Answer:
The first journal entry was not the most appropriate, but since the mistake was correctly adjusted at the end of the year, both assets and expenses will be the same whether they did it correctly the first time or they had to adjust a mistake at the end of the year.
E.g. something like this happened
October 1, rent expense for 1 year
Dr Rent expense 12,000
Cr Cash 12,000
December 31, adjustment to rent expense
Dr Prepaid rent 10,000
Cr Rent expense 10,000
they should have recorded it as:
October 1, prepaid rent for 1 year
Dr Prepaid rent 12,000
Cr Cash 12,000
December 31, adjustment to rent expense
Dr Rent expense 2,000
Cr Prepaid rent 2,000
Whichever way you recorded the transactions, the balances a the end of the year would be:
prepaid rent (asset) $10,000
rent expense (expense) $2,000
Answer:
O'Hara Marine Co.
Depreciation Expense is:
$13,903
Explanation:
a) Data and Calculations:
sales = $75,500;
costs = $35,200;
addition to retained earnings = $9,580;
dividends paid = $8,420;
interest expense = $2,620;
tax rate = 23 percent
Net Income:
addition to retained earnings = $9,580;
dividends paid = $8,420
Total net income = $18,000
Pre-tax Income = $18,000/0.77 = $23,377
Income tax (23%) of $23,377 = $5,377
After Tax Income = $18,000 ($23,377 - 5,377)
Depreciation:
sales = $75,500
costs = $35,200
Gross profit = $40,300
Less interest (2,620)
Less net income (23,777)
Depreciation = $13,903
Answer:
It allowed pre-emptive identification of problems to minimize the impact on customers.
