Financial Statements Paper 19

1

C Co. reported a retained earnings balance of $200,000 at December 31, 2017. In September 2018, C determined that insurance premiums of $30,000 for the three-year period beginning January 1, 2017, had been paid and fully expensed in 2017. C has a 30% income tax rate. What amount should C report as adjusted beginning retained earnings in its 2018 statement of retained earnings?






2

Berkshire Inc. uses a periodic inventory system. At the end of 2017, it missed counting some inventory items, resulting in an inventory understatement by $600,000. Assume that Berkshire has a 30% income tax rate and that this was the only error it made. What is the effect of the error on Berkshire’s 2018 income statement?






3

Berkshire Inc. uses a periodic inventory system. At the end of 2017, it missed counting some inventory items, resulting in an inventory understatement by $600,000. Assume that Berkshire has a 30% income tax rate and that this was the only error it made. What is the effect of the error on Berkshire’s December 31,2018 balance sheet?






4

Moonland Company’s income statement contained the following errors: Ending inventory, December 31, 2018, understated by $6,000 Depreciation expense for 2018 overstated by $1,000 What is the effect of the errors on 2018 net income before taxes?






5

Popeye Company purchased a machine for $300,000 on January 1, 2017. Popeye depreciates machines of this type by the straight-line method over a five-year period using no salvage value. Due to an error, no depreciation was taken on this machine in 2017. Popeye discovered the error in 2018. What amount should Popeye record as depreciation expense for 2018? The tax rate is 40%.






6

Powell Company had the following errors over the last two years:
2016: Ending inventory was overstated by $30,000 while depreciation expense was overstated by $24,000.
2017: Ending inventory was understated by $5,000 while depreciation expense was understated by $4,000.
By how much should retained earnings be adjusted on January 1, 2018? (Ignore taxes)






7

Due to an error in computing depreciation expense, Prewitt Corporation overstated accumulated depreciation by $20 million as of December 31, 2018. Prewitt has a tax rate of 30%. Prewitt’s retained earnings as of December 31, 2018, would be:






8

Working capital is defined as:






9

The current ratio is defined as:






10

The acid-test ratio includes all the following assets in the numerator except






Result

Total Questions:
Correct Answers:
Wrong Answers:
Percentage: