Proline Company has the following errors in 2017, all discovered in 2018 while t
ID: 2528958 • Letter: P
Question
Proline Company has the following errors in 2017, all discovered in 2018 while the books for 2018 are still open:
Prepare correcting entries
A machine was purchased in January of 2017 costing $45,000. The machine was charged to repairs expense. 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. It was charged to rental revenue. 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.
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 Entry for Machine Purchased
Account
Debit
Credit
Machine
$45,000
Cash
$45,000
Cash
$45,000
Repair Expense
$45,000
Accumulated Depreciation
$20,000
Machine
$20,000
Correcting Entry for Rent Revenue
Account
Debit
Credit
Unearned Revenue
$6,000
Rent Revenue
$6,000
No entry required for missed accrued interest income as now the revenue has been realized in 2018.
Correcting Entry for inventory out on consignment
Account
Debit
Credit
Account Receivable
$19,000
Sales
$19,000
Correcting Entry for Machine Purchased
Account
Debit
Credit
Machine
$45,000
Cash
$45,000
Cash
$45,000
Repair Expense
$45,000
Accumulated Depreciation
$20,000
Machine
$20,000
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