Prepare the compound entry

Assignment Help Financial Accounting

Reference no: EM132787243

Problem - For three years the Sandy Caven Company failed to recognize accruals, prepayments, and other transactions in its accounts. Reported net income and a listing of the errors appear below.

	20X1	20X2	20X3
Reported net income (loss)	$12,000	4,000	$(1,000)
Failed to record accrued revenues	2,000	2,500	4,800
Failed to record uncollectible accounts expense	600	800	200
Failed to record accrued salaries	1,300	1,800	nil
Understated depreciation expense	1,200	1,500	1,500
Goodwill purchased and expensed (Should be Reviewed for Impairment)	5,000	nil	1,000
Overstated ending inventories	3,600	2,800	nil
Failed to record purchase on account; merchandise properly included in ending inventory	nil	nil	4,000
Failed to recognize unused supplies as an asset (expensed them instead)	300	nil	400
Failed to recognize gain on sale of land; land credited for amount of proceeds	600	nil	nil
Failed to recognize unearned revenue at end of year	nil	500	900

Note: Goodwill was Impaired by 10.0% Each Year!

Required -

1. Recalculate the correct/adjusted net income for each year.

2. Prepare the compound entry, if necessary, to correct the books at the end of 2001, assuming that the books have not been closed. Ignore taxes.

3. Prepare the compound entry, if necessary, to correct the books at the end of 2001, assuming that the books have been closed. Ignore taxes.

Reference no: EM132787243

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