Lancer Company's preliminary income statement for 2021 and its reported income statement for 2020 are given...

  

Transcribed Image Text:

Lancer Company's preliminary income statement for 2021 and its reported income statement for 2020 are given below. 2021 2020 1,350,000 (648,0001 702,000 (172,500) (162.000 367.500 Sales Revenues 1,320,000 (630.000 690,000 Cost of Goods Sold Gross Profit Depreciation Other Expenses (172,500) (153.000 364.500 Net Income Lancer's records reveal the following information: (1) Lancer neglected to record S8,000 of supplies expense at the end of 2020, so the supplies inventory was overstated at the end of 2020. Consequently, the supplies expense computed for 2021 included the additional amount of supplies used in 2020. (2) On 1/1/19, Lancer purchased a machine for $120,000. Although the machine was expected to have an eight-year life, it was erroneously expensed in recording the purchase. The appropriate depreciation method for this machine is double-declining-balance with no residual. (3) At the end of 2021, Lancer decided to change its inventory costing method from the FIFO costing method to the average costing method. An analysis of the accounting records provides the following cost of goods sold amounts under average cost and FIFO: Year FIFO Average 615,000 645,000 637,500 2019 2020 630,000 648,000 675,000 2021 (4) Lancer acquired a machine on 1/3/19 for $100,000 and estimated its useful life to be 6 years with a salvage value of $10,000. In 2021, after the preliminary statements were prepared, Lancer realized that the machine could be used for an additional 5 years, but that the salvage value at the end of that time would probably be only $5,000. Straight-line depreciation is being used. Required: A. Prepare the necessary journal entries at December 31, 2021, to record the above information. B. Prepare new comparative income statements to reflect the adjustments required (1) through (4) above. You may ignore income taxes. C. Retained earnings reported for the end of 2020 was $2,416,500 and at the end of 2019 was S2,112,000. Dividends of $60,000 were declared in each year. Prepare comparative statements of retained earnings for Lancer Company for 2021 and 2020, reflecting appropriate adjustments from items (1)-(4) above, ignoring income taxes. Lancer Company's preliminary income statement for 2021 and its reported income statement for 2020 are given below. 2021 2020 1,350,000 (648,0001 702,000 (172,500) (162.000 367.500 Sales Revenues 1,320,000 (630.000 690,000 Cost of Goods Sold Gross Profit Depreciation Other Expenses (172,500) (153.000 364.500 Net Income Lancer's records reveal the following information: (1) Lancer neglected to record S8,000 of supplies expense at the end of 2020, so the supplies inventory was overstated at the end of 2020. Consequently, the supplies expense computed for 2021 included the additional amount of supplies used in 2020. (2) On 1/1/19, Lancer purchased a machine for $120,000. Although the machine was expected to have an eight-year life, it was erroneously expensed in recording the purchase. The appropriate depreciation method for this machine is double-declining-balance with no residual. (3) At the end of 2021, Lancer decided to change its inventory costing method from the FIFO costing method to the average costing method. An analysis of the accounting records provides the following cost of goods sold amounts under average cost and FIFO: Year FIFO Average 615,000 645,000 637,500 2019 2020 630,000 648,000 675,000 2021 (4) Lancer acquired a machine on 1/3/19 for $100,000 and estimated its useful life to be 6 years with a salvage value of $10,000. In 2021, after the preliminary statements were prepared, Lancer realized that the machine could be used for an additional 5 years, but that the salvage value at the end of that time would probably be only $5,000. Straight-line depreciation is being used. Required: A. Prepare the necessary journal entries at December 31, 2021, to record the above information. B. Prepare new comparative income statements to reflect the adjustments required (1) through (4) above. You may ignore income taxes. C. Retained earnings reported for the end of 2020 was $2,416,500 and at the end of 2019 was S2,112,000. Dividends of $60,000 were declared in each year. Prepare comparative statements of retained earnings for Lancer Company for 2021 and 2020, reflecting appropriate adjustments from items (1)-(4) above, ignoring income taxes.

Answer rating: 100% (QA)

a Journal Entries Date Account Title and Explanation De... View the full answer