On January 1, 2021, Save Company discovered that it had incorrectly expensed a P2,100,000 machine purchased on January 1, 2018. The entity estimated the machine's original useful life to be 10 years and the residual value at P100,000. The entity used the straight line method of depreciation and is subject to a 30% income tax rate. In the December 31, 2021 financial statements, what amount should be reported as a prior period error?

On January 1, 2021, Save Company discovered that it had incorrectly expensed a P2,100,000 machine purchased on January 1, 2018. The entity estimated the machine's original useful life to be 10 years and the residual value at P100,000. The entity used the straight line method of depreciation and is subject to a 30% income tax rate. In the December 31, 2021 financial statements, what amount should be reported as a prior period error?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 5MC: During 2019, White Company determined that machinery previously depreciated over a 7-year life had a...

See similar textbooks

Similar questions

The following are independent errors: a. In January 2019, repair costs of 9,000 were debited to the Machinery account. At the beginning of 2019, the book value of the machinery was 100,000. No residual value is expected, the remaining estimated life is 10 years, and straight-line depreciation is used. b. All purchases of materials for construction contracts still in progress have been immediately expensed. It is discovered that the use of these materials was 10,000 during 2018 and 12,000 during 2019. c. Depreciation on manufacturing equipment has been excluded from manufacturing costs and treated as a period expense. During 2019, 40,000 of depreciation was accounted for in that manner. Production was 15,000 units during 2019, of which 3,000 remained in inventory at the end of the year. Assume there was no inventory at the beginning of 2019. Required: Prepare journal entries for the preceding errors discovered during 2020. Ignore income taxes.
Shannon Corporation began operations on January 1, 2019. Financial statements for the years ended December 31, 2019 and 2020, contained the following errors: In addition, on December 31, 2020, fully depreciated machinery was sold for 10,800 cash, but the sale was not recorded until 2021. There were no other errors during 2019 or 2020, and no corrections have been made for any of the errors. Refer to the information for Shannon Corporation above. Ignoring income taxes, what is the total effect of the errors on the amount of working capital (current assets minus current liabilities) at December 31, 2020? a. working capital overstated by 4,200 b. working capital understated by 5,800 c. working capital understated by 6,000 d. working capital understated by 9,800
During 2019, White Company determined that machinery previously depreciated over a 7-year life had a total estimated useful life of only 5 years. An accounting change was made in 2019 to reflect the change in estimate. If the change had been made in 2018, accumulated depreciation at December 31, 2018, would have been 1,600,000 instead of 1,200,000. As a result of this change, the 2019 depreciation expense was 100,000 greater than it would have been if no change were made. Ignoring income tax considerations, what is the proper amount of the adjustment to Whites January 1, 2019, balance of retained earnings? a. 0 b. 100,000 c. 280,000 d. 400,000
On January 1, 2020, Company discovered that it had incorrectly expensed a P2,100,000 machine purchased on January 1, 2017. The entity estimated the machine’s original useful; life to be 10 years and the residual value at P100,000. The entity used the straight-line method of depreciation and is subject to a 30% income tax rate. In the December 31, 2020 financial statements, what amount should be reported as prior period error? A.P1,659,000 B.P1,029,000 C.P1,050,000 D.P1,680,000
Wildhorse Co. purchased machinery that cost $2850000 on January 4, 2019. The entire cost was recorded as an expense. The machinery has a 9-year life and a $185000 residual value. The error was discovered on December 20, 2021. Ignore income tax considerations.Wildhorse's income statement for the year ended December 31, 2021, should show the cumulative effect of this error in the amount of
Cullumber Co. purchased machinery that cost $3600000 on January 4, 2019. The entire cost was recorded as an expense. The machinery has a 9-year life and a $260000 residual value. The error was discovered on December 20, 2021. Ignore income tax considerations.Cullumber's income statement for the year ended December 31, 2021, should show the cumulative effect of this error in the amount of $0. $2857778. $2800000. $2420000.
In 2021, internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $350,000 cost of a machine purchased on January 1, 2018. The machine’s useful life was expected to be five years with no residual value. Straight-line depreciation is used by PKE. Ignoring income taxes, what journal entry will PKE use to correct the error?
Sheridan Co. purchased machinery that cost $3250000 on January 4, 2019. The entire cost was recorded as an expense. The machinery has a 9-year life and a $225000 residual value. The error was discovered on December 20, 2021. Ignore income tax considerations.Sheridan's income statement for the year ended December 31, 2021, should show the cumulative effect of this error in the amount of $2577778. $2213889. $0. $2527778.
On January 1, 2019, Uptown Builders purchased a machine for $200,000. Uptown's policy is to depreciate this type of machinery using straight-line depreciation, over five years, with no residual value. Because of a bookkeeping error, no depreciation was recognized in Uptown's 2019 or 2020 financial statements. The error was discovered during the preparation of the 2021 financial statements. Ignoring income taxes, the impact of this error on retained earnings prior to any 2021 adjustments is: Question 8 options: Overstatement of $80,000 Understatement of $120,000 Understatement of $80,000 Overstatement of $120,000
In 2024, internal auditors discovered that PKE Displays, Incorporated, had debited an expense account for the $402,000 cost of a machine purchased on January 1, 2021. The machine’s useful life was expected to be six years with no residual value. Straight-line depreciation is used by PKE. Ignoring income taxes, prepare the journal entry PKE will use to correct the error (before adjusting and closing entries). Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
In 2024, internal auditors discovered that PKE Displays, Incorporated, had debited an expense account for the $300,000 cost of a machine purchased on January 1, 2021. The machine’s useful life was expected to be four years with no residual value. Straight-line depreciation is used by PKE. Ignoring income taxes, prepare the journal entry PKE will use to correct the error (before adjusting and closing entries). Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
In 2024, internal auditors discovered that PKE Displays, Incorporated, had debited an expense account for the $350,000 cost of a machine purchased on January 1, 2021. The machine’s useful life was expected to be five years with no residual value. Straight-line depreciation is used by PKE. Ignoring income taxes, prepare the journal entry PKE will use to correct the error (before adjusting and closing entries). Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.