The ledger of Weather Vane Limited at September 30, 2021, contains the following summary data:

Your analysis reveals the following additional information:

1. The company has a 25% income tax rate.

2. On July 9, 2021, 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, 2021, common shares costing $57,500 were reacquired for $90,000. This is the fi rst 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, 2021.

d. Prepare the statement of retained earnings for the year ended September 30, 2021.

Taking It Further

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?

Transcribed Image Text:

Cash dividends-common Common shares Depreciation expense Service revenue $ 150,000 Operating expenses 750,000 Commission revenue 74,000 Retained earnings, October 1, 2020 1,647,000 $971,000 845,000