Exercise 20-23 (Algo) Error correction; three errors [LO20-6]

Below are three independent and unrelated errors.

On December 31, 2020, Wolfe-Bache Corporation failed to accrue salaries expense of $1,350. In January 2021, when it paid employees for the December 27January 2 workweek, Wolfe-Bache made the following entry:

Salaries expense	1,350
Cash		1,350

On the last day of 2020, Midwest Importers received a $81,000 prepayment from a tenant for 2021 rent of a building. Midwest recorded the receipt as rent revenue. The error was discovered midway through 2021.

At the end of 2020, Dinkins-Lowery Corporation failed to accrue interest of $7,100 on a note receivable. At the beginning of 2021, when the company received the cash, it was recorded as interest revenue.

Required: For each error: 1. What would be the effect of each error on the income statement and the balance sheet in the 2020 financial statements? 2. Prepare any journal entries each company should record in 2021 to correct the errors.

What would be the effect of each error on the income statement and the balance sheet in the 2020 financial statements?

Error a
Income Statement:
Balance Sheet:
Error b
Income Statement:
Balance Sheet:
Error c
Income Statement:
Balance Sheet:

Required 2

A. Record correction of salaries expense error.

B. Record correction of rent received in advance.

C. Record correction of interest revenue on note receivable.