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DESCRIPTION OF ERROR
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
2014
Understated
Overstated
Overstated
No effect
Understated
Understated
No effect
Overstated
No effect
Overstated
Overstated
Understated
Overstated
2015
Overstated
Understated
Understated
No effect
Overstated
Overstated
No effect
Understated
No effect
Understated
Understated
Overstated
Understated
JOY COMPANY
UNDERSTATEMENT (OVERSTATEMEN
PROFIT
(148,000.00)
(140,500.00)
-
(120,000.00)
75,000.00
(333,500.00)
(140,500.00)
(140,500.00)
(11,500.00)
120,000.00
75,000.00
54,500.00
120,000.00
75,000.00
43,000.00
TOY COMPANY
2015
210,000.00
(36,000.00)
36,000.00
(40,000.00)
40,000.00
15,000.00
301,000.00
Reported profit
2014
295,000.00
219,000.00
BOY INC.
EFFECT ON 12/31/15 RETAINED
EARNINGS
UNDERSTATED (OVERSTATEMENT)
12,500.00
5,000.00
(4,000.00)
13,500.00
COY COMPANY
DATE
2015
Dec. 31
a
DESCRIPTION
CORRECTING ENTRIES
OPERATING EXPENSE
PREPAID INSURANCE
RETAINED EARNINGS
c.
OPERATING EXPENSES
ALLOWANCE FOR BAD DEBTS
[(980,000*10%)-92,500]
d.
RETAINED EARNINGS
COST OF GOODS SOLD
INVENTORY
e.
MACHINE
OPERATING INCOME
ACCUMULATED DEPRECIATION- MACHINE
RETAINED EARNINGS
DEBIT
CREDIT
3,100
9,300
12,400
7,500
16,750
24,250
5,500
5,500
37,750
11,750
49,500
75,000
6,250
12,500
68,750
UNADJUSTED PROFIT
ADJUSTMENTS:
A
B
C
D
E
CORRECTED PROFIT
2014
487,500
12400
-16750
-37750
68750
445,400
2,015
550,000
(3,100)
24,250
(5,500)
(11,750)
(6,250)
547,650
SOY COMPANY
UNADJUSTED PROFIT
ADJUSTMENTS:
RENT REVENUE REVENUE FOR 2015 RECOGNIZED IN 2014
UNRECORDED OFFICE SUPPLIES INVENTORIES AT YEAR-END
UNRECORDED ACCRUED SALARIES AT YEAR-END
ACCRUED COMMISSIONS
ADJUSTED PROFIT
2014
145,000
(65,000)
(6,500)
3,700
5,500
(7,500)
(12,000)
9,000
72,200
2015
185,000
6,500
(3,700)
7,100
7,500
(4,700)
(9,000)
15,000
203,700
FELLOW COMPANY
DATE
2015
Dec. 31
a
c.
d.
DESCRIPTION
CORRECTING ENTRIES
DEBIT
EQUIPMENT
OPERATING INCOME
120,000
500,000
DEPRECIATION EXPENSE
ACCUMULATED DEPRECIATION-MACHINE
CASH
ACCUMULATED DEPRECIATION-MACHINE
GAIN ON SALE OF MACHINE
MACHINE
CREDIT
120,000
500,000
20,000
20,000
60,000
150,000
30,000
180,000
DOY CORPORATION
INITIAL AMOUNTS
ADJUSTMENTS: INCREASE(DECREASE)
1
2
3
4
5
6
7
8
ADJUSTED AMOUNTS
INVENTORY
1,750,000
50,000
20,000
26,000
25,000
30,000
2,000
1,903,000
ACCOUNTS PAYABLE
1,200,000
NET SALES
8,500,000
(35,000)
50,000
(40,000)
60,000
4,000
1,314,000
8,425,000
b.
c.
d.
e.
f.
g.
CORRECTED PROFIT
2013
490,000
(34,000)
(63,000)
12,000
(24,000)
4,800
385,800
2014
670,000
34,000
(28,000)
63,000
(28,000)
(12,000)
6,000
24,000
(20,000)
No effect
2015
(320,000)
DATE
2014
DEC 31
a
RETAINED EARNINGS
RETAINED EARNINGS
INTEREST RECEIVABLE
INTEREST REVENUE
RETAINED EARNINGS
COST OF SALES
OPERATING EXPENSES
ACCUMULATED DEPRECIATION
PREPAID INSURANCE
28,000
(43,000)
28,000
(36,000)
(6,000)
8,000
20,000
18,000
No effect
(120,000)
(80,000)
(4,800)
6,200
590,400
(6,200)
7,800
(381,400)
DESCRIPTION
CLOSING ENTRIES
DEBIT
RETAINED EARNINGS
ACCRUED ACCOUNTS PAYABLE
OPERATING EXPENSE
34,000
RETAINED EARNINGS
INVENTORIES
COST OF SALES
63,000
INTEREST RECEIVABLE
INTEREST REVENUE
RETAINED EARNINGS
28,000
4,000
28,000
35,000
6,000
6,000
12,000
RETAINED EARNINGS
UNEARNED RENT
RENT REVENUE
24,000
COST OF SALES
ACCOUNTS PAYABLE
25,000
OPERATING EXPENSES
ACCUMULATED DEPRECIATION
CAPITALIZED ASSET
PREPAID INSURANCE
OPERATING EXPENSE
RETAINED EARNINGS
CREDIT
20,000
4,000
25,000
108,000
12,000
120,000
6,200
1,400
4,800