Discussion:Accounting Errors Question (homework q)

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Revision as of 20:12, 15 May 2008

Discussion Forum Index --> Accounting Questions --> Accounting Errors Question (homework q)

Kwakkles (talk|edits) said:

4 May 2008
I took a 34-question multiple choice paper exam for my class called, "Financial Accounting Concepts," at my college a few weeks ago. The exam was the first of three in the spring 2008 semester. Out of the 34, I got one question wrong, and I wrote it down while my instructor was reviewing the handed-back, graded exams. I know how to do it now. This is that one question:


3. Tack, Inc reported a retained earnings balance of $200,000 at December 31, 2008. In June 2009, Tack discovered that merchandise costing $70,000 had not been included in inventory in its 2008 financial statements. Also, a $20,000 prepaid expense was omitted on 12/31/07. Tack has a 20% tax rate. Assuming the correcting journal entry net of tax was recorded, what amount should Tack report as adjusted beginning retained earnings in its statement of retained earnings?

a. $272,000 b. $270,000 c. $160,000 d. $144,000 e. $256,000

Uncle Sam (talk|edits) said:

4 May 2008
So - you're expecting us to give you the answer?

This isn't a homework or test helper site. Ask your instructor.

BEGooding (talk|edits) said:

May 4, 2008
Sound it out! If $70k of inventory had been charged to expense instead of capitalizing it, would that adjustment increase profit or decrease it?

If $20,000 of prepaid expenses had been charged to expense when it should have been capitalized, would that adjustment increase profit or decrease it?

If $90,000 shows up on the balance sheet instead of being charged to expense, at a 20% tax rate, would that increase tax by $18k or decrease it?

See! Even you can speak accounting!

Kwakkles (talk|edits) said:

9 May 2008
Uncle Sam, you don't know how to this problem, do you? I posted this question to test those who come to this forum, testing skills accounting skills you may not have used recently. I don't care if you solved it or even knew how to, as it's just something to think about.

The answer is "E. $256,000." $14,000 would be credit to Income Tax Payable.

BEGooding (talk|edits) said:

May 9, 2008
Watch it Kwakkles. Uncle Sam is a major contributor to the discussions on this forum. We get tired of students that come here under false pretenses to get answers to their homework questions. If you are not a tax and/or accounting professional, your contributions are not welcome here.

Uncle Sam (talk|edits) said:

9 May 2008
Thank you BE - I am pleased when there are others on this board who share my views.

DZCPA (talk|edits) said:

10 May 2008
I agree. Some of the students posting here can be jerks!

Bushmaster (talk|edits) said:

15 May 2008
I disagree with kwakkles answer BTW.

BEGooding (talk|edits) said:

May 15, 2008
So do I...good catch Bush.
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