You were engaged by DIANE Company to audit its financial statements for the first time. In examining
Question:
You were engaged by DIANE Company to audit its financial statements for the first time. In examining the books, you noted that certain adjustments had been overlooked at the end of 2020 and 2021. You also discovered that other items had been improperly recorded. These omissions and other errors for each year were summarized:
12-31-2021 | 12-31-2020 | |
Salaries Payable | 780,000 | 873,600 |
Interest Receivable | 213,000 | 259,200 |
Prepaid Insurance | 307,800 | 384,000 |
Advances from Customers | 561,000 | 470,400 |
(Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year) | ||
Machinery | 522,000 | 564,000 |
(Capital expenditures had been recorded as repairs but should have been charged to Machinery; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%) |
The necessary adjusting journal entry for the error in recording capital expenditures on Machinery as of December 31, 2020 would include:
Group of answer choices
A credit to retained earnings of P535,800
A debit to Machinery of P522,000
A debit to Depreciation expense of P54,300
A credit to Accumulated Depreciation of P82,500
none of the choices
Expert Answer:
The Correct Option is d ie A credit to Accumulated Depreciation of P82500 EXPLANATION Capital expend... View the full answer
