Honey Crunch Limited started business in 2018. It is now 2021 and the Board of Directors of Honey Crunch Limited hired Aegis Solutions to recommend how each of the following types of accounting changes or errors should be dealt with. The company changed its method of inventory pricing from FIFO to Average Cost in 2020.
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Honey Crunch Limited started business in 2018. It is now 2021 and the Board of
Directors of Honey Crunch Limited hired Aegis Solutions to recommend how
each of the following types of accounting changes or errors should be dealt with.
The company changed its method of inventory pricing from FIFO to
Average Cost in 2020. The change was made from 2020 onwards. Just to
see the impact, the company also did an analysis of the change for the
previous years
As an audit assistant for Aegis, provide Honey Crunch with this information. For
each issue write a note for the audit file (3-5 sentences) identify the type of
accounting change or error, the appropriate accounting treatment, include
amounts where applicable and how net income would be impacted if the issue
needs correcting
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- Honey Crunch Limited started business in 2018. It is now 2021 and the Board ofDirectors of Honey Crunch Limited hired Aegis Solutions to recommend howeach of the following types of accounting changes or errors should be dealt with.As an audit assistant for Aegis, provide Honey Crunch with this information. The company changed its method of inventory pricing from FIFO toAverage Cost in 2020. The change was made from 2020 onwards. Just tosee the impact, the company also did an analysis of the change for theprevious years For each issue write a note for the audit file (3-5 sentences) identify the type ofaccounting change or error, the appropriate accounting treatment, includeamounts where applicable and how net income would be impacted if the issueneeds correcting.Honey Crunch Limited started business in 2018. It is now 2021 and the Board ofDirectors of Honey Crunch Limited hired Aegis Solutions to recommend howeach of the following types of accounting changes or errors should be dealt with. In 2020, the company incorrectly understated the ending inventory by$12,000 As an audit assistant for Aegis, provide Honey Crunch with this information. Foreach issue write a note for the audit file (3-5 sentences) identify the type ofaccounting change or error, the appropriate accounting treatment, includeamounts where applicable and how net income would be impacted if the issueneeds correctingThe Assistant Manager of Ridley Corporation is seeking your advice as the accountant, in dealing with the accounting changes in the company for the year 2020. Prepare a report, indicating the appropriate accounting treatment for the following situations. In your report, indicate the type of accounting change (change in accounting policy or change in estimate) or correction of error and the appropriate accounting treatment (retrospective or prospective).1. It was found in May 2020 that warranty claims for 2019 sales have increased because of a defective component used in manufacturing. The extra costs amounted to $200,000 in excess of the 2019 warranty accrual. 2. In 2020, the company examined its entire policy relating to the depreciation of plant equipment. Plant equipment had normally been depreciated over a 15-year period, but recent experience has indicated that the company was using too short a period in its estimates and that the assets should be depreciated over a 20-year…
- You have been hired as the new controller for the Ralston Company. Shortly after joining the company in 2021, you discover the following errors related to the 2019 and 2020 financial statements: Inventory at December 31, 2019, was understated by $6,100. Inventory at December 31, 2020, was overstated by $9,100. On December 31, 2020, inventory was purchased for $3,100. The company did not record the purchase until the inventory was paid for early in 2021. At that time, the purchase was recorded by a debit to purchases and a credit to cash. The company uses a periodic inventory system.Required:1. Assuming that the errors were discovered after the 2020 financial statements were issued, analyze the effect of the errors on 2020 and 2019 cost of goods sold, net income, and retained earnings. (Ignore income taxes.)2. Prepare a journal entry to correct the errors.The Mike Tomlin Company has a calendar-year accounting period. The following error was discovered in April of 2019. This error would have affected the financial statements for 2017 and 2018. The ending balance in the inventory had been overstated at 12/31/2017 by $100,000. INSTRUCTIONS: Compute the effect this error had on the 2017 net income. Compute the effect, if any, each error had on the December 31, 2017 balance sheet items. Hint: be very careful about the time period!PLEASE ANSWER ASAP. THANK YOU SO MUCH. During your examination of the accounting books of South Sky Company for the year ended December 31, 2022 revealed the following errors: 1. Unrecorded unpaid salaries at the end of 2021 and 2022 were P 100,000 and P 140,000, respectively. 2. The following errors were discovered in the audit of inventory at December 31, 2021: (a) over footing, P 220,000; (b) Under extension, P 30,000. 3. Unexpired insurance of P 120,000 for the year 2023 was expensed in 2022. 4. Unrecorded interest receivable at the end of 2023, P 20,000. 5. The proceeds of P 220,000 from sale of a machinery with a cost of P 400,000 was credited to Miscellaneous Income on January 1, 2022. The machinery was 60% depreciated on the date of sale. Depreciation for 2022 was recorded at the rate of 10%. The reported net income at the end of 2021 and 2022 were P 1,750,000 and P 2,000,000, respectively. QUESTIONS: 1. what is the correct net income for the year 2021? 2. What is the correct…
- PROBLEM: During your examination of the accounting books of South Sky Company for the year ended December 31, 2022 revealed the following errors: 1. Unrecorded unpaid salaries at the end of 2021 and 2022 were P 100,000 and P 140,000, respectively. 2. The following errors were discovered in the audit of inventory at December 31, 2021: (a) over footing, P 220.000: (b) Under extension, P 30,000. 3. Unexpired insurance of P 120,000 for the year 2023 was expensed in 2022. 4. Unrecorded interest receivable at the end of 2023, P 20,000. 5. The proceeds of P 220,000 from sale of a machinery with a cost of P 400,000 was credited to Miscellaneous Income on January 1, 2022. The machinery was 60% depreciated on the date of sale. Depreciation for 2022 was recorded at the rate of 10% The reported net income at the end of 2021 and 2022 were P 1.750,000 and P 2.000.000, respectively. QUESTIONS: 1. What is the correct net income for the year 2021? 2. What is the correct net income for the year 2022?You have been engaged to audit the financial statements of LUNA Corp for the year ended December 31, 2020. Your audit reveals the following situations: 1. The physical inventory count on December 31, 2020, improperly included merchandise with a cost of P42,500 that had been recorded as a sale on December 29, 2020 and held for the customer to pick up on January 2, 2021. 2. In 2020, BSA sold for P18,500 fully depreciated equipment that originally cost P110,000. The proceeds from the sale were credited to the Equipment account. 3. BSA has a portfolio of current marketable equity securities acquired in 2019 for trading purposes. No valuation entry has been made. Information on cost and market value is as follows: Cost Market December 31, 2019 P 475,000 P 475,000 December 31, 2020…The owner of a trading company engaged your services as auditor. There is a discrepancy between the companys income and the sales volume. The owner suspects that the staff is committing theft. You are to determine whether or not this is true. Your investigation revealed the following: 1. Physical inventory, taken December 31, 2019 under your observation, showed that cost was P26,500 and market value, P25,000. The inventory of January 1, 2019 showed cost of P39,000 and market value of P37,500. It is the firms practice to value inventory at lower of cost or market. Any loss between cost and market value is included in Other Expenses. 2. The average gross profit rate was 40% of net sales. 3. The Accounts Receivable as of January 1, 2019 were P13,500. During 2019, Accounts Receivable written off during the year amounted to P1,000. Accounts Receivable as of December 31, 2019 were P37,500. 4. Outstanding purchase invoices amounted to P50,000 at the end of 2019. At the beginning of 2019 they…
- Penn Company is in the process of adjusting and correcting its books at the end of 2020. In reviewing its records, the following information is compiled. 1. Penn has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows. December 31, 2019 $3,500 December 31, 2020 $2,500 2. In reviewing the December 31, 2020, inventory, Penn discovered errors in its inventory-taking procedures that have caused inventories for the last 3 years to be incorrect, as follows. December 31, 2018 Understated $16,000 December 31, 2019 Understated $19,000 December 31, 2020 Overstated $ 6,700 Penn has already made an entry that established the incorrect December 31, 2020, inventory amount. 3. At December 31, 2020, Penn decided to change the depreciation method on its office equipment from double-declining-balance to straight-line. The equipment had an original cost of $100,000 when purchased on January 1, 2018. It has a 10-year…In 2021, the internal auditors of Development Technologies, Inc., discovered that (a) 2020 accrued salaries of $2 million were not recognized until they were paid in 2021 and (b) a $3 million purchase of merchandise in 2021 was recorded as a debit to Purchases in 2020 instead. The physical inventory count at the end of 2020 was correct. Ignoring income taxes, what journal entries are needed in 2021 to correct each error? Also, briefly describe any other measures Development Technologies would take in connection with correcting the errors.During the year ended December 31, 2021, Angel Company revealed the following events: a) A counting error relating to inventory on December 31, 2020 was discovered. This required an increase in the carrying amount of inventory on that date of P500,000. b)It was also decided to write off P50,000 from inventory which was over two years old as it was obsolete. c) The provision for uncollectible accounts on December 31, 2020 was P200,000. During 2021, an amount of P300,000 was written off on the December 31, 2020 accounts receivable. What pretax adjustment is required to restate retained earnings on January 1, 2021?
