| Course | AC302 Intermediate Accounting III |
|---|---|
| Unit | Unit 8 |
| Paper type | Error correction entries |
| Length | About 580 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Accounting |
| Updated | October 2026 |
Free sample paper for AC302 Unit 8
A $360,000 Router Booked as Repairs: A Unit 8 Error Correction Entries Set for a Furniture Manufacturer
[Student Name]
Purdue University Global
AC302: Intermediate Accounting III
Unit 8 Error Correction Entries
[Instructor Name]
[Date]
Tidewell Furniture Works and every amount are composite; the standard, staff bulletin and textbook cited are real.
Facts
The router went into service on January 2, 2024, with a six-year life and no salvage value, so correct straight-line depreciation is $60,000 a year. The same error was made on the tax returns, which Tidewell will amend, and its tax rate is 25 percent. The 2024 and 2025 statements have been issued; the 2026 books are still open.
Effects Schedule
1. 2024: expense recorded, $360,000 of repairs; correct expense, $60,000 of depreciation. Pretax income understated by $300,000.
2. 2025: expense recorded, none; correct expense, $60,000 of depreciation. Pretax income overstated by $60,000.
3. Cumulative to January 1, 2026: pretax income understated by $240,000. Tax effect at 25 percent, $60,000. After-tax effect on retained earnings, $180,000.
4. Balance sheet at January 1, 2026: equipment understated by $360,000; accumulated depreciation understated by $120,000; income taxes payable understated by $60,000.
Correcting Entry, Dated in 2026
Equipment, debit $360,000; Accumulated Depreciation, credit $120,000; Income Taxes Payable, credit $60,000; Retained Earnings, credit $180,000.
2026 depreciation is then recorded in the ordinary way: Depreciation Expense, debit $60,000; Accumulated Depreciation, credit $60,000.
The correction goes to opening retained earnings and never through 2026 income, because the error belongs to periods already reported; running it through this year's results would misstate 2026 by the very amount that made 2024 wrong.
Restated 2025 Column
Because 2025 is presented as a comparative year, it is restated rather than left as originally issued (Financial Accounting Standards Board, 2005).
1. Depreciation expense: as reported $1,140,000; restated $1,200,000.
2. Income tax expense: as reported $412,000; restated $397,000.
3. Net income: as reported $1,236,000; restated $1,191,000.
4. Equipment, net: as reported $4,820,000; restated $5,060,000, adding $360,000 of cost less $120,000 of accumulated depreciation.
5. Income taxes payable: as reported $96,000; restated $156,000.
6. Retained earnings, December 31, 2025: as reported $6,410,000; restated $6,590,000.
The opening 2025 retained earnings balance in the statement of stockholders' equity rises by $225,000, the after-tax effect of the 2024 understatement. The restated net income for 2025 then lowers the closing balance by $45,000 relative to the original, leaving the net increase of $180,000.
Draft Note
Note 14, Correction of an Error in Previously Issued Financial Statements. In January 2024 the Company acquired a CNC router for $360,000 and recorded the purchase as repairs expense. The router should have been capitalized and depreciated over six years. The accompanying 2025 statements have been restated. The correction increased equipment, net, at December 31, 2025, by $240,000 and income taxes payable by $60,000; decreased 2025 net income by $45,000, or $0.05 per share; and increased retained earnings at January 1, 2025, by $225,000.
Materiality and Why Restatement, Not a Current-Year Fix
A $45,000 change to 2025 net income is under 4 percent, and Tidewell's auditor asked whether a correction in 2026 alone would do. The SEC staff's guidance, which many private-company auditors also follow, asks preparers to judge an error both by its effect on the year it arose and by the effect of correcting it now (Securities and Exchange Commission, 2006). Correcting all $180,000 through 2026 income would be material to 2026, so a restatement of the comparative year is the right approach (Kieso et al., 2019).
References
Financial Accounting Standards Board. (2005). Accounting changes and error corrections (Statement of Financial Accounting Standards No. 154). https://www.fasb.org
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.
Securities and Exchange Commission. (2006). Considering the effects of prior year misstatements when quantifying misstatements in current year financial statements (Staff Accounting Bulletin No. 108). https://www.sec.gov
The Purdue Global AC302 Unit 8 instructions
The eighth AC302 unit gives an error discovered after one or more years have closed and asks for its correction. Start by stating the facts that matter: what was recorded, what should have been, the dates, the asset life and the tax rate. Build an effects schedule year by year, pretax and after tax, and cumulate it to the start of the current year. Record one correcting entry dated in the current year, sending the cumulative after-tax effect to retained earnings. Then record the current year's ordinary entries. Restate any prior year presented as a comparative, line by line. Adjust opening retained earnings in the equity statement. Draft the note the standard requires. Some sections also ask whether the error is material enough to restate. A clear schedule makes the rest straightforward. Cite SFAS 154 and the textbook in APA 7.
Inside the AC302 Unit 8 example
The sample states the router's January 2024 purchase, six-year life, 25 percent tax rate and the matching tax return error. A four-line effects schedule shows the 2024 understatement, the 2025 overstatement, the cumulative $240,000 pretax and $180,000 after-tax effect, and the balance sheet amounts at January 1, 2026. The correcting entry follows, then ordinary 2026 depreciation of $60,000. The highlighted sentence explains why the correction bypasses 2026 income. A restated 2025 column lists six lines with original and restated amounts, from depreciation of $1,200,000 to retained earnings of $6,590,000, and a paragraph traces the $225,000 opening adjustment. A draft Note 14 gives the nature of the error and its effects, including $0.05 per share. The last section uses SEC guidance on misstatements to defend restatement.
Reading the AC302 Unit 8 grading rubric
The AC302 grader checks the effects schedule first, because the entry and restatement depend on it. Each year's pretax and after-tax effect must be correct and the cumulative figure must follow. The correcting entry must go to retained earnings, not current income, and include the tax effect. Current-year depreciation is a separate point. The restated comparative year is graded line by line. Students who also move the 2025 opening retained earnings by $225,000 in the equity statement pick up a point many miss. The draft note must describe the error and its effect on each affected line and per share. A materiality discussion shows judgment. Original and restated figures side by side make checking easy. Purdue Global instructors in this course expect SFAS 154, and SAB 108 where the materiality point is argued, listed in APA 7.
AC302 Unit 8 help from the desk
Error correction problems often fail on the cumulative effect: students correct only the original year and forget that the next year's missing depreciation partly reversed it. Others run the correction through current income as an expense or gain. The tax effect is left out, so retained earnings is credited pretax. Accumulated depreciation is recorded for one year instead of two. The comparative year is not restated, or only net income is changed while the balance sheet stays the same. The opening retained earnings of the comparative year is not adjusted. Notes are vague about amounts. Errors are confused with changes in estimate, which are applied prospectively. If your problem involves inventory errors that reverse on their own or an accrual missed for several years, our writers can build the schedule and entries.
Get an AC302 Unit 8 example written to your instructions
What the Unit 8 problem says about the mistake, when it happened, the tax rate, which years the statements present and when the error came to light is everything the entry needs; forward it with the rubric. The schedule, entry, restated column and note return in 24-48h, and a first custom sample is free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC302 Unit 8 questions, answered
Why is the credit to retained earnings 180,000 and not 225,000?
Because the entry is made in 2026, and by then two years have passed. The 225,000 is the net effect at the start of 2025: 300,000 of pretax understatement less 25 percent tax. During 2025 no depreciation was recorded, so a further 60,000 pretax, 45,000 net, reversed part of it. At the start of 2026 the cumulative net effect is 180,000, which is what the entry corrects.
What if the error had been found before the 2025 books were closed?
Then the 2024 effect would still go to opening retained earnings as a prior period adjustment, but the missing 2025 depreciation of 60,000 could be recorded as a 2025 expense in the ordinary way, since that year's books would still be open. The entry changes shape while the restated statements end up identical. AC302 problems often vary this timing to test whether the entry follows the closing date.
How does a change in accounting principle differ?
A change in principle, such as moving from one permitted inventory method to another, is also applied retrospectively, restating the prior periods presented as if the new method had always applied. The difference is the reason: a principle change is a choice justified as preferable, while an error was never acceptable. The disclosures differ accordingly, and many AC302 problems include one of each to test the sorting.
Where can I find a free AC302 Unit 8 sample paper?
This page gives a complete AC302 Unit 8 error correction set for a composite furniture maker's expensed router, with a year-by-year effects schedule, the correcting entry, a restated comparative year, a draft note and APA 7 references.
Why is 2025 restated in the AC302 Unit 8 sample instead of fixed in 2026?
2025 is presented beside 2026, and correcting the whole $180,000 through 2026 income would misstate that year. Restating the comparative column puts each year's depreciation where it belongs.