Williams-Santana Incorporated is a manufacturer of high-tech industrial parts that was started in 2009 by two...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/6648ee32148b1_6016648ee3171ec1.jpg)
Transcribed Image Text:
Williams-Santana Incorporated is a manufacturer of high-tech industrial parts that was started in 2009 by two talented engineers with little business training. In 2024, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2024 before any adjusting entries or closing entries were prepared. The income tax rate is 25% for all years. a. A five-year casualty insurance policy was purchased at the beginning of 2022 for $33,500. The full amount was debited to insurance expense at the time. b. Effective January 1, 2024, the company changed the salvage value used in calculating depreciation for its office building. The building cost $598,000 on December 29, 2013, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $110,000. Declining real estate values in the area indicate that the salvage value will be no more than $27,500. c. On December 31, 2023, merchandise inventory was overstated by $23,500 due to a mistake in the physical inventory count using the periodic inventory system. d. The company changed inventory cost methods to FIFO from LIFO at the end of 2024 for both financial statement and income tax purposes. The change will cause a $945,000 increase in the beginning inventory at January 1, 2025. e. At the end of 2023, the company failed to accrue $16,100 of sales commissions earned by employees during 2023. The expense was recorded when the commissions were paid in early 2024. f. At the beginning of 2022, the company purchased a machine at a cost of $690,000. Its useful life was estimated to be 10 years with no salvage value. The machine has been depreciated by the double-declining balance method. Its book value on December 31, 2023, was $441,600. On January 1, 2024, the company changed to the straight-line method. g. Warranty expense is determined each year as 1% of sales. Actual payment experience of recent years indicates that 0.80% is a better indication of the actual cost. Management effects the change in 2024. Credit sales for 2024 are $3,700,000; in 2023 they were $3,400,000. Required: For each situation: 1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change. For accounting errors, choose "Not applicable". 2. Prepare any journal entry necessary as a direct result of the change or error correction, as well as any adjusting entry for 2024 related to the situation described. Any tax effects should be adjusted for through Income tax payable or Refund-income tax. Williams-Santana Incorporated is a manufacturer of high-tech industrial parts that was started in 2009 by two talented engineers with little business training. In 2024, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2024 before any adjusting entries or closing entries were prepared. The income tax rate is 25% for all years. a. A five-year casualty insurance policy was purchased at the beginning of 2022 for $33,500. The full amount was debited to insurance expense at the time. b. Effective January 1, 2024, the company changed the salvage value used in calculating depreciation for its office building. The building cost $598,000 on December 29, 2013, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $110,000. Declining real estate values in the area indicate that the salvage value will be no more than $27,500. c. On December 31, 2023, merchandise inventory was overstated by $23,500 due to a mistake in the physical inventory count using the periodic inventory system. d. The company changed inventory cost methods to FIFO from LIFO at the end of 2024 for both financial statement and income tax purposes. The change will cause a $945,000 increase in the beginning inventory at January 1, 2025. e. At the end of 2023, the company failed to accrue $16,100 of sales commissions earned by employees during 2023. The expense was recorded when the commissions were paid in early 2024. f. At the beginning of 2022, the company purchased a machine at a cost of $690,000. Its useful life was estimated to be 10 years with no salvage value. The machine has been depreciated by the double-declining balance method. Its book value on December 31, 2023, was $441,600. On January 1, 2024, the company changed to the straight-line method. g. Warranty expense is determined each year as 1% of sales. Actual payment experience of recent years indicates that 0.80% is a better indication of the actual cost. Management effects the change in 2024. Credit sales for 2024 are $3,700,000; in 2023 they were $3,400,000. Required: For each situation: 1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change. For accounting errors, choose "Not applicable". 2. Prepare any journal entry necessary as a direct result of the change or error correction, as well as any adjusting entry for 2024 related to the situation described. Any tax effects should be adjusted for through Income tax payable or Refund-income tax.
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
A company acquired a chargeable asset (not a chattel) in 1979. The asset was sold in December 2020 for 2,800. Compute the chargeable gain or allowable loss if the original cost of the asset and its...
-
Under what conditions will the weighted average and FIFO methods give the same results?
-
Use nodal analysis to find Vo in the circuit of Fig. 3.72. Figure 3.72 For Prob. 3.23. 1 4 30 16
-
Ashton wants to store the following data about S&Ss purchases of inventory: item number date of purchase vendor number vendor address vendor name purchase price quantity purchased employee number...
-
1) Eric Johnson makes billiard balls in his New England plant. With recent increases in his costs, he has a new-found interest in efficiency. Eric is interested in determining the productivity of his...
-
Explain five ways how performance appraisal helps in career planning?
-
How does your invention improve life for people and help the community/society? (80 to 100 words) a little background about my product is that when you wear it, it calms peoples nerves and help to...
-
What is meant by reliable test data? Practically, is it possible to establish whether a set of test data is reliable? Why or why not?
-
Give one strength and one limitation of program code review as an audit evidence-collection technique.
-
In a COBOL program, what verbs would auditors review to check any computations performed in the program? What verbs do you think would be the most error-prone?
-
Give three COBOL verbs that can be used to violate the privacy of data. Explain briefly how they can be used. How would auditors go about detecting the use of these verbs?
-
Briefly explain the difference between program source-code comparison and program object-code comparison. What are the relative advantages and disadvantages of each type of code comparison?
-
A local Chevrolet dealership carries the following types of vehicles: Unit Inventory Itema Vans Trucks 2-door sedans 4-door sedans Unit NRV $21,500 16,300 14,300 19,300 36, 500 24,500 Quantity Cost...
-
In a nonmagnetic medium, E = 50 cos (10 9 t 8x) a y + 40 sin (10 9 t 8x) a z V/m find the dielectric constant r and the corresponding H.
-
TC Company makes four types of patio sets: wood, plastic, wicker, and aluminum. Data regarding the four products follows: Additional information about the company follows: Wood sets require \($40\)...
-
Curry Company has two divisions, Eastern Division and Western Division. Curry Company has been allocating overhead based on direct labor hours. For the most recent year, the predetermined overhead...
-
The controller for Tamale Cooking Oil Co. established the following overhead cost pools and cost drivers: An order of 80 finished barrels of cooking oil used: If the company uses activity-based...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App