Question

(check figure: on GAAP entry - debit to retained earnings = 5,992) GAAP Sales 1,200,000 COGS 825,000 Gross Margin 375,000 Operating Expenses 245,000 Other IncomelExpens (2,450) Net Income b4 Taxes 127,550 Income Tax Expense Net Income 127,550 Tax 1,200,000 825,000 375,000 260,000 (2,450) 112,550 112,550 There were material errors that were found after the books that had been closed and need to be corrected. Depreciation on equipment bought in September 1 costing $27,000 had not been recorded. GAAP depreciation = 3,600 and Tax depreciation = 3,858 should have been recorded Supply usage had not been recorded. The supplies on hand at the end of the year were $7,200 on the books, but the supplies ending amount after the physcial count was $1,300 A computer purchased for $525 had been capitalized - it should have been expensed. The GAAP depreciaion recorded was $42 and the tax depreciation recorded was $52 Create the correction entry for GAAP as of January 1 and create the amended tax income statement after the corrections have been recorded 2. When reconciling the bank statement in January, 2006, a check written for $256.65 for mobile phone service on 12/15/05 was posted on the books as $256.56. The entry error must be corrected to get the bank statement to balance. Create the journal entry in 2006 to correct this error for both GAAP and tax books. 3. Company buys a tractor for $14,215 with no salvage life using SL method for 7 years. After the 4th year, it is decided that the tractor should have a $1,500 salvage value. Determine the yearly depreciation for the life of the tractor.

Answer 1

please find attachment

2,45,000 TAX 1200000 0 SALES COGS 8,25.000 LESS SUPPLIES IN HAND CACTUAL VALUE 1,300 823700 GROSS MARGIN 376 300 OPERATING EXPENSES - (LESS) OTHER INCOME (ADD) (2450) OTHER EXPENSES DE PRECIATION ON EQUIPMENT 3600 (LESS) (DEPRECIATION ON COMPUTER 483 (525-42) NET INCOME BEFORE TAXES 129667 INCOME TAX EXPENSES NET INCOME 129667 4083 DR CR 2006 JAN MOBILE PHONE SERVICE A/C DR 0.09 TO CASH CBEING THE ERROR IN BOOKS RECTIFIED 0.09 1 St YEAR DEPRECIATION AIC DEBIT 2031 TO ASSET C TRACTOR) 203) OND YEAR DE PRECIATION AC DEBIT 2031 TO ASSET (TRACTOR) 2031 3RD YEAR DEPRECIATION AIL DEBIT 2031 TO ASSET LTRACTOR) 2031 4 Th YEAR DEPRECIATION All DEBIT 2031 TO ASSET (TRACTOR 2031 CÀLCULA TION OF DE PREGIATLON VALUE (PURCH COST) - NO OF YEARS = 14215 : 7 = 2031 CROUNDED OFF) YEAR DE PRECIATION ALL DEBIT 1530 TO ASSET (TRACTOR 1530 6TH YEAR DEPRECIATION ALL DEBIT 1530 TO ASSET (TRACTOR) 1530 7TH YEAR DEPRECIATION AlC DEBIT 1530 TO ASSET (TRACTOR 1530 CALCULATION OF DEPRECIATION (14215- 8124-1500 = 4591 4591 4 = 1530.