Learning Materials
Features
Discover
Chapter 4: 14Q (page 180)
How should correction of errors be reported in the financial statements?
In the financial statements, error correction is reported by adjusting to the beginning balance of retained earnings.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
(Multiple-Step Statement) The following balances were taken from the books of Alonzo Corp. on December 31, 2017.
Interest revenue \(86,000 Accumulated depreciation equipment \)40,000
Cash \(51,000 Accumulated depreciation—buildings \)28,000
Sales revenue \(1,380,000 Notes receivable \)155,000
Accounts receivable \(150,000 Selling expenses \)194,000
Prepaid insurance \(20,000 Accounts payable \)170,000
Sales returns and allowances \(150,000 Bonds payable \)100,000
Allowance for doubtful accounts \(7,000 Administrative and general expense \)97,000
Sales discounts \(45,000 Accrued liabilities \)32,000
Land \(100,000 Interest expense \)60,000
Equipment \(200,000 Notes payable \)100,000
Buildings \(140,000 Loss from earthquake damage \)150,000
Cost of goods sold \(621,000 Common stock \)500,000
Retained earnings $21,000
Assume the total effective tax rate on all items is 34%.
Instructions
Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year.
(Single-Step Statement, Retained Earnings Statement, Periodic Inventory) Presented below is the trial balance of Thompson Corporation on December 31, 2017.
| THOMPSON CORPORATION | ||
| TRIAL BALANCE | ||
| DECEMBER 31, 2017 | ||
Debit (\() | Credit (\)) | |
Purchase Discounts | \(10,000 | |
Cash | \)189,700 | |
Accounts receivables | 105,000 | |
Rent Revenue | 18,000 | |
Retained Earnings | 160,000 | |
Salaries and Wages payable | 18,000 | |
Sales Revenue | 1,100,000 | |
Notes Receivables | 110,000 | |
Accounts payable | 49,000 | |
Accumulated Depreciation | 28,000 | |
Sales discount | 14,500 | |
Sales return and allowances | 17,500 | |
Notes payable | 70,000 | |
Selling expenses | 232,000 | |
Administrative expenses | 99,000 | |
Common Stock | 300,000 | |
Income tax expenses | 53,900 | |
Cash Dividends | 45,000 | |
Allowance for Doubtful Accounts | 5,000 | |
Supplies | 14,000 | |
Freight-In | 20,000 | |
Land | 70,000 | |
Equipment | 140,000 | |
Bonds Payable | 100,000 | |
Gain on Sale of Land | 30,000 | |
Accumulated Depreciation | 19,600 | |
Inventory | 89,000 | |
Buildings | 98,000 | |
Purchases | 610,000 | |
Totals | \(1,907,600 | \)1,907,600 |
A physical count of inventory on December 31 resulted in an inventory amount of \(64,000; thus, cost of goods sold for 2017 is \)645,000.
Instructions
Prepare a single-step income statement and a retained earnings statement. Assume that the only changes in retained earnings during the current year were from net income and dividends. Thirty thousand shares of common stock were outstanding the entire year.
Neumann Company computed earnings per share as follows.
Net income
_____________________________________
Common shares outstanding at year-end
Neumann has a simple capital structure. What possible errors might the company have made in the computation? Explain.
The financial statements of P&G are presented in Appendix B. The company’s complete annual report, including the notes to the financial statements, is available online.
Instructions
Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
(a) What type of income statement format does P&G use? Indicate why this format might be used to present income statement information.
(b) What are P&G’s primary revenue sources?
(c) Compute P&G’s gross profit for each of the years 2012–2014. Explain why gross profit decreased in 2014.
(d) Why does P&G make a distinction between operating and nonoperating revenue?
(e) What financial ratios did P&G choose to report in its “Financial Summary” section covering the years 2009–2014?
Explain the transaction approach to measuring income. Why is the transaction approach to income measurement preferable to other ways of measuring income?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Exams 
GCSE 
IGCSE 
AS 
A Level 
International A Level 
University Admissions Tests 
Flashcards 
Vaia AI 
Notes 
Study Plans 
Study Sets 
Find a job 
Find a degree 
Student Deals 
Magazine 
Mobile App