Thorpe Co.\'s Income Statement for the year ended December 31, 2017 reported net

Question

Thorpe Co.'s Income Statement for the year ended December 31, 2017 reported net income of $74,100. The auditor raised questions about the following amounts that had been included in net income:

The loss from the fire was an infrequent but not unusual occurrence in Thorpe's line of business. Thorpe's December 31, 2017, Income Statement should report net income of:

Adjustment to the profits of prior years for errors in depreciation (net of $3,750 tax effect) (7,500) Loss from fire (net of $7,000 tax effect) (14,000)

Explanation / Answer

Net Income before adjustment = $ 74,100 Adjustments: = Add: Error of Deporeciation = $   7,500 Net Income after adjustment = $ 81,600 Net Income to be reported = $ 81,600 [Note : Loss from fire shall not be excluded from it therefore no treatment required]

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