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Activity 3-Cae06: 1. The Bookkeeper of Latsch Company, Which Has An Accounting Year Ending

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Marian Gerangaya07

The bookkeeper of Latsch Company made several accounting errors in 20x0: 1) A ₱1,000 collection and ₱1,600 of inventory purchases were not recorded until 20x1. 2) Depreciation was understated by ₱900. 3) An office supplies expense of ₱200 was incorrectly recorded. 4) ₱3,000 of sales were recorded in 20x1 instead of 20x0. The net impact of these errors was an understatement of 20x0 profit by ₱500 and working capital by ₱1,400 and total assets by ₱2,100.

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Activity 3-Cae06: 1. The Bookkeeper of Latsch Company, Which Has An Accounting Year Ending

Uploaded by

Marian Gerangaya07
522 views3 pages
The bookkeeper of Latsch Company made several accounting errors in 20x0: 1) A ₱1,000 collection and ₱1,600 of inventory purchases were not recorded until 20x1. 2) Depreciation was understated by ₱900. 3) An office supplies expense of ₱200 was incorrectly recorded. 4) ₱3,000 of sales were recorded in 20x1 instead of 20x0. The net impact of these errors was an understatement of 20x0 profit by ₱500 and working capital by ₱1,400 and total assets by ₱2,100.

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ACTIVITY 3-CAE06

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The bookkeeper of Latsch Company made several accounting errors in 20x0: 1) A ₱1,000 collection and ₱1,600 of inventory purchases were not recorded until 20x1. 2) Depreciation was understated by ₱900. 3) An office supplies expense of ₱200 was incorrectly recorded. 4) ₱3,000 of sales were recorded in 20x1 instead of 20x0. The net impact of these errors was an understatement of 20x0 profit by ₱500 and working capital by ₱1,400 and total assets by ₱2,100.

Copyright:

© All Rights Reserved
Download as PDF, TXT or read online from Scribd
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522 views3 pages

Activity 3-Cae06: 1. The Bookkeeper of Latsch Company, Which Has An Accounting Year Ending

Uploaded by

Marian Gerangaya07
The bookkeeper of Latsch Company made several accounting errors in 20x0: 1) A ₱1,000 collection and ₱1,600 of inventory purchases were not recorded until 20x1. 2) Depreciation was understated by ₱900. 3) An office supplies expense of ₱200 was incorrectly recorded. 4) ₱3,000 of sales were recorded in 20x1 instead of 20x0. The net impact of these errors was an understatement of 20x0 profit by ₱500 and working capital by ₱1,400 and total assets by ₱2,100.

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ACTIVITY 3-CAE06

1. The bookkeeper of Latsch Company, which has an accounting year ending


December 31, made the following errors:
A ₱1,000 collection from a customer was received on December 29, 20x0, but
not recorded until the date of its deposit in the bank, January 4, 20x1.
A supplier's ₱1,600 invoice for inventory items received in December 20x0 was
not recorded until January 20x1. (Inventories at December 31, 20x0 and 20x1,
were stated correctly, based on physical count.)
Depreciation for 20x0 was understated by ₱900. In September 20x0, a ₱200
invoice for office supplies was charged to the Utilities Expense account. Office
supplies are expensed as purchased. December 31, 20x0, sales on account of
₱3,000 were recorded in January 20x1. Assume that no other errors have
occurred and that no correcting entries have been made. Ignore income taxes.
Profit for 20x0 was

SOLUTIONS:
Effect on profit
(over)/understatement
Unrecorded collection -
Unrecorded purchases (1600)
Understatement in depreciation (900) Erroneous
debit of the office supplies expense to
utilities expense -
Unrecorded sales 3,000
Net effect on profit – understatement 500________

2. The bookkeeper of Latsch Company, which has an accounting year ending


December 31, made the following errors:
A ₱1,000 collection from a customer was received on December 29, 20x0, but
not recorded until the date of its deposit in the zank, January 4, 20x1.
A supplier's ₱1,600 invoice for inventory items received in December
20x0 was not recorded until January 20x1. (Inventories at December 31,
20x0 and 20x1, were stated correctly, based on physical count.)
Depreciation for 20x0 was understated by ₱900. In September 20x0, a ₱200
invoice for office supplies was charged to the Utilities Expense account. Office
supplies are expensed as purchased.
December 31, 20x0, sales on account of ₱3,000 were recorded in January
20x1.
Assume that no other errors have occurred and that no correcting entries have
been made. Ignore income taxes.

Assume the same facts as above. Working capital at December 31, 20x0, was

SOLUTIONS:
Effect on working
capital
(over)/understatement
Unrecorded collection - Unrecorded purchases (1600)
Understatement in depreciation - Erroneous debit
of the office supplies expense to utilities
expense -
Unrecorded sales 3,000
Net effect on working capital – understatement 1,400 ___

3. The bookkeeper of Latsch Company, which has an accounting year ending


December 31, made the following errors:
A ₱1,000 collection from a customer was received on December 29, 20x0, but
not recorded until the date of its deposit in the bank, January 4, 20x1.
A supplier's ₱1,600 invoice for inventory items received in December 20x0 was
not recorded until January 20x1. (Inventories at December 31, 20x0 and 20x1,
were stated correctly, based on physical count.)
Depreciation for 20x0 was understated by ₱900. In September 20x0, a ₱200
invoice for office supplies was charged to the Utilities Expense account. Office
supplies are expensed as purchased.
December 31, 20x0, sales on account of ₱3,000 were recorded in January
20x1.

Assume that no other errors have occurred and that no correcting entries have
been made. Ignore income taxes.

Assume the same facts as above. Total assets at December 31, 20x0, were

SOLUTIONS:
Effect on total assets
(over)/understatement
Unrecorded collection - Unrecorded purchases -
Understatement in depreciation (900)
Erroneous debit of the office supplies
expense to utilities expense -
Unrecorded sales 3,000
Net effect on total assets – understatement 2,100_______

4. Bren Co.'s beginning inventory at January 1, 20x3, was understated by


₱26,000, and its ending inventory was overstated by ₱52,000. As a result, Bren's
cost of goods sold for 20x3 was

SOLUTIONS:
Effect on COGS –
(over)/understatement
Understatement in beg. inventory 26,000
Overstated in end. inventory 52,000_____
Net effect on COGS – understatement 78,000_____

5. Conn Co. reported a retained earnings balance of ₱400,000 at December


31, 20X8. In August 20X9, Conn determined that insurance premiums of ₱60,000
for the three-year period beginning January 1, 20X8, had been paid and fully
expensed in 20X8. Conn has a 30% income tax rate. What amount should Conn
report as adjusted beginning retained earnings in its 20X9 statement of retained
earnings?

SOLUTIONS: 400,000 + [(60,000 x 2/3) c 70% ] = 428,000

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