A spreadsheet is provided that lists a series of errors that were discovered in

Question

A spreadsheet is provided that lists a series of errors that were discovered in January 2016 while examining the accounting records for 2014 and 2015. Enter the amounts that would correct the reported net income for 2014 and 2015 due to each listed error. For example, if you believe the error overstated 2014 net income by $8,000, then the answer is -8,000 for 2014 to reduce reported net income by $8,000.

Reported Net Income per books 2014: $100,000 2015: $150,000
          
Description   

1. Recorded December 2014 wages of $15,000          
as a $15,000 expense in January, 2015 when the payment was made

2014?

2015?   
          
2. Paid $8,400 on January 1, 2014 for rent covering the period          
1/1/14 to 12/31/15. On January 1, 2014, Rent Expense was          
debited for $8,400.

2014?

2015?   

3. Recorded interest revenue of $8,000 on June 30, 2015 when $8,000 cash          
interest was received. The interest relates to the period July 1, 2014          
to June 30, 2015. No adjusting entry was made on 12/31/14.          

2014?

2015?      

4. Recorded service revenue of $16,000 on December 30, 2014          
$16,000 cash was received on 12/30/14 but the service was          
provided in January, 2015.          

2014?

2015?      

5. Failed to recorded the increase in the FMV of available-for-sale          
securities at the end of 2014 and 2015. 2014-$11,000, 2015-$25,000          

2014?

2015?      

6. Erroneously capitalized repair expense of $20,000 on December 31, 2014.            
The repair was recorded as an asset with a remaining life of 4 years.          
The company depreciates these assets using straight-line and no salvage          

2014?

2015?   

7. Ending inventory on December 31, 2014 was overstated by $17,000          
The company uses a periodic invetnory system.          

2014?

2015?   

Corrected Net Income $100,000        $150,000

Explanation / Answer

2014 2015 Reported Net Income per books $100,000.00 $150,000.00 Errors: 1 (Wages are related to 2014) -15000 15000 Errors: 2 (Rent paid for 2014 and 2015. Therefore, out of $8400, $4200 is related to 2014 and $4,200 id related to 2015 4200 -4200 Error :3 (Interest received for 2014 and 2015. Therefore, out of $8000, $4000 is related to 2014 and $4000 id related to 2015) 4000 -4000 Error :4 Advance received in 2014 for service provided in 2015 -16000 16000 Error :5 Change in FMV -11000 -25000 Error :6 Expenses -20000               Depreciataion (20000/4) 5000 5000 Error :7 Inventory overstated (It Means Gross profit increased by $17,000. Hence it shall be reduced) -17000 Correct net income $34,200.00 $152,800.00

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