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SCORPION-xisa [38]
3 years ago
7

Megan Company (not a corporation) was careless about its financial records during its first year of operations, 2017. It is Dece

mber 31, 2017, the end of the annual accounting period. An outside CPA has examined the records and discovered numerous errors, all of which are described here. Assume that each error is independent of the others.
Required:
Analyze each error and indicate its effect on 2017 and 2018 net income, assets, and liabilities if not corrected. Do not assume any other errors. Use these codes to indicate the effect of each dollar amount: O = overstated, U = understated, and NE = no effect. The first transaction is used as an example.

1. Depreciation expense for 2013, not recorded in 2013, $950.
2. Wages earned by employees during 2013 not recorded or paid in 2013 but recorded and paid in 2014, $500.
3. Revenue earned during 2013 but not or recorded until 2014, $600.
4. Amount paid in 2013 and recorded as expense in 2013 but not an expense until 2014, $200.
5. Revenue collected in 2013 and recorded as revenue in 2013 but not earned until 2014,$900.
6. Sale of services and cash collected in 2013. Recorded as a &bit to Cash and as a credit
to Accounts Receivable, $300.
7. On December 31, land on credit for not recorded until payment was made on February l, 2014.
Business
1 answer:
Ilya [14]3 years ago
6 0

Answer:

Megan Company

Analysis of Error and Indication of its effect on 2013 and 2014 Net Income, Assets, and Liabilities:

                  Net Income                 Assets                     Liabilities

            2013          2014          2013        2014          2013      2014

1.           O                                   O

2.          O                U                                                   U

3.          U                O                U

4.          O                U                U

5.          O                U                                                  U

6.          U                                   O

7.                                                U                               U

Explanation:

a) Data and Calculations:

Codes to indicate the effect of each dollar amount: O = overstated, U = understated, and NE = no effect.

The overstatement of Net Income happens when an expense incurred is not recorded in the affected period or a revenue not earned is recognized in the wrong period.  For instance, when depreciation expense for 2013 is not recorded in 2013, the net income is overstated.  We cannot assume that the error is corrected in 2014, according to this question.

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Answer:

a. Incremental analysis.

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c. Relevant information.

d. Opportunity cost.

e. Joint products.

f. Out-of-pocket cost.

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Explanation:

a. Incremental analysis: examination of differences between costs to be incurred and revenue to be earned under different courses of action.

b. Sunk cost: a cost incurred in the past that cannot be changed as a result of future actions. Sunk cost can be defined as a cost or an amount of money that has been spent on something in the past and as such cannot be recovered.

c. Relevant information: costs and revenue that are expected to vary, depending on the course of action decided on. Hence, relevant cost are relevant for decision-making purposes but not sunk costs.

d. Opportunity cost: the benefit foregone by not pursuing an alternative course of action. Opportunity cost also known as the alternative forgone, can be defined as the value, profit or benefits given up by an individual or organization in order to choose or acquire something deemed significant at the time.

e. Joint products: products made from common raw materials and shared production processes.

f. Out-of-pocket cost: a cost yet to be incurred that will require future payment and may vary among alternative courses of action.

g. Split-off point: the point at which manufacturing costs are split equally between ending inventory and cost of goods sold. Thus, it give rise to joint products that emerge from the same raw materials and a shared manufacturing process.

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What two reasons are given for why wages differ between jobs?
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The efficiency of the worker and the level of skill required differ between occupations 
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3 years ago
Business applications have moved from transaction processing and monitoring to other activities. Which of the following is NOT o
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Answer:

data monitoring                    

Explanation:

Data monitoring refers to the business practice where key business data are constantly monitored against quality assurance rules to ensure that it's always of good quality and complies with previously defined design and accuracy requirements.

Monitoring the data helps a company to constructively maintain high, accurate data quality standard. Through periodically reviewing the data as it is processed inside programs, enterprises may eliminate commodity-intensive information pre-processing before transferring. Software quality is tested with software management at the moment of creation, rather than during a step.

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3 years ago
To maximize profits, a firm should continue to increase production of a good until?
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To maximize profits, a firm should continue to increase production of a good until marginal revenue is equal to marginal cost.

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What Is Marginal Revenue?

Marginal revenue is the increase in revenue that results from the sale of one additional unit of output.

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In economics, the marginal cost is the change in total production cost that comes from making or producing one additional unit.

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7 0
2 years ago
Vore Corp. bought equipment on January 2, 20X4 for $200,000. This equipment had an estimated useful life of five years and a sal
Harrizon [31]

Answer:

The accumulated depreciation balance at December 31, 20X5 should be: $91,800

Explanation:

Under the straight-line method, useful life is 5 years, so the asset's annual depreciation will be 20% of the Depreciable cost.

Depreciable cost = Total asset cost - salvage value = $200,000 - $20,000 = $180,000

Depreciation was computed by the 150% declining balance method. Depreciation rate is 30%.

Depreciation for the year of 20X4 = 30% x $180,000 = $54,000

At the beginning of the second year, the Depreciable cost's book value = $180,000 - $54,000 = $126,000

Depreciation for the year of 20X5 =  30% x $126,000 = $37,800

The accumulated depreciation balance at December 31, 20X5 = $54,000 + $37,800 = $91,800

7 0
3 years ago
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