Assignment #1 For three years the Sandy Caven Company failed to recognize accruals, prepayments, and other transactions in its accounts. Reported net income and a listing of the errors appear below. 1999 2000 2001 1. 2. 3. 4. 5. 6. $ 12,000 2,000 600 1,300 1,200 $ 4,000 2,500 800 1,800 1,500 $ (1,000) 4,800 200 1,500 7. 8. Reported net income (loss). Failed to record accrued revenues Failed to record uncollectible accounts expense Failed record accrued salaries Understated depreciation expense Goodwill purchasetantespended (4) (should be mortized over ten years) Overstated ending inventories Failed to record purchase on account; merchandise properly included in ending inventory Failed to recognize unused supplies as an asset (expensed them instead) Failed to recognize gain on sale of land; land credited for amount of proceeds Failed to recognize unearned revenue at end of year 5,000 3,600 nil 2,800 1,000 9. nil 4,000 10. 300 nil 400 11. 600 nil nil nil 500 900 Required: 1. Recalculate the correct/adjusted net income for each year. 2. Prepare the compound entry, if necessary, to correct the books at the end of 2001, assuming that the books have not been closed. Ignore taxes. 3. Prepare the compound entry, if necessary, to correct the books at the end of 2001, assuming that the books have been closed. Ignore taxes. Good will was pu rchased & expended Goodwill is imparred by 16.0% each year A)
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