4. Listed below are various types of accounting changes and errors. a) Nathalie Cole Inc. acquired...
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4. Listed below are various types of accounting changes and errors. a) Nathalie Cole Inc. acquired the equipment that cost $525,000 in January 2021; estimated service life is 5 years; salvage value $15,000. The equipment has been depreciated using sum-of the years digits method for the first 3 years for financial reporting purposes. In 2024, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. b) Phil Collins Construction Company changed from the completed contract to the percentage of completion method of accounting for long term construction contracts during 2018. The appropriate information related to this change is as follows. 2017 2018 The tax rate is 35%. Pretax Income from Percentage of Completion $780,000 700,000 Completed-Contract Difference $590,000 $190,000 480,000 220,000 c) On December 31, 2022, John Meyers enterprise did not accrue wages in the amount of $1,500. Meyers discovered the error in 2023 and has not closed the books for 2023. d) In January 2022 Alicia Keys co. purchased two-year insurance policy costing $1,000. It debited insurance expense, and credited cash. The company made no adjusting entries at the end of 2022. Keys has closed the books for 2023, but discovered the error after closing the books. e) In January 2022, Houston co. purchase a machine for $10,000 that had an estimated useful life of five years. The accountant incorrectly expensed this machine in 2022, and discovered the error in 2023 and has not closed the book. Instructions Prepare the journal entry necessary for all accounting changes and errors above. 4. Listed below are various types of accounting changes and errors. a) Nathalie Cole Inc. acquired the equipment that cost $525,000 in January 2021; estimated service life is 5 years; salvage value $15,000. The equipment has been depreciated using sum-of the years digits method for the first 3 years for financial reporting purposes. In 2024, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. b) Phil Collins Construction Company changed from the completed contract to the percentage of completion method of accounting for long term construction contracts during 2018. The appropriate information related to this change is as follows. 2017 2018 The tax rate is 35%. Pretax Income from Percentage of Completion $780,000 700,000 Completed-Contract Difference $590,000 $190,000 480,000 220,000 c) On December 31, 2022, John Meyers enterprise did not accrue wages in the amount of $1,500. Meyers discovered the error in 2023 and has not closed the books for 2023. d) In January 2022 Alicia Keys co. purchased two-year insurance policy costing $1,000. It debited insurance expense, and credited cash. The company made no adjusting entries at the end of 2022. Keys has closed the books for 2023, but discovered the error after closing the books. e) In January 2022, Houston co. purchase a machine for $10,000 that had an estimated useful life of five years. The accountant incorrectly expensed this machine in 2022, and discovered the error in 2023 and has not closed the book. Instructions Prepare the journal entry necessary for all accounting changes and errors above.
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Step 1 While preparing the books of accounts there always remains a possibility of errors and omissions Errors can be of many types some errors affect ... View the full answer
Related Book For
Intermediate Accounting principles and analysis
ISBN: 978-0471737933
2nd Edition
Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso
Posted Date:
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