Homework Chapter 22

E22-1 a) Net income =

700 000 ,
-

(700 000 ,
+ 20 % )

= $560 ,
000

3) Dr Construction in
process
:
$190 000 ,

Cr Deferred tax liability : $38 ,

000

Cr Retained earnings :
$152 ,
000

EGL-2 al Weighted average -

cost to FiFo

Dr Inventory :
$14 ,
000 (A)

C Retained $14 000

earnings
:

(* ) =
Inet income using Fifo -
Net income using WA

=
67 008
,
-
33 000,

= $14 ,
000

b) As we
changed from average - cost to Fifo

Net income FiFo

using
2018 $ 19 000,

2019 $23 000 ,

2028 $) 25 ,
888

c) LiFo to FiFo
Dr
Inventory :

$24 000 , (xx)

C Retained $24 000
earnings :
,

(x) I FiFo I LiFo

net income
using net income
using
-

=
67 000 ,
-

33 008 ,

- $ 24 ,
008

E22-3 a) Income statement

using LiFo
2018 2019 2020

Sales 3 000
,
3 000
,
3 000
,

lost of goods sold 800 1 , 000 1 130,

Operating expense 1000 1000 1000

Net income 1 200

,
1 ,
000 870
 Income statement
using FiFo
2018 2019 2020

Sales 3 000
,
3 000
,
3 000
,

lost of goods sold 828 948 1 100

,

Operating expense 1000 1000 1000

Net income 1 ,
180 1 ,
060908

b) Change from LiFo to FiFa

2019 2028

Sales $) 3000 $) 3000

Cost of goods sold 940 1 100 ,

Operating expenses 1 000

,
1 000
,

Net income 1 068

,
908

c) Note for financial statements

2019 2020

Sheet
dance LIFO FIFO Difference LIFO FIFO Difference

Inventory 200 248 40 320 398 70

Retained Earnings 2 200

,
2 240, 48 3 070
,
3 148 ,
78

Income statement
Cost of goods sold
Net income
1888/msl or
60
sir "g I 30
30

Statement of Cash flows

d) Retained statement
earnings
2019 2020

Retained
earnings ,
as Jan 1
reported , $1200 $ 2 240 ,

Less Adjustment for cumulative effect of

applying FIF8 (20)
:

Retained Jan 1 as adjusted $ 1 , 188 $ 2 240

earnings , , ,

Net income $ 1 , 868 $908

Retained earnings Dec 31 , $ 2 248
, $ 3 140,

E22-8 *
Depreciation of equipment under SLM

Depreciation for each year =

693 800
, =
23 , 100/year
30
 First 3 years depreciation =
23 100 , x 3 =
69 300 ,

Balance depreciated value = 693 %00 ,

-

69 300 ,
=
623 700 ,

New depreciation =
623 700 , = $16 ,
836 76 .

140 -3)

Depreciation value =
Cost of machine -

Salvage value
=$510 ,
000
5/13
5510 000 ,
170 , 080 =>
Depreciation value of asset after 3 years =
102 000
,

4510 000 ,
4/15 136 000 ,
1 =
68 000 ,
+
34 ,
000) as there's no change in salvage value
3 510 000
,
3/13 102 000 ,
This's to be depreciated for the period of 2 years with SLM
2510 000
,
2/15 68 000 , =
182 800 , x
2 =
51
,
000 + 2 =
182 000,
for 2 years
1 510 000,
1/1534 ,
000
2

a) Depreciation for year under SLM

Dr Depreciation Alc $510 000 :
,

Cr Equipment Alc : $510 ,

000
b) Depreciation for year after change in estimated life
Dr Depreciation Alc $16 836 76 :
, .

CrBuilding A/c : $16 ,

856 76 .

E22-15 - Journal entries

① Dr Accumulated Depreciation Equipment $23 ,
400

C Depreciation expense :

$8 ,
500

C Retained earnings : $ 17 000 ,

& Du Retained earnings $45 000 :

G Salaries and wages expense : $45 000 ,

③ No entry The loss was considered to be remote in earlier

->
year
④ Dr Amortization expense (Current Year) $2 250 ( $4500020) : , =

Dr Retained earnings (Prior Year) $4 500 ( $45 000/20 2) : ,

=
,
x

Cr Copyrights $6 750 : ,

③ Dr Inventory Write off :

$87 ,
000

C Retained earnings :
$87 000 ,

x Correction for books

 Prior Years (2019+ 2020) Current Year (2021)

Depreciation incorrectly charged $170 000 ( , =

85 000
,
+ 2)$05 ,
000

CorrectDepreciation charged $153 000( ,

=
$76 500 2)$76 500
,
x .

Depreciation excess charged $ 17 008 ,

# 8 300 ,

E 22 16
-
x
Correting entries (Calender-year basis)
① Du Salaries and wages expense $3 ,
400

C Salaries and wages payable $3 400 ,

② Du Salaries and wages expense $31 100 ,

Cr Salaries and wages payable $ 31 100 ,

③ Dr Prepaid insurance $2 ,
200 ( =

$40 x 10) (Nor1)

Cr Insurance expense $2 ,
200

④ Dr Sale revenue $120 ,

000 ( _

$2- 6i)
G Sale tax payable $120 ,
000

Dr Sale tax payable $103 ,

400

G Sale tax
expense $103
400 ,

E22-19 a) Adjusting entries at Dec 31 ,

2021 (Not closed (
① Dr Supplies expense ($1 600( , =
$2 700 ,
-
1 ,
100)
C Supplies $1 600 ,

② Du Salaries and wages expenses $2 900( , = $4 ,

400 -
1 ,
500)
Cr Salaries and wages payable $2 ,
900

③ Dr Interest revenue $750 ( $5100

=
-

4350)
C Interest receivable
$750
④ Dr Insurance
expense $25 000 ( $190
000 ,
=

,
-
65 ,
000)
C Prepaid insurance $25 000 ,

⑤ Du Rent revenue $14 ,

000 ( =
$28 000/2) ,

C Unearned Rent revenue $14 ,

000

⑧ Dr Depreciation expenses $15 000 ( , =

$50 000-5 000) , ,

Cr Accumulated Depreciation -

Equipment $45 000 ,

⑦ Dr Accumulated Depreciation Equipment $7

-

,
200

C Prior Period expenses $7 200 ,

b) Adjusting entries at Dec 31 2021 ,

(Closed)
① Dr Retained earnings :

$1 ,
600

C Supplies $1 600
: ,

② Dr Retained earnings :

$2 900 ,

C Salaries and payable $2 900

wages
:

③ Dr Retained earnings :

$750
C Interest receivable :
$750
④ Dr Retained earnings $25 000 :

Cr Prepaid insurance $25 000 :

,

⑤ Dr Retained earnings $14 000 :

Cr Unearned revenue :
$14 ,
000

⑥ Dr Retained earnings $45 000 :

CrAccumulated Depreciation equipment $45 000 -

:
,

⑦ Dr Retained earnings $7 200 :

C Accumulated Depreciation $7 200

equipment
-
:
,

Apply 40 % tax rate (Not closed)

d)

⑥ Dr Income tax refundable $18 000 ,

( =
45 000
,
x 40 % )

Cr Retained earnings $18 000 ,

⑦ Dr Income tax refundable $2 880( ,

=
7 200
,
x 40 % )
Cr Retained earnings $2 800 ,