ABC Inc.is a publicly traded enterprise.The following were observed as at the end of Years 1 and 2
Year-end inventories were understated by $40,000 at the end of Year 1 and overstated by $60,000 at the end of Year 2.
The company took out a 2-year insurance policy on January 1st, Year 1 for $10,000.This entire amount was expensed during Year 1.
Effective January 1st, Year 2, the company decided to move from straight line amortization to declining balance amortization.The company recorded its straight line amount of depreciation expense for year 2 in the amount of $10,000.Declining balance amortization for the year would have been $20,000.
The company is subject to a tax rate of 20%.
Required:
1.For each of Years 1 and 2, prepare the journals entry for each of the above, OR, if no entry is required, state why.Assume that the company's Year 2 books are still open.
2.Repeat part 1 above this time assuming that the books are closed.

Question

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The Answer of ABC Inc.is a publicly traded enterprise.The following were observed as at the end of Years 1 and 2
Year-end inventories were understated by $40,000 at the end of Year 1 and overstated by $60,000 at the end of Year 2.
The company took out a 2-year insurance policy on January 1st, Year 1 for $10,000.This entire amount was expensed during Year 1.
Effective January 1st, Year 2, the company decided to move from straight line amortization to declining balance amortization.The company recorded its straight line amount of depreciation expense for year 2 in the amount of $10,000.Declining balance amortization for the year would have been $20,000.
The company is subject to a tax rate of 20%.
Required:
1.For each of Years 1 and 2, prepare the journals entry for each of the above, OR, if no entry is required, state why.Assume that the company's Year 2 books are still open.
2.Repeat part 1 above this time assuming that the books are closed.

ABC IncIs a Publicly Traded Enterprise