Income statement for the year


Use the given information for questions I and II below.

Rice Co. purchased machinery that cost $810,000 on January 4, 2006. The entire cost was recorded as an expense. The machinery has a nine-year life and a $54,000 residual value. The error was discovered on December 20, 2008. Ignore income tax considerations.

Question I. Rice's income statement for the year ended December 31, 2008, should show the cumulative effect of this error in the amount of

a. $726,000.
b. $642,000.
c. $558,000.
d. $0.

Question II. Before the correction was made, and before the books were closed on December 31, 2008, beginning of year 2007 Retained Earnings was understated by

a. $810,000.
b. $726,000.
c. $642,000.
d. $558,000.

Solution Preview :

Prepared by a verified Expert
Accounting Basics: Income statement for the year
Reference No:- TGS01737986

Now Priced at $20 (50% Discount)

Recommended (94%)

Rated (4.6/5)

2015 ┬ęTutorsGlobe All rights reserved. TutorsGlobe Rated 4.8/5 based on 34139 reviews.