On 30 June 2020, the Accounting V.P. of ABC discovered accounting errors in the 2017 statements:...

 

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On 30 June 2020, the Accounting V.P. of ABC discovered accounting errors in the 2017 statements: Land purchases of $330,000 on Jan. 1, 2017 had inadvertently been charged to equipment, a capital asset account, and had been depreciated by 15% for each year. The accounting depreciation rate is the same as the rate for tax purposes. The ending and beginning inventories had been properly stated. ABC's income tax rate is 29% and has a December 31 year end. Required: a. Prepare general journal entries to record the correction of the above error. b. Calculate the earnings correction that ABC must show in the 2020 financial statements. Where will these amounts be disclosed? On 30 June 2020, the Accounting V.P. of ABC discovered accounting errors in the 2017 statements: Land purchases of $330,000 on Jan. 1, 2017 had inadvertently been charged to equipment, a capital asset account, and had been depreciated by 15% for each year. The accounting depreciation rate is the same as the rate for tax purposes. The ending and beginning inventories had been properly stated. ABC's income tax rate is 29% and has a December 31 year end. Required: a. Prepare general journal entries to record the correction of the above error. b. Calculate the earnings correction that ABC must show in the 2020 financial statements. Where will these amounts be disclosed?

Answer rating: 100% (QA)

Land is an asset of the company which is having an unlimited useful life therefore no depreciation i... View the full answer