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16 July, 21:47

Buffalo Corporation has used the accrual basis of accounting for several years. A review of the records, however, indicates that some expenses and revenues have been handled on a cash basis because of errors made by an inexperienced bookkeeper. Income statements prepared by the bookkeeper reported $27,700 net income for 2019 and $34,300 net income for 2020. Further examination of the records reveals that the following items were handled improperly.

Rent was received from a tenant in December 2016. The amount, $1,030, was recorded as revenue at that time even though the rental pertained to 2017.

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  1. 16 July, 22:11
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    Corrected net income for 2019 = 23,750.

    Corrected net income for 2020 = $36,210

    Explanation:

    For the year 2019, below are the particulars and the amount recorded for each particulars.

    Net income = > $27,700.

    Rent received in 2019 = > - $1,030.

    Salaries and Wages not accrued, 12/31/18 = > - $1190.

    Salaries and Wages not accrued, 12/31/19 = > - $1290.

    Inventory of Supplies, 12/31/18 = - 1430.

    Inventory of Supplies, 12/31/19 = 990

    Corrected net income = 23,750.

    For the year 2020, below are the particulars and the amount recorded for each particulars.

    Net income = > $34,300.

    Rent received in 2020 = > $1,030.

    Salaries and Wages not accrued, 12/31/2020 = > - $ 870

    Salaries and Wages not accrued, 12/31/19 = > $1290.

    Inventory of Supplies, 12/31/19 = - 990.

    Inventory of Supplies, 12/31/20 = 1450.

    Corrected net income = $36,210
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