Professional Documents
Culture Documents
PROBLEM 2
A B C D E F
Income Statement - 2006
Purchases X X U U O O
Ending Inventory O U X U O X
Cost of sales U O U X X O
Net Income O U O X X U
Balance sheet - December 31, 2006
Inventory O U X U O X
Accounts Payable X X U U O O
Retained Earnings, before closing X X X X X X
Retained Earnings, after closing O U O X X U
Income Statement - 2007
Beginning inventory O U X U O X
Purchases X X O O U U
Ending Inventory X X X X X X
Cost of sales O U O X X U
Net Income U O U X X O
Balance sheet - December 31, 2007
Retained Earnings, before closing O U O X X U
Retained Earnings, after closing X X X X X X
G H I J
Income Statement - 2006
Sales X O U U
Ending Inventory U U O X
Cost of sales X O U X
Net Income X O U U
Balance sheet - December 31, 2006
Inventory X U O X
Accounts Receivable O O U U
Retained Earnings, before closing X X X X
Page 1 of 13
Answer Key – Correction of Errors
PROBLEM 3 - DEPRECIATION
Exercise 1
Items 2006 2007 2008
Depreciation Expense for the year 8,000 12,000 (20,000)
Net income (8,000) (12,000) 20,000
Accumulated depreciation, year-end 8,000 20,000 -
Net book value, year-end (8,000) (20,000) -
Retained Earnings, before closing - (8,000) (20,000)
Retained Earnings, after closing (8,000) (20,000) -
Correcting Entries
200
6
200
7 Depreciation expense 12,000
Page 2 of 13
Answer Key – Correction of Errors
200
8 Retained earnings 20,000
Accumulated
depreciation 20,000
Exercise 2
Items 2006 2007 2008
Depreciation Expense for the year 24,000 24,000 24,000
Net income (24,000) (24,000) (24,000)
Accumulated depreciation, year-end 24,000 48,000 72,000
Net book value, year-end 24,000 (48,000) (72,000)
Retained Earnings, before closing - (24,000) (48,000)
Retained Earnings, after closing (24,000) (48,000) (72,000)
Correcting Entries
200
6
200
7 Depreciation expense 24,000
200
8 Depreciation expense 24,000
180,000/
* Depreciation reported 3 60000
Page 3 of 13
Answer Key – Correction of Errors
Exercise 3
Items 2006 2007 2008
Depreciation Expense for the year 10,000 30,000 30,000
Net income (10,000) (30,000) (30,000)
Building 300,000 300,000 300,000
Accumulated depreciation, year-end 10,000 40,000 70,000
Net book value, year-end 290,000 260,000 230,000
Retained Earnings, before closing - (10,000) (40,000)
Retained Earnings, after closing (10,000) (40,000) (70,000)
Correcting Entries
200
6
Building 300,000
Donated capital 300,000
200
7 Building 300,000
Donated capital 300,000
200
8 Building 300,000
Donated capital 300,000
Page 4 of 13
Answer Key – Correction of Errors
* Depreciation reported -
Should have been
reported 300,000/10 30,000
Exercise 4
Items 2006 2007 2008
Repairs Expense (75,000) - -
Depreciation Expense for the year 15,000 15,000 15,000
Net income 60,000 (15,000) (15,000)
Machinery 75,000 75,000 75,000
Accumulated depreciation, year-end 15,000 3,000 45,000
Net book value, year-end 60,000 45,000 30,000
Retained Earnings, before closing - 60,000 45,000
Retained Earnings, after closing 60,000 45,000 30,000
Correcting Entries
200
6
Building 75,000
Repairs Expense 75,000
200
7 Building 300,000
Retained earnings 300,000
200
8 Building 300,000
Retained earnings 300,000
Page 5 of 13
Answer Key – Correction of Errors
* Depreciation reported -
Should have been
reported 75000/5 15,000
Exercise 5
Items 2006 2007 2008
Repairs Expense 9,000 - -
Depreciation Expense for the year (3,000) (3,000) (3,000)
Net income (6,000) 3,000 3,000
Machinery (9,000) (9,000) (9,000)
Accumulated depreciation, year-end (3,000) (6,000) (9,000)
Net book value, year-end (6,000) (3,000) -
Retained Earnings, before closing - (6,000) (3,000)
Retained Earnings, after closing (6,000) (3,000) -
Correcting Entries
200
6
200
7 Retained Earnings 9,000
Machinery 9,000
Accumulated depreciation
Page 6 of 13
Answer Key – Correction of Errors
6,000
Depreciation
expense 3,000
Retained earnings 3,000
200
8 Retained Earnings 9,000
Machinery 9,000
PROBLEM 4
1. A
2. A
3. B
Page 7 of 13
Answer Key – Correction of Errors
PROBLEM 5
1. B
2. C
Net Income
2007 2008
PROBLEM 6
1. B
2. D
Net Income
2006 2007
Page 8 of 13
Answer Key – Correction of Errors
Correcting Entry
Insurance
Expense 5,000
Retained earnings 15,000
Inventories 20,000
PROBLEM 7
1. A
2. C
3. B
Depreciation of
equipment 2006 4,000
2007 4,000
(3,000)
Page 9 of 13
Answer Key – Correction of Errors
PROBLEM 8
1. B
2. A
3. D 0r P310,900
Page 10 of 13
Answer Key – Correction of Errors
PROBLEM 9
1. D
2. A
PROBLEM 10
1. A
2. A
3. A
4. C
Page 11 of 13
Answer Key – Correction of Errors
2007 Errors
PROBLEM 11
1. A
2. C
3. A
4. D
5. A
Net Income WC SHE
2004 2005 2006 2007 2007 2007
Page 12 of 13
Answer Key – Correction of Errors
(500) (500)
Page 13 of 13