Reference no: EM133094856
Problem - The income statements of Hudson Corporation for the three years ended December 31, 2016, 2017, and 2018 show the following net income amounts:
|
2016
|
$17,400
|
|
2017
|
20,200
|
|
2018
|
11,300
|
An examination of the company's accounting records for these years reveals that several errors were made in arriving at the net income amounts reported. The following errors were discovered:
1. Wages earned by workers but not paid at December 31 were consistently omitted from the records. The amounts omitted were:
|
December 31, 2016
|
$1,000
|
|
December 31, 2017
|
1,400
|
|
December 31, 2018
|
1,600
|
These amounts were recorded as expenses when they were paid; that is, in the year following the year when they were earned by the employees.
1. The merchandise inventory on December 31, 2016 was overstated by $1,900 as a result of errors made in the footings (totals) and extensions on the inventory sheets.
2. Insurance of $1,200 that is applicable to 2018 was expenses on December 31, 2017
3. Interest receivable in the amount of $240 was not recorded on December 31, 2017
4. On January 2, 2017, a piece of machinery costing $3,900 was sold for $1,800. At the date of the sale, the equipment had accumulated depreciation of $2,400. The proceeds on the sale were credited to Gain on sale of machinery in 2017. In addition, depreciation was recorded for this equipment in both 2017 and 2018 at the rate of 10% of cost.
Required -
1. Do the correcting entries assuming the books for 2018 have not been closed.
2. Do the correcting entries assuming the books for 2018 have been closed.