Question: In 2015, Thom Inc. discovered an error in its 2012 financial statements. The firm recorded $ 8,500,000 of depreciation expense on its equipment instead of

In 2015, Thom Inc. discovered an error in its 2012 financial statements. The firm recorded $ 8,500,000 of depreciation expense on its equipment instead of recording $ 9,500,000. Thom has a constant tax rate of 40% and reports three years of comparative income statements and two years of comparative balance sheets with its financial reports. Assume Thom uses the same depreciation method for tax and financial reporting. Retained earnings and accumulated depreciation as of December 31, 2014, were $ 12,075,000 and $ 4,600,000, respectively.
Required
a. What is the necessary journal entry to record the prior- period adjustment?
b. How would Thom report its accumulated depreciation and retained earnings balances in the restated dated December 31, 2014?

Step by Step Solution

★★★★★

3.43 Rating (178 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a If the error had been found in 2012 net income would have been 600000 lower There is ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

578-B-A-E-M (475).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

In 2015, Meg Inc. discovered an error in its 2012 financial statements. The firm recorded $ 11,000,000 of depreciation expense on its equipment instead of recording $ 10,000,000. Meg has a constant...

On March 1, 2014, Broadfoot Bakeries, Inc. discovered an error in its inventory count on December 31, 2013. The error had caused the prior year's cost of goods sold to be overstated by $110,000. The...

In 2018, Thom Inc. discovered an error in its 2015 financial statements. The firm recorded $8,500,000 of depreciation expense on its equipment instead of recording $9,500,000. Thom has a constant tax...

In 2022, Thom Inc. discovered an error in its 2019 financial statements. The firm recorded $8,500,000 of depreciation expense on its equipment instead of recording $9,500,000. Thom has a constant tax...

In 2 0 2 2 2 0 2 2 , MegMeg Inc. discovered an error in its 2 0 1 9 2 0 1 9 financial statements. The firm recorded $ 1 1 comma 0 0 0 comma 0 0 0 1 1 , 0 0 0 , 0 0 0 of depreciation expense on its...

Score: 0 of 10 pts 10 of 11 (1 complete) HW Score: 9.09%, 10 of 110 pts E15-18 (similar to) Question Help alts In 2018, Meredith Inc, discovered an error in its 2015 financial statements. The firm...

In 2018, Manny Inc. discovered an error in its 2015 financial statements. The firm recorded $13,000,000 of depreciation expense on its equipment instead of recording $11,000,000. Manny has a constant...

PLEASE COMPLETE NO LATER THAN 10/07 @8:00AM Each question(1,2,& 3) must be a minimum of 200 words. Please make answers detailed and knowledgeable based off the attached reading. ARE YOU ABLE TO...

Please see attachment. All three question need to be answered in narrative format. If you have questions, just let me know. Normal requirement for references are 2 outside our course text....

Here is a scale diagram of a living room. Each grid square is 0.5 cm. The scale of the diagram is 1 cm : 5 ft. 1. Determine the actual size of the living room? 2. You need to put the following items...

An investment opportunity having a market price of $1,000,000 is available. You could obtain a $750,000, 25-year mortgage loan requiring equal monthly payments with interest at 7.0 percent. The...

Obj 1 : Exercise 1 0 - 1 Inclusion in Property, Plant, and Equipment Guthrie Inc. must determine whether the following items are included in property, plant, and equipment. Answer yes or no for the...

Identify the primary categories and types of transportation risk

Dollar-Value LIFO Issues Arruza Co. is considering switching from the specific-goods LIFO approach to the dollar-value LIFO approach. Because the financial personnel at Arruza know very little about...

A corporation in a 40% tax bracket invests in the preferred stock of another company and earns a 5% pretax rate of return. An individual investor in a 20% tax bracket invests in the same preferred...

Notice this study used the verbal answer from each subject to measure the cocaine use status after six weeks of treatment. It has been argued that verbal reporting of cocaine use will cause subjects...

You have the following expectations about market returns and interest rates on T-bills: T-Bill Rate Market Rate Probability RF Probability MR 0.1 0.02 0.1 -0.1 0.2 0.03 0.3 0.15 0.4 0.06 0.3 0.33 0.2...