Reference no: EM132720399
Question: In October 2019, Green Apple Food Corp hired Susan Lau as their new CFO. Susan then launched a thorough review of corporation's past accounting, particularly of transactions that exceeded the company's normal level of materiality. As a result of her review, she instructed the company's accountant to correct two errors:
a. The company made extensive improvements to the granola bar production process in 2016, and installed a substantial amount of new equipment. The entire cost of the equipment was accidentally charged to income as restructuring expense in 2016. However, the equipment should have been capitalized and added to the factory equipment account. The cost of the equipment was $1,500,000. Green Apple depreciates its factory equipment on the straight-line basis over twelve years. A full year's depreciation is charged in the year that equipment is acquired.
b. A year-end cut-off error occurred in 2017. A large shipment of nonperishable supplies arrived from South America on the last day of 2017 and had been left in the shipping containers outside the main plant. As a result, the supplies were recorded as received in 2018 and had not been included in the year-end 2017 inventory count. The account payable also had not been recorded in 2017. The supplies cost $140,000. The company's tax rate is 30%
Required: 1. Prepare the necessary journal entry for part a, if any, to correct the accounts as of January 1, 2019.
2. Prepare the necessary journal entry for part b, if any, to correct the accounts as of January 1, 2019.
3. Prepare the journal entry for part b if the error was discovered at the end of 2018.
4. Prepare the retained earnings section of the SCE for the year ended December 31, 2019 assuming that retained earnings at January 1, 2019 was $2,300,000; net income for before tax for 2019 was $610,000; and dividends of $270,000 were declared and paid during 2019. (See Chapter 4 Powerpoint Slide for Format)
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