Question 2 On January 1, 2019, JKJ Inc. posted a repair expense bill of $100,000 to...

 

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Question 2 On January 1, 2019, JKJ Inc. posted a repair expense bill of $100,000 to the machinery account instead of the repair expense account. You are the new accountant for this business and you are in the process of preparing the 2020 financial statements when you notice that the $100,000 expenditure was recorded incorrectly in 2019. This error is discovered prior to the recording of the 2020 depreciation expense. The expenditure, posted in the machinery account, was also set up to be depreciated on a straight line basis. The assumed salvage value was $0 and the expected useful life was 5 years. The tax rate is 35%. The unadjusted balance in retained earnings at January 1, 2020 was $1,500,000. The company had a net income of $750,000 and paid dividends of $45,000 during 2020. Required: a) Calculate the earnings correction that JKJ must show in the 2020 financial statements. b) Prepare the 2020 entry to record the correction of the 2019 error. General Journal Account Titles and Explanation Date Debit Credit c) Present the retained earnings reconciliation that would appear on JKJ's statement of changes in equity. Question 2 On January 1, 2019, JKJ Inc. posted a repair expense bill of $100,000 to the machinery account instead of the repair expense account. You are the new accountant for this business and you are in the process of preparing the 2020 financial statements when you notice that the $100,000 expenditure was recorded incorrectly in 2019. This error is discovered prior to the recording of the 2020 depreciation expense. The expenditure, posted in the machinery account, was also set up to be depreciated on a straight line basis. The assumed salvage value was $0 and the expected useful life was 5 years. The tax rate is 35%. The unadjusted balance in retained earnings at January 1, 2020 was $1,500,000. The company had a net income of $750,000 and paid dividends of $45,000 during 2020. Required: a) Calculate the earnings correction that JKJ must show in the 2020 financial statements. b) Prepare the 2020 entry to record the correction of the 2019 error. General Journal Account Titles and Explanation Date Debit Credit c) Present the retained earnings reconciliation that would appear on JKJ's statement of changes in equity.

Answer rating: 100% (QA)

1 Incorrectly recorded to machine 100000 Less Depreciation on incorrect amount 10000005 20000 Unders... View the full answer