5. Proline Company has the following errors in 2017, all discovered in 2018 whil

Question

5. Proline Company has the following errors in 2017, all discovered in 2018 while the books for 2018 are still open: Prepare correcting entries Amachine was purchased in January of 2017 costing $45,000. The machine was charged to repairs expense. a. It has a salvage value of $5,000 and a four year life. On January 1,2017 a check was received for $18,000 for three years of rent. rental revenue. b. It was charged to The error was discovered December 31, 2018. On December 31, 2017, Proline failed to record accrued interest revenue of $7,000. When the check was received early in 2018, they recorded it as revenue for 2018. C. d. Inventory purchased in 2017 for 19,000 and correctly recorded was out on consignment and not included in ending inventory for 2017. They noticed this immediately in January 2018 when it was recorded as cost of goods sold on the date of its sale.

Explanation / Answer

Correcting entries that are required to be made are:

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Date Particulars Dr. Cr. A. Machinery a/c dr. 45000 To repairs a/c 45000 (Being machinery capitalised , rectification made) Depreciation a/c dr. 10000 To machinery a/c 10000 (Being machinery depreciated on SLM basis) B. Rental revenue a/c dr 12000 To rent in arrear a/c 12000 (Being rent received on arrear recorded as income now rectified) C. Accrued interest a/c dr 7000 To interest revenue a/c 7000 (Being interest accrued omitted to be recorded) D. Inventory a/c dr. 19000 To goods sent on consignment a/c 19000

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