You have been assigned to examine the financial statement of Jackson, Inc. for t

Question

You have been assigned to examine the financial statement of Jackson, Inc. for the year ended December 31, 2017. You discover the following situations in February 2018.

Brady has not accrued salaries payable at the end of each of the last 3 years, as follows.

                                               December 2015   $5,500

                                                December 2016   $7,800

                                                December 2017   $7,000

           ii              The physical inventory count has been incorrectly counted resulting in the following errors.

                                                                December 2015 Overstated $20,000

                                                                 December 2016 Understated $16,500

                                                                 December 2017 Overstated $6,000

Assume the trial balance has been prepared but the books HAVE NOT been closed for 2017.

Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations).

b). Assume the trial balance has been prepared but the books HAVE been closed for 2017. Assuming all amounts are material, prepare journal entries showing the adjustment that are required. (Ignore income tax considerations.)

               c). Prepare a schedule correcting net incomes for 2015, 2016 and 2017 assuming the books HAVE NOT been closed for 2017

Explanation / Answer

Dear Student,

a) Journal entries when trial balance has been prepared but the books HAVE NOT been closed for 2017:

b) Journal entries when trial balance has been prepared but the books HAVE been closed for 2017:

c) schedule correcting net incomes for 2015, 2016 and 2017 assuming the books HAVE NOT been closed for 2017

Regards,

Date Particulars LF Amount (in $) Amount (in $) 31 Dec 2017 Profit & Loss A/c Dr 20,300        To Outstanding Salaries (2015) 5,500        To Outstanding Salaries (2016) 7,800        To Outstanding Salaries (2017) 7,000 (In Feb 18 realised that the salaries for last 3 years has not been accrued) 31 Dec 2017 Profit & Loss A/c Dr 9,500     To Closing Inventory A/c 9,500 (Adjustment for closing inventory

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