below are three independent and unrelated errors.\n1. on december 31, 2023, wolfe - bache corporation failed…

below are three independent and unrelated errors.\n1. on december 31, 2023, wolfe - bache corporation failed to accrue salaries expense of $2,000. in january 2024, when it paid employees for the december 27 - january 2 workweek, wolfe - bache made the following entry:\ngeneral journal debit credit\nsalaries expense 2,000\ncash 2,000\n2. on the last day of 2023, midwest importers received a $94,000 prepayment from a tenant for 2024 rent of a building. midwest recorded the receipt as rent revenue. the error was discovered midway through 2024.\n3. at the end of 2023, dinkins - lowery corporation failed to accrue interest of $8,400 on a note receivable. at the beginning of 2024, when the company received the cash, it was recorded as interest revenue.\nrequired:\nfor each error:\n1. what would be the effect of each error on the income statement and the balance sheet in the 2023 financial statements?\n2. prepare any journal entries each company should record in 2024 to correct the errors.

below are three independent and unrelated errors.\n1. on december 31, 2023, wolfe - bache corporation failed to accrue salaries expense of $2,000. in january 2024, when it paid employees for the december 27 - january 2 workweek, wolfe - bache made the following entry:\ngeneral journal debit credit\nsalaries expense 2,000\ncash 2,000\n2. on the last day of 2023, midwest importers received a $94,000 prepayment from a tenant for 2024 rent of a building. midwest recorded the receipt as rent revenue. the error was discovered midway through 2024.\n3. at the end of 2023, dinkins - lowery corporation failed to accrue interest of $8,400 on a note receivable. at the beginning of 2024, when the company received the cash, it was recorded as interest revenue.\nrequired:\nfor each error:\n1. what would be the effect of each error on the income statement and the balance sheet in the 2023 financial statements?\n2. prepare any journal entries each company should record in 2024 to correct the errors.

Answer

Explanation:

Step1: Analyze Wolfe - Bache error impact on 2023 statements

In 2023, salaries expense was under - stated by $2,000 as it was not accrued. Net income was over - stated by $2,000. Salaries payable (a liability) was under - stated by $2,000 on the balance sheet.

Step2: Correcting Wolfe - Bache error in 2024

The correct entry to reverse the incorrect 2024 entry and accrue the 2023 expense is: Debit: Retained earnings $2,000 Credit: Salaries expense $2,000

Step3: Analyze Midwest Importers error impact on 2023 statements

In 2023, rent revenue was over - stated by $94,000. Net income was over - stated by $94,000. Unearned rent revenue (a liability) was under - stated by $94,000 on the balance sheet.

Step4: Correcting Midwest Importers error in 2024

Debit: Retained earnings $94,000 Credit: Unearned rent revenue $94,000

Step5: Analyze Dinkins - Lowery error impact on 2023 statements

In 2023, interest revenue was under - stated by $8,400. Net income was under - stated by $8,400. Interest receivable (an asset) was under - stated by $8,400 on the balance sheet.

Step6: Correcting Dinkins - Lowery error in 2024

Debit: Interest revenue $8,400 Credit: Retained earnings $8,400

Wolfe - Bache Corporation:

  1. Effect on 2023 financial statements:
    • Income statement: Net income over - stated by $2,000 due to under - stated salaries expense.
    • Balance sheet: Salaries payable under - stated by $2,000.
  2. 2024 Journal entry: | General Journal | Debit | Credit | | ---- | ---- | ---- | | Retained earnings | 2,000 | | | Salaries expense | | 2,000 |

Midwest Importers:

  1. Effect on 2023 financial statements:
    • Income statement: Net income over - stated by $94,000 due to over - stated rent revenue.
    • Balance sheet: Unearned rent revenue under - stated by $94,000.
  2. 2024 Journal entry: | General Journal | Debit | Credit | | ---- | ---- | ---- | | Retained earnings | 94,000 | | | Unearned rent revenue | | 94,000 |

Dinkins - Lowery Corporation:

  1. Effect on 2023 financial statements:
    • Income statement: Net income under - stated by $8,400 due to under - stated interest revenue.
    • Balance sheet: Interest receivable under - stated by $8,400.
  2. 2024 Journal entry: | General Journal | Debit | Credit | | ---- | ---- | ---- | | Interest revenue | 8,400 | | | Retained earnings | | 8,400 |