11-6

Statement of changes in equity: 2019

Retained Earnings - beginning 850,000
Less prior period error
Understatement of Depn exp - 2017 25,000
Understatement of Depn exp - 2018 25,000 (50,000)
Adjusted beginning balance of RE 800,000
Net income 500,000
1,300,000

11-8 B
11- 10 C (5,840,000-1,200,000) 4,640,000
2nd Q 11-10
Development costs (8,160,000-5,840,000) 2,320,000
Less amort 2019 (1,800,000-1,200,000) 600,000
Expense 2019 1,720,000

11-12 A

11-13 A

11-15
16-1 2018 2019
Unadjusted income 1,750,000 2,000,000
Omission of Accrued Salaries
2018 (100,000) 100,000
2019 (140,000)
Overstatement of inventories - 2018 (190,000) 190,000
Insurance applicable 2020 expense in 2019 120,000
Unrecorded interest income 2019 20,000 Insurance expese
Sale of eqiupt 2019
SP 220,000
Carrying of equipt 160,000 Cash
Gain on sale 60,000 (160,000)
Overdepreciatio 40,000
Adjusted income 1,460,000 2,170,000

B1 books are still open in 2019

Error 2018
Retained earnings 1-1-19 100,000
Accrued salaries payable 100,000

Retained earning 1-1-19 190,000

Inventory 1-1-19 190,000

Error 2019
Salaries expense 140,000
Accrued salaries payable 140,000

Prepaid insurance 120,000

Insurance expense 120,000

Interest receivable 20,000

Interest income 20,000

Miscellaneous 220,000
Accumulated depreciation 240,000
Equipment 400,000
Gain on sale 60,000

Accumulated depreciation 40,000

Depreciation expense 40,000

Books are closed in 2019

Error 2018 NO ENTRY

Error 2019
Retained earnings 140,000
Accrued salaries payable 140,000

Prepaid insurance 120,000

Retained earnings 120,000

Interest receivable 20,000

Retained earnings 20,000

Retained earnings 160,000

Accumulated depreciation 240,000
Equipment 400,000

Accumulated depreciation 40,000

Retained earnings 40,000

2018 2019
Unajusted net income 4,000,000 5,000,000
Unrecorded purchases 2019 (160,000)
Understatement of Depreciation - 2018 (90,000)
Sale in 2019 recorded in 2020 - 300,000
Adjusted net income 3,910,000 5,140,000

Cash 100,000
Account receivable 100,000

COGS 160,000
Accounts payable 160,000

Retained earnings 90,000

Accumulated depreciation 90,000

Office supplies expense 20,000

COGS 20,000

Account receivable 300,000

Sales 300,000

Tower Co.
Unadjusted net income 5,000,000
Prepaid insurance 200,000
Accrued wages (250,000)
Rent revenue collected in advance (300,000)
Interest receivable 100,000
4,750,000

Victoria Company

Ending inventory
2018 understated -
2019 overstated (300,000)
Depreciation
2018 understated (50,000)
2019 overstated 100,000
Decrease (250,000)
SHANNON COMPANY Income 2018 Income 2019
Ending inventory
2018 understated 160,000 (160,000)
2019 overstated (150,000)
Depreciation - Understated (60,000) -
Prepaid insurance understated 2018 100,000 (100,000)
Unrecorded sale of equipt - 108,000
200,000 (302,000)

(102,000)

MALAMPAYA
Unadjusted net income 6,500,000
Unrecorded purchases (1,000,000)
Understatement of inventory ending 1,500,000
Unrecorded Advertising 2019 (500,000)
Rent income overstated (300,000x4/6) (200,000)
Insurance expense overstated (200,000x6/12) 100,000
Adjusted net income 6,400,000

Taal Company
Income 2018 Income 2019
Inventories
2018 overstated (35,000) 35,000
2019 understated 10,000
Depreciation
2018 overstated 25,000
2019 understated (8,000)
Prepaid insurance 2018 5,000 (5,000)
Unearned rent income 4,000
Accrued salaries understated 2019 - (20,000)
 (5,000) 16,000
11,000

SUSAN COMPANY
2018 2019
Unadjusted net income 3,000,000 4,000,000
Inventories
2018 understated 20,000 (20,000)
2019 overstated (18,000)
Depreciation 2018 understated (4,000)
Insurance 3 year period charged 2018 10,000 (5,000)
Recorded sale of fully depreciated assets - 32,000
Adjusted net income 3,026,000 3,989,000

Adjusting entries 2018 errors

Inventory 1-1-19 20,000
RE 20,000

RE 4,000
Accumulated depreciation 4,000

Insurance exp (2019) 5,000

Prepaid insurance (2020) 5,000
Retained earnings 10,000

2019 errors
Cogs 18,000
Inventory 12-31-19 18,000

Cash 32,000
Accumulated depreciation 200,000
Machinery 200,000
Gain on sale 32,000

EMERALD COMPANY
Unadjusted net income 1,550,000
1 year insurance for Apr 1 2019 (40,000x3/12) 10,000
Inventory
Beginning (80,000)
Ending 120,000
Taxes 4th of 2019 (60,000)
Cash adv from customer (100,000)
Adjusted net income 1,440,000

Inventory 1-1-19 80,000

 RE 80,000

Inventory 12-31-19 120,000

COGS 120,000

Taxes expense 60,000

Taxes payable 60,000

Sales 100,000
Advances from customers 100,000

PAUL COMPANY
 ENTRY MADE CORRECT ENTRY

No entry Salaries expense 140,000

Accrued salaries payable

Insurance expese 120,000 Prepaid insurance 120,000

Cash 120,000 Cash

220,000 Cash 220,000

Miscellaneous expense 220,000 Accumlated depreciation 240,000
Equipment
Gain on sale
WC 12-31-19

-
(150,000)

108,000
(42,000)

WC 2019

10,000

4,000
(20,000)
(6,000)
RY CORRECTING ENTRY

Salaries expense 140,000

140,000 Accrued salaries payable 140,000

Prepaid insurance 120,000

120,000 Insurance expense 120,000

Accumulated depreciation 240,000

Miscellaneous income 220,000
400,000 Equipment 400,000
60,000 Gain on sale of equipt 60,000