AC 302 WEEK 8 Willy Exercises

AC 302 WEEK 8 Willy Exercises 
Exercise 22 Question 4
 
 	
Gordon Company started operations on January 1, 2009, and has used the FIFO method of inventory valuation since its inception. In 2014, it decides to switch to the average cost method. You are provided with the following information.
		
Net Income		Retained Earnings
(Ending Balance)
		Under FIFO		Under Average-Cost		Under FIFO
2009		$101,820		$91,710		$101,540
2010		69,300		64,170		159,340
2011		90,860		79,020		234,640
2012		120,440		129,930		339,100
2013		300,710		292,510		590,990
2014		305,810		310,900		780,730

(a) What is the beginning retained earnings balance at January 1, 2011, if Gordon prepares comparative financial statements starting in 2011?
Answer 
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Exercise 22-4
Gordon Company started operations on January 1, 2009, and has used the FIFO method of inventory valuation since its inception. In 2014, it decides to switch to the average cost method. You are provided with the following information.
		
Net Income		Retained Earnings
(Ending Balance)
		Under FIFO		Under Average-Cost		Under FIFO
2009		$101,820		$91,710		$101,540
2010		69,300		64,170		159,340
2011		90,860		79,020		234,640
2012		120,440		129,930		339,100
2013		300,710		292,510		590,990
2014		305,810		310,900		780,730

(a) What is the beginning retained earnings balance at January 1, 2011, if Gordon prepares comparative financial statements starting in 2011?
Retained earnings, January 1		$  


(b) What is the beginning retained earnings balance at January 1, 2014, if Gordon prepares comparative financial statements starting in 2014?
Retained earnings, January 1		$  


(c) What is the beginning retained earnings balance at January 1, 2015, if Gordon prepares single-period financial statements for 2015?
Retained earnings, January 1		$  


(d) What is the net income reported by Gordon in the 2014 income statement if it prepares comparative financial statements starting with 2012?
		2012		2013		2014
Net Income		$  
	$  
	$  

______________________________________



Exercise 22-6
 
 	Your answer is correct. 
 	 
Kathleen Cole Inc. acquired the following assets in January of 2012.
Equipment, estimated service life, 5 years; salvage value, $14,800		$446,350
Building, estimated service life, 30 years; no salvage value		$787,500

The equipment has been depreciated using the sum-of-the-years’-digits method for the first 3 years for financial reporting purposes. In 2015, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. It was also decided to change the total estimated service life of the building from 30 years to 40 years, with no change in the estimated salvage value. The building is depreciated on the straight-line method.
(a)		Prepare the general journal entry to record depreciation expense for the equipment in 2015.
(b)		Prepare the journal entry to record depreciation expense for the building in 2015.

(Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
No.	Account Titles and Explanation	Debit	Credit
(a)	  
  	  

	  
  	  

(b)	  
  	  

	  
  	  

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Exercise 22-18
 
 	Your answer is correct. 
 	 
Peter Henning Tool Company- December 31 year-end financial statements contained the following errors.
		December 31, 2014		December 31, 2015
Ending inventory		$9,708 understated		$6,954 overstated
Depreciation expense		$2,662 understated		

An insurance premium of $59,670 was prepaid in 2014 covering the years 2014, 2015, and 2016. The entire amount was charged to expense in 2014. In addition, on December 31, 2015, fully depreciated machinery was sold for $11,370 cash, but the entry was not recorded until 2016. There were no other errors during 2014 or 2015, and no corrections have been made for any of the errors. (Ignore income tax considerations.) (Enter negative amounts using either a negative sign preceding the number e.g. -15,000 or parentheses e.g. (15,000).)

(a) Compute the total effect of the errors on 2015 net income.
Total effect of errors on net income		$  

(b) Compute the total effect of the errors on the amount of Henning- working capital at December 31, 2015.
Total effect on working capital		$  

(c) Compute the total effect of the errors on the balance of Henning- retained earnings at December 31, 2015.
Total effect on retained earnings		$  

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