quantitative analysis, SPSS quantitative analysis, research writing, and proofreading articles and reports. I will deliver the highest quality online and offline Excel, R, SPSS, and other spreadsheet solutions within your operational deadlines. I have also compiled many original Excel quantitative and text spreadsheets which solve client’s problems in my research writing career.
I have extensive enterprise resource planning accounting, financial modeling, financial reporting, and company analysis: customer relationship management, enterprise resource planning, financial accounting projects, and corporate finance.
I am articulate in psychology, engineering, nursing, counseling, project management, accounting, finance, quantitative spreadsheet analysis, statistical and economic analysis, among many other industry fields and academic disciplines. I work to solve problems and provide accurate and credible solutions and research reports in all industries in the global economy.
I have taught and conducted masters and Ph.D. thesis research for specialists in Quantitative finance, Financial Accounting, Actuarial science, Macroeconomics, Microeconomics, Risk Management, Managerial Economics, Engineering Economics, Financial economics, Taxation and many other disciplines including water engineering, psychology, e-commerce, mechanical engineering, leadership and many others.
I have developed many courses on online websites like Teachable and Thinkific. I also developed an accounting reporting automation software project for Utafiti sacco located at ILRI Uthiru Kenya when I was working there in year 2001.
I am a mature, self-motivated worker who delivers high-quality, on-time reports which solve client’s problems accurately.
I have written many academic and professional industry research papers and tutored many clients from college to university undergraduate, master's and Ph.D. students, and corporate professionals. I anticipate your hiring me.
I know I will deliver the highest quality work you will find anywhere to award me your project work. Please note that I am looking for a long-term work relationship with you. I look forward to you delivering the best service to you.
Rectification of errors refers to the process of correcting mistakes or errors in accounting records to ensure that they accurately reflect the financial position of a business. There are several types of errors that can occur in accounting records, including errors of omission, errors of commission, errors of principle, compensating errors, errors of original entry, and errors of reversal.
The process of rectifying errors involves identifying the error, determining the correct entry, and making the necessary adjustments to the books of accounts. The rectification of errors can be done by making journal entries, adjusting entries, or by creating a suspense account to temporarily hold the difference until the error is identified and corrected. The steps are; locate the error, determine the type of error, make the necessary corrections, and recheck the accounts.
Rectification of errors is important to ensure the accuracy of financial statements, which are used by stakeholders to make important business decisions. Accurate accounting records are essential for making informed decisions, managing cash flows, and complying with legal and regulatory requirements.