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ACCTG414 (6)
Chapter 4

Chapter 4 In Class Questions_solutions.docx

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Department
Accounting
Course
ACCTG414
Professor
Jocelyn King
Semester
Fall

Description
Assignment 4-20 a. B (given) b. C c. A d. B e. B f. D g. A& B h. D i. A& B j. D k. B or D l. D m. B n. D Assignment 4-14 Requirement 1: Earnings correction amount: a. Inventory error: Understatement of cost of sales $ 1,200,000 Overstatement of depreciation (240,000) Pre-tax overstatement of income 960,000 Income tax (25%) (240,000) $ 720,000 b. Revenue error: Overstatement of revenue $ 2,300,000 Income tax (25%) (575 ,000) 1,725,000 Total overstatement of 20X5 net income $ 2,445,000 Disclosure: The earnings correction (reduction) of $2,445,000 will be shown in the 20X7 statements as an adjustment to the opening balance of retained earnings.As well, other balances must be restated by the following amounts on the 20X6 comparative balance sheet: Adjustments to 20X6 balance sheet: Dr./(Cr.) Equipment $ (1,200,000) Accumulated depreciation
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