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P22-3 Error Corrections and Accounting Changes

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P22-3 (Error Corrections and Accounting Changes)

Patricia Voga Company is in the process of adjusting and correcting its books at the end of 2008. In reviewing its records, the following information is compiled.

1. Voga has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows.
December 31, 2007 $4,000
December 31, 2008 $2,500

2. In reviewing the December 31, 2008, inventory, Voga discovered errors in its inventory-taking procedures that have caused inventories for the last 3 years to be incorrect, as follows.
December 31, 2006 Understated $16,000
December 31, 2007 Understated $21,000
December 31, 2008 Overstated $ 6,700

Voga has already made an entry that established the incorrect December 31, 2008, inventory amount.

Instructions:

Prepare the journal entries necessary at December 31, 2008, to record the above corrections and changes. The books are still open for 2008. The income tax rate is 40%. Voga has not yet recorded its 2008 income tax expense and payable amounts so current-year tax effects may be ignored. Prior-year tax effects must be considered in item 4.

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P22-3 (Error Corrections and Accounting Changes) for the Patricia Voga Company

$2.19