Answer:
Corrected income before tax year 2017 = $65,690
Corrected income before tax year 2018 = $102,467
Explanation:
According to the scenario, computation of the given data are as follow:-
Particular Year 2017 ($) Year 2018 ($)
Income before tax 101,000 84,100
Corrections
1. In 2017, unearned sales -36,200
Sales added in 2018 36,200
2. In 2017, understated ending inventory 9,500
In 2018, overstated opening inventory -9,500
3. Add-wrongly charged interest expenses 13,800 13,800
Less-actual interest expenses
In 2017 ($230,000-$14,000)×7%=$216,000×7% -15,120
In 2018, bond of carrying amount
=$216,000+($15,120-$13,800)=$217,320
In 2018, Actual interest expense=($217,320×7%) -15,212
4 Add-wrongly charged depreciation expenses
In 2017=($8,100×10%) 810
In 2018,=($8,100-$810)×10%+$8,500×10% = 1,579
Less-actual expenses for repairs -8,100 -8,500
Corrected income before tax 65,690 102,467
