On December 31, YR10, Firm X made the following errors:
a) Inventory was overstated by $8,000 (periodic system)
b) In YR10 the firm failed to record a Prepaid for $1,500 (e.g., paid for something in YR10
that is going to be used in YR11, but expensed it all in YR10)
c) In YR10 the firm failed to accrue Revenue of $1,000 (e.g., earned Revenue in YR10 but accrued it in YR11)
In addition, Firm X made the following errors on December 31, YR11:
d) The December 31, YR11 Inventory balance was understated by $12,000 (periodic system)
e) In YR11 the firm failed to record a Prepaid of $1,200 (e.g., the firm paid cash for something to be used in YR12, but no prepaid was recorded)
f) In YR11 the firm failed to accrue an expense of $800 (e.g., the firm rented office space for YR11 but did not accrue an expense ... assume that in YR12 it will pay for both YR11 and YR12 rent and record it all as an expense that year)
g) In YR11 the firm failed to record Unearned Revenue of $1,400 (e.g., the cash was received in YR11 and it was incorrectly considered Revenue ... the Revenue is earned in YR12)
Net Income for YR11 was incorrectly reported as $15,000.
Requirements:
(1) Make the correcting entries assuming the errors are discovered on December 31, YR11.
(2) Make the correcting entries assuming the errors are discovered on January 1, YR12.
(3) Make the correcting entries assuming the errors are discovered on December 31, YR12.
(4) Compute the corrected Net Income for YR11.

Answer rating: 100% (QA)

1 Correcting Entries on December 31 YR11 Journal Entry Event Particulars Debit Credit A Income Summary 8000 Dec 31 YR10 To Inventory 8000 being rectif... View the full answer