Question

You have been assigned to examine the financial statements of Cheyenne Company for the year ended December 31, 2017. You discover the following situations. 4. 1. Depreciation of $3,000 for 2017 on delivery vehicles was not recorded. 2. The physical Inventory count on December 31, 2016, Improperly excluded merchandise costing $17,900 that had been temporarily stored in a public warehouse. Cheyenne uses a periodic inventory system. A collection of $5,400 on account from a customer received on December 31, 2017, was not recorded until January 2, 2018 3. 5. In 2017, the company sold for $3,300 fully depreciated equipment that originally cost $27,300 The company credited the proceeds from the sale to the Equipment account. 4. 5. During November 2017, a competitor company filed a patent-infringement suit against Cheyenne claiming damages of $201,600. 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 $122,500. The company has not reflected or disclosed this situation in the financial statements 6, 7 6. Cheyenne 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 8. December 31, 2016 December 31, 2017 $102,900 $90,800 $102,900 $89,000 At December 31, 2017, an analysis of payroll information shows accrued salaries of $11,900. The Salaries and Wages Payable account had a balance of $15,800 at December 31, 2017, which as unchanged from its balance at December 31, 2016. A large piece of equipment was purchased on January 3, 2017, for $36,200 and was charged to Maintenance and Repairs Expense. The equipment is estimated to have a service life of 8 years and no residual value. Cheyenne normally uses the straight-line depreciation method for this type of equipment. A $12,000 insurance premium paid on July 1, 2016, for a policy that expires on June 30, 2019 was charged to insurance expense 7. 8. 9. 9. 10 10. A trademark was acquired at the beginning of 2016 for $45,500. 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.) No. Account Titles and Explanation Debit Credit

Answer 1

No.	Account Titles and Explanations	Debit (in $)	Credit (in $)	Calculation
1.	Depreciation	3000
	Delivery Vehicles		3000
2.	Closing Stock	17900
	Trading account		17900
3	Bank	5400
	Customer's account		5400
4	Equipment account	3300
	Profit on sale of equipment		3300
5	No entry
6	Fair Value adjustment	1800		($90800-$89000)
	Investment account		1800
7	Salaries and wages account	11900
	Salaries and wages payable		11900
8	Equipment	36200
	Maintenance and repair		36200
	Depreciation	4525		($36200/8)
	Equipment		4525
9	Prepaid Insurance	8000		($12000/36 months*18 m) Remaining months
	Insurance expenses		8000
10	Amortization	9100		($ 45500/10*2) Two years amortization charge
	Trademark account		9100