Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones
Wardell Company purchased a mini computer on January 1, 2014, at a cost of $40,000. The computer has been depreciated using the straight-line method over an estimated five-year useful life with an estimated residual value of $4,000. On January 1, 2016, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $900.
Prepare the appropriate adjusting entry for depreciation in 2016 to reflect the revised estimate.
Prepare the appropriate adjusting entry for depreciation in 2016 to reflect the revised estimate. Assuming that the company uses the sum-of-the-years’-digits method instead of the straight-line method.
Below are three independent and unrelated errors.
On December 31, 2015, Wolfe-Bache Corporation failed to accrue office supplies expense of $1,800. In January 2016, when it received the bill from its supplier, Wolfe-Bache made the following entry:
Office supplies expense1,800 Cash 1,800
On the last day of 2015, Midwest Importers received a $90,000 prepayment from a tenant for 2016 rent of a building. Midwest recorded the receipt as rent revenue.
At the end of 2015, Dinkins-Lowery Corporation failed to accrue interest of $8,000 on a note receivable. At the beginning of 2016, when the company received the cash, it was recorded as interest revenue.
Required:For each error:
What would be the effect of each error on the income statement and the balance sheet in the 2015 financial statements?
Prepare any journal entries each company should record in 2016 to correct the errors.