Answer:
<em>Corrected Income for 2020 is $ 86540 and for 2021 is $160,610 </em>
Explanation:
Ivanhoe Co.
Correction of Income for 2020 2021
The before-tax income $104,000 $81,200
1) Sales (39,000) 39000
2) Inventory (9,400) 9,400
3) Entry wrongly made 14,400 14,400
4) Correct Entry 15,680 15,680
5<u>) Add Depreciation 860 930</u>
<u>Corrected Income $ 86540 $ 160,610 </u>
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1) Sales are included when the purchaser gets the title . They are the liability of the seller so they will be deducted from 2020 sales and added to 2021.
2) Ending inventory is deducted from COGS as it is understated it will be deducted from 2020 income and added to the 2021 income when it becomes the opening inventory.
3) Interest was received not given so the it will be treated as revenue not expense and added to the income statement.
4) Actual interest received was ($ 240,000- $16,000)* 7% = $ 15680. So an entry for actual interest will be made.
5) Additional amount of depreciation was charged to 2020 and 2021 income statement which will be added back. 10 % of $ 8600= $ 860 for 2020 and 10% of $ 9,300= $ 930 for 2021
