Exercise 22-20 The before-tax income for Splish Co. for 2017 was $107,000 and $8
ID: 2549035 • Letter: E
Question
Exercise 22-20
The before-tax income for Splish Co. for 2017 was $107,000 and $82,300 for 2018. However, the accountant noted that the following errors had been made:
Interest Expense
14,400
Cash
14,400
Prepare a schedule showing the determination of corrected income before taxes for 2017 and 2018. (Enter negative amounts using either a negative sign preceding the number e.g. -15,000 or parentheses e.g. (15,000). Round answers to 0 decimal places, e.g. 125.)
2017
2018
Income Before Tax
Corrections:
Corrected Income Before Tax
1. Sales for 2017 included amounts of $37,100 which had been received in cash during 2017, but for which the related products were delivered in 2018. Title did not pass to the purchaser until 2018. 2. The inventory on December 31, 2017, was understated by $8,900. 3. The bookkeeper in recording interest expense for both 2017 and 2018 on bonds payable made the following entry on an annual basis.Explanation / Answer
2017 2018 Income Before Taxes $107,000 82300 Corrections Sales Erroneously Included in 2017 Income -37100 37100 Adjustment to Bond Interest expenses -1280 -1370 Understatement of 2017 Ending Inventory 8900 -8900 Repairs errorneously charged to Equipment -8100 -9100 Depreciation Recorded on Improperly Capitalized Repairs 810 1639 (8100-810+9100)*10% Correct Income Before taxes $70,230 $101,669 working Adjustment to Bond Interest 2017 Interest expenses (240000-16000)*7% 15680 Less: interest expense charged 14400 Less interest charged 1280 2018 Interest expenses (240000-16000+1280)*7% 15770 Less: interest expense charged 14400 Less interest charged 1370 If any doubt please comment
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