The before-tax income for Lonnie Holdiman Co. for 2025 was $101,000 and $77,400 for 2026. However, the

Question:

The before-tax income for Lonnie Holdiman Co. for 2025 was $101,000 and $77,400 for 2026. However, the accountant noted that the following errors had been made:


1. Sales for 2025 included amounts of $38,200 which had been received in cash during 2025, but for which the related products were delivered in 2026. Title did not pass to the purchaser until 2026.


2. The inventory on December 31, 2025, was understated by $8,640.


3. The bookkeeper in recording interest expense for both 2025 and 2026 on bonds payable made the following entry on an annual basis.image


The bonds have a face value of $250,000 and pay a stated interest rate of 6%. They were issued at a discount of $15,000 on January 1, 2025, to yield an effective-interest rate of 7%. (Assume that the effective-interest method should be used.)


4. Ordinary repairs to equipment had been erroneously charged to the Equipment account during 2025 and 2026. Repairs in the amount of $8,500 in 2025 and $9,400 in 2026 were so charged. The company applies a rate of 10% to the balance in the Equipment account at the end of the year in its determination of depreciation charges.


Instructions


Prepare a schedule showing the determination of corrected income before taxes for 2025 and 2026.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 9781119790976

18th Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

Question Posted: