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hat certain adjustments had either been overlook or improperly recorded at the end of years to 2020. Omissions and ot

hat certain adjustments had either been overlook or improperly recorded at the end of years to 2020. Omissions and ot

Intermediate Accounting: Reporting And Analysis
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
Chapter9: Current Liabilities And Contingent Obligations
Section: Chapter Questions
Problem 1MC: The balance in Ashwood Companys accounts payable account at December 31, 2019, was 1,200,000 before...
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Problem 1. You were engaged for the first time to audit the FS of Bebeko Corporation for the period
ended December 31, 2020. The company started its operation in 2018. In reviewing the books, the
auditor discovered that certain adjustments had either been overlook or improperly recorded at the
end of years to 2020. Omissions and other failures for each year are summarized below:

 

December 31 2018 2019 2020 1. Omissions of the following year-end accruals/deferrals: a. Accrued utilities expense 5000 7000 6000 b. Accrued interest income c. Prepaid rent expense d. Unearned royalty income 2. Delivery of merchandise at year-end to customers, recorded as sales upon collection the following year. 3. Receipt of merchandise at year-end from suppliers, recorded as purchases upon payment the following year. 4. Cash received from customers at year-end, recorded as sales 2000 4000 3000 2000 1000 8000 3000 5000 10000 6000 3000 deliveries 3000 5000 yet to be made the following year. In the year of collection, corresponding inventories at cost were included in the physical count. 5. Payments to suppliers at year-end for goods to be received the following year, under FOB Destination, recorded as purchases upon payment. Inventories were included in physical count at the year when these were received. 6. Overstatement in year-end inventories | 7. Understatement in year-end inventories 8. Organization costs incurred in the start-up of the business at the beginning of 2018 was capitalized by the company as an intangible asset and has been amortized by 5 years. | 9. Major repairs on the company's equipment were recognized as outright expenses. The company depreciates equipment at 20% per annum, but depreciation in the year of the expenditure is at 10% 2000 1000 9000 7000 4000 50000 35000 40000
Transcribed Image Text:December 31 2018 2019 2020 1. Omissions of the following year-end accruals/deferrals: a. Accrued utilities expense 5000 7000 6000 b. Accrued interest income c. Prepaid rent expense d. Unearned royalty income 2. Delivery of merchandise at year-end to customers, recorded as sales upon collection the following year. 3. Receipt of merchandise at year-end from suppliers, recorded as purchases upon payment the following year. 4. Cash received from customers at year-end, recorded as sales 2000 4000 3000 2000 1000 8000 3000 5000 10000 6000 3000 deliveries 3000 5000 yet to be made the following year. In the year of collection, corresponding inventories at cost were included in the physical count. 5. Payments to suppliers at year-end for goods to be received the following year, under FOB Destination, recorded as purchases upon payment. Inventories were included in physical count at the year when these were received. 6. Overstatement in year-end inventories | 7. Understatement in year-end inventories 8. Organization costs incurred in the start-up of the business at the beginning of 2018 was capitalized by the company as an intangible asset and has been amortized by 5 years. | 9. Major repairs on the company's equipment were recognized as outright expenses. The company depreciates equipment at 20% per annum, but depreciation in the year of the expenditure is at 10% 2000 1000 9000 7000 4000 50000 35000 40000
2018 2019 2020 Retained earnings 325,000 691,000 1,001,000 Profit 345,000 586,000 460,000 Dividends declared and distributed 110,000 130,000 150,000 Compute for the following: 1. Adjusted profit for 2018 2. Adjusted profit for 2019 3. Adjusted profit for 2020 4. Retained earnings balance, 2018 5. Retained earnings balance, 2019 6. Retained earnings balance, 2020
Transcribed Image Text:2018 2019 2020 Retained earnings 325,000 691,000 1,001,000 Profit 345,000 586,000 460,000 Dividends declared and distributed 110,000 130,000 150,000 Compute for the following: 1. Adjusted profit for 2018 2. Adjusted profit for 2019 3. Adjusted profit for 2020 4. Retained earnings balance, 2018 5. Retained earnings balance, 2019 6. Retained earnings balance, 2020
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