The 2014 and 2015 financial statements for Angelica Company had the following errors:
•Ending inventory was overstated by $8,000 on December 31, 2014, and overstated by $5,000 on December 31, 2015.
•A five-year insurance policy costing $20,000 was charged to expense when paid in advance on January 1, 2014.
•Depreciation expense of $12,000 on new equipment was omitted from the 2014 financial statements.
•Major improvements to Angelica's manufacturing plant costing $25,000 were charged to expense in 2014 and should have been capitalized. Consequently, annual depreciation expense of $2,500 was omitted from the 2014 and 2015 financial statements.
•Wages of $7,000 earned in 2014 but not paid until 2015 were recorded as an expense in 2015 instead of 2014.
Angelica Company had reported net income of $90,000 in 2014 and $95,000 in 2015.
Required:
Prepare a schedule to determine the correct net income for 2014 and 2015. Begin the schedule with reported net income for 2014 and 2015 and work to a corrected figure. Ignore income taxes.

Question

The 2014 and 2015 financial statements for Angelica Company had the following errors: 
•Ending inventory was overstated by $8,000 on December 31, 2014, and overstated by $5,000 on December 31, 2015.
•A five-year insurance policy costing $20,000 was charged to expense when paid in advance on January 1, 2014.
•Depreciation expense of $12,000 on new equipment was omitted from the 2014 financial statements.
•Major improvements to Angelica's manufacturing plant costing $25,000 were charged to expense in 2014 and should have been capitalized. Consequently, annual depreciation expense of $2,500 was omitted from the 2014 and 2015 financial statements.
•Wages of $7,000 earned in 2014 but not paid until 2015 were recorded as an expense in 2015 instead of 2014.
Angelica Company had reported net income of $90,000 in 2014 and $95,000 in 2015.
Required:
Prepare a schedule to determine the correct net income for 2014 and 2015. Begin the schedule with reported net income for 2014 and 2015 and work to a corrected figure. Ignore income taxes.

Quizplus · Accepted Answer

The Answer of The 2014 and 2015 financial statements for Angelica Company had the following errors: 
•Ending inventory was overstated by $8,000 on December 31, 2014, and overstated by $5,000 on December 31, 2015.
•A five-year insurance policy costing $20,000 was charged to expense when paid in advance on January 1, 2014.
•Depreciation expense of $12,000 on new equipment was omitted from the 2014 financial statements.
•Major improvements to Angelica's manufacturing plant costing $25,000 were charged to expense in 2014 and should have been capitalized. Consequently, annual depreciation expense of $2,500 was omitted from the 2014 and 2015 financial statements.
•Wages of $7,000 earned in 2014 but not paid until 2015 were recorded as an expense in 2015 instead of 2014.
Angelica Company had reported net income of $90,000 in 2014 and $95,000 in 2015.
Required:
Prepare a schedule to determine the correct net income for 2014 and 2015. Begin the schedule with reported net income for 2014 and 2015 and work to a corrected figure. Ignore income taxes.

The 2014 and 2015 Financial Statements for Angelica Company Had