Disregard effects of corrections on income tax
Course:- Financial Accounting
Reference No.:- EM13863483

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Financial Accounting

The first audit of the books of Bruce Gingrich Company was made for the year ended December 31, 2015. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are:

1. At the beginning of 2013, the company purchased a machine for $494,300 (salvage value of $52,600) that had a useful life of 6 years. The bookkeeper used straight-line depreciation, but failed to deduct the salvage value in computing the depreciation base for the 3 years.

2. At the end of 2014, the company failed to accrue sales salaries of $41,950.

3. A tax lawsuit that involved the year 2013 was settled late in 2015. It was determined that the company owed an additional $86,180 in taxes related to 2013. The company did not record a liability in 2013 or 2014 because the possibility of loss was considered remote, and charged the $86,180 to a loss account in 2015 and credited Cash for the same amount.

4. Gingrich Company purchased a copyright from another company early in 2013 for $47,800. Gingrich has not amortized the copyright because its value had not diminished. The copyright has a useful life at purchase of 20 years.

5. In 2015, the company wrote off $88,791 of inventory considered to be obsolete; this loss was charged directly to Retained Earnings.

Prepare the journal entries necessary in 2015 to correct the books, assuming that the books have not been closed. Disregard effects of corrections on income tax

Please show all work!

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Accounting) Materials
Evaluate the exponentially smoothed forecast of calls for each week. Suppose an initial forecast of 50 calls in the first week and use smoothing constant for forecasts=0.1 e
ABC Company employs a periodic inventory system and sells its inventory to customers for $32 per unit. ABC Company had the following inventory information available for the mo
Why does management believe that the fixed costs will persist at $4,000 even though the mine is temporarily closed - what sales volume per month will the company be indifferen
At January 1, 2016, Canaday Corporation had outstanding the following securities: 610 million common shares 25 million 6% cumulative preferred shares, $50 par 8% convertible b
Describe b riefly the substance over form concept and exactly what it requires. What responsibility, if any, do auditors have when a client violates this principle
Company owner Abel Terrio has reviewed the 2011 financial statements you prepared for Jackson Company as accountant, and questions the $6,000 loss reported on sale of its in
What was the company's basic net income per share for 2013? How does this amount compare to 2012? How much preferred dividends were subtracted in the computation of this incom
There was no income or expenses in the preceding year. In the current year, Akona again made $5.00 distributions to each shareholder. Please explain the tax treatment of