The ledger of Weather Vane Limited at September 30, 2024, contains the following summary data: Cash dividendscommon
Question:
The ledger of Weather Vane Limited at September 30, 2024, contains the following summary data:
Cash dividends—common ................................................................ $ 150,000
Common shares ...................................................................................... 750,000
Depreciation expense ............................................................................ 74,000
Service revenue ......................................................................................1,647,000
Operating expenses ................................................................................$971,000
Commission revenue .................................................................................65,000
Retained earnings, October 1, 2023 ........................................................845,000
Your analysis reveals the following additional information:
1. The company has a 25% income tax rate.
2. On July 9, 2024, Weather Vane discovered an error made in the previous fiscal year. A $61,500 payment of a note payable had been recorded as interest expense.
3. On August 18, 2024, common shares costing $57,500 were reacquired for $90,000. This is the first time the company has reacquired common shares.
Instructions
a. Prepare a journal entry to correct the prior period error.
b. Prepare the journal entry to record the reacquisition of common shares.
c. Calculate profit for the year ended September 30, 2024.
d. Prepare the statement of retained earnings for the year ended September 30, 2024.
If an error from a previous year is found and corrected, why is it also important to restate the prior years’ data shown for comparative purposes?
Step by Step Answer:
Accounting Principles Volume 2
ISBN: 9781119786634
9th Canadian Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak