Accounting midterm Quiz help

Chapter 22 Exercises

1. b. 6. b. 2. b. 7. a. 3. a. 8. b. 4. b. 9. a. 5. a.

(a) Inventory ............................................................... 11,000* Retained Earnings ........................................ 11,000 *(€19,000 + €21,000 + €25,000) – (€16,000 + €18,000 + €20,000) (b) Net Income (FIFO) 2016 €19,000 2017 21,000 2018 25,000

(a) Computation of depreciation for 2019: Cost of building £1,200,000 Less: Depreciation prior to 2019 2015 (£1,200,000 – £ 0) X .05* £60,000 2016 (£1,200,000 – £ 60,000) X .05* 57,000 2017 (£1,200,000 – £117,000**) X .05* 54,150 2018 (£1,200,000 – £171,150***) X .05* 51,443 222,593 Book value, January 1, 2019 £ 977,407(a) *(1 ÷ 40) X 2 **(£60,000 + £57,000) ***(£60,000 + £57,000 + £54,150) Depreciation expense for 2019: £25,761(b) = [(£977,407(a) – £50,000) ÷ (40 – 4)] Depreciation Expense ............................................ 25,761(b)

Accumulated Depreciation—Building ........... 25,761

(b) Computation of 2019 depreciation expense on the equipment: Cost of equipment .................................................. £130,000 Accumulated depreciation [(£130,000 – £10,000) ÷ 12] X 4 years................. (40,000) Book value, January 1, 2019 .................................. £ 90,000

2019 Depreciation expense: £90,000– £5,000 £85,000

= (9 – 4) 5

= £17,000

2016 (a) Retained earnings, January 1, as reported ................. £160,000 Cumulative effect of change in accounting policy to average cost .............................................. (13,000)* Retained earnings, January 1, as adjusted ................ £147,000 *[{£100,000 – £92,000} (2014) + {£70,000 - £65,000} (2015)] 2019 (b) Retained earnings, January 1, as reported ................. £590,000 Cumulative effect of change in accounting policy to average cost .............................................. (20,000)** Retained earnings, January 1, as adjusted ................ £570,000 **[{£100,000 - £ 92,000} (2014) + {£70,000 - £65,000} (2015) + {£90,000 - £ 80,000} (2016) – {£120,000 - £130,000} (2017) + {£300,000 - £293,000} (2018)] 2020 (c) Retained earnings, January 1, as reported ................. £780,000 Cumulative effect of change in accounting policy to average cost .............................................. (15,000)*** Retained earnings, January 1, as adjusted ................ £765,000 2017 2018 2019 (d) Net Income ............................. £130,000 £293,000 £310,000

Retained Earnings ......................................................... 33,700* Inventory ................................................................. 14,200** Accumulated Depreciation—Equipment ($38,500(a) – $19,000(b)) ....................................... 19,500 Computations: Effect on retained earnings over (under) statement

Overstatement of 2019 ending inventory ($14,200** Overstatement of 2018 depreciation ( (19,000)(b) Understatement of 2019 depreciation ( 38,500(a) Total effect of errors on retained earnings ($33,700*