The Following Errors Were Discovered in the Financial Statements of CBK

question 75

Essay

The following errors were discovered in the financial statements of CBK.
(a)Ending inventories at December 31 were incorrect as follows: December 31,20x1,Understated by $4,000; December 31,20x2 Overstated $3,600.
(b)Depreciation expense (straight-line)for 20x1 was Overstated $800.
(c)Insurance premium of $3,000 covering for 20x1,20x2 and 20x3 was prepaid on January,20x1 and expensed in full at the time.
(d)On December 31,20x2,fully depreciated machinery was sold for $6,400 on credit,but the sale was not recorded until January 1,20x3.
The accounting year ends December 31,and none of the above errors were corrected with journal entries prior to January 2,20x3.
Give the journal entry to correct the accounts on January 1,20x3 (after the 20x2 closing entries and before any reversing entries).

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Definitions:

Scientific Method

A systematic and logical approach to discovering how things in the universe work, involving observation, hypothesis formation, experimentation, and conclusion.

Reporting Results

The process of presenting data and findings from research or analysis to stakeholders, typically through written documents or presentations.

Hypothesis

An initial explanation suggested for an observed event, intended to guide further research.

Nature

In development, nature refers to genes. Thus, traits, capacities, and limitations inherited at conception are nature.