Question

You have been assigned to examine the financial statements of Carla Company for the year ended December 31, 2017. You discover the following situations.

1.		Depreciation of $3,300 for 2017 on delivery vehicles was not recorded.
2.		The physical inventory count on December 31, 2016, improperly excluded merchandise costing $17,200 that had been temporarily stored in a public warehouse. Carla uses a periodic inventory system.
3.		A collection of $5,900 on account from a customer received on December 31, 2017, was not recorded until January 2, 2018.
4.		In 2017, the company sold for $4,000 fully depreciated equipment that originally cost $24,200. The company credited the proceeds from the sale to the Equipment account.
5.		During November 2017, a competitor company filed a patent-infringement suit against Carla claiming damages of $226,300. The company’s legal counsel has indicated that an unfavorable verdict is probable and a reasonable estimate of the court’s award to the competitor is $134,000. The company has not reflected or disclosed this situation in the financial statements.
6.		Carla has a portfolio of trading investments. No entry has been made to adjust to market. Information on cost and fair value is as follows.

		Cost		Fair Value
December 31, 2016		$99,600		$99,600
December 31, 2017		$89,600		$87,600

7.		At December 31, 2017, an analysis of payroll information shows accrued salaries of $12,300. The Salaries and Wages Payable account had a balance of $17,500 at December 31, 2017, which was unchanged from its balance at December 31, 2016.
8.		A large piece of equipment was purchased on January 3, 2017, for $37,400 and was charged to Maintenance and Repairs Expense. The equipment is estimated to have a service life of 8 years and no residual value. Carla normally uses the straight-line depreciation method for this type of equipment.
9.		A $10,800 insurance premium paid on July 1, 2016, for a policy that expires on June 30, 2019, was charged to insurance expense.
10.		A trademark was acquired at the beginning of 2016 for $54,400. No amortization has been recorded since its acquisition. The maximum allowable amortization period is 10 years.

Assume the trial balance has been prepared but the books have not been closed for 2017. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

There will be 10 entries

Answer 1

Answer:-

No.	Account titles and explanation	Debit	Credit
1.	Depreciation expense	3300
	Accumulated depreciation - equipment		3300
2.	Cost of goods sold	17200
	Retained earnings		17200
3.	Cash	5900
	Accounts receivable		5900
4.	Accumulated depreciation- equipment	24200
	Equipment		20200
	Gain on disposal of plant assets		4000
5.	Lawsuit loss	134000
	Lawsuit liability		134000
6.	Unrealized holding gain or loss – income (89600-87600)	2000
	Fair value adjustment (trading)		2000
7.	Salaries and wages payable (17500-12300)	5200
	Salaries and wages expense		5200
8.	Depreciation expense (37400/8)	4675
	Equipment	37400
	Maintenance and repairs expense		37400
	Accumulated depreciation - equipment		4675
9.	Insurance expense (10800/3)	3600
	Prepaid earnings (10800-3600)	7200
	Retained earnings		10800
10.	Amortization expense (54400/10)	5440
	Retained earnings	5440
	Trademarks		10880

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