ACC 423 Week 5 Final Exam 2 Chapter-22

Exercise 22-18

Pina Tool Company’s December 31 year-end financial statements contained the following errors.

Dec 31 2017

Dec 31 2018

Ending inventory

$9,600

Understated

7600

Overstated

Depreciation expense

$2,100

Understared

-

Exercise 22-19

A partial trial balance of Bramble Corporation is as follows on December 31, 2018.

Debit

Credit

Supplies

2,700

Salaries and wages payable

1,500

Interest Receivable

5,100

Prepaid Insurance

90,000

Unearned Rent

0

Interest Payable

15,000

Additional adjusting data:

1. A physical count of supplies on hand on December 31, 2018, totaled

$1,100

2. Through oversight, the Salaries and Wages Payable account was not changed during 2018. Accrued salaries and wages on December 31, 2018, amounted to

$4,400

3. The Interest Receivable account was also left unchanged during 2018. Accrued interest on investments amounts to

$4,350

on December 31, 2018.

4. The unexpired portions of the insurance policies totaled

$65,000

as of December 31, 2018.

5

$28,000

was received on January 1, 2018, for the rent of a building for both 2018 and 2019. The entire amount was credited to rent revenue.

6. Depreciation on equipment for the year was erroneously recorded as

$5,000

 rather than the correct figure of

$50,000

7. A further review of depreciation calculations of prior years revealed that equipment depreciation of

$7,200

was not recorded.

 It was decided that this oversight should be corrected by a prior period adjustment.

Exercise 22-5

Presented below are income statements prepared on a LIFO and FIFO basis for Novak Company, which started operations on January 1, 2016.

The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2017.

The FIFO income statement is computed in accordance with the requirements of GAAP. Novak’s profit-sharing agreement with its employees

indicates that the company will pay employees

10%

of income before profit-sharing. Income taxes are ignored.