Question

1. You have been assigned to examine the financial statements of Jackson Inc. for the year ended December 31, 2019. You discover the following situations in February 2020.

Jackson Inc. has not accrued salaries payable at the end of each of the last 3 years, as follows. Salaries are expensed when paid.

December 2017 $5,500 December 2018 $7,800 December 2019 $0

2) The physical inventory count has been incorrectly counted resulted in the following errors.

December 2017    Overstated $20,000

December 2018    Understated $4,200

December 2019    Overstated $6,000

3) Jackson Inc. purchased $4,500 of supplies on Dec. 19, 2019 recording a debit to supplies and a credit to accounts payable. The bill was paid on Dec. 26, 2019, but not recorded until January 2, 2020.

4) In 2019, the company sold for $3,500 equipment that had a book value of $2,000 and originally cost $30,000. The company credited the proceeds from the sale to the equipment account. The company made the following entry:

Cash    3,500

Equipment    3,500

5) At Dec.31, 2019 Jackson Inc. decided to change the depreciation method on its machinery from double-declining-balance to straight-line. The machinery had an original cost of $100,000 when purchases on July 1, 2017. It has a 10-year useful life and no salvage value. Depreciation expense recorded prior to 2019 under the double-declining-balance method was $28,000. Jackson, Inc. has already recorded 2019 depreciation expense of $14,400 using the double-declining-balance.

6) During November 2019, a competitor company filed a patent-infringement suit against Jackson Inc. claiming damages of $150,000. 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 $70,000. The company has not reflected or disclosed this situation in the financial statements.

7) A $24,000 insurance premium paid on June 1, 2019 for a policy that expires on May 31, 2020, was charged to insurance expense.

8) A Trademark was acquired at the beginning of 2018 for $50,000. No amortization has been recorded since its acquisition. The maximum allowable amortization period is 10 years.

9) Commissions on sales have been entered when paid. Commissions payable on Dec 31 of each year were as follows:

2017 $1,400    2018    $800 2019 $ 620)

10) A relatively small number of machines have been shipped on consignment. These transactions have been recorded as ordinary sales and billed as such. On December 31 of each years, machines billed and in the hands of consignees amounted to:

2017    $6,500    2018    $0 2019    $10,500

Assume the goods were sold the following year and that the Gross Profit rate is 20% and the inventory at the end of each year included the machines which were at on consignment at December 31.

11) Reported Net Income is:

2017 $560,000 2018 $580,000    2019 $620,000

INSTRUCTIONS

A) Assuming the trial balance has been prepared but the books HAVE NOT BEEN CLOSED for 2019. Assume all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations)

B) Assuming the trial balance has been prepared but the books HAVE BEEN CLOSED for 2019. Assume all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations)

C) Prepare a schedule correcting Net Incomes for 2017, 2018, 2019 assuming the books HAVE NOT been closed for 2019.

Answer 1

F 3 NO A:Books have not been closed Account Name Accountive DR ICR B books have been closed Account type Amount Account Name 4500 4500 de accouP/L corect entry 3500 corect entry Cash BS Equipment Gain from sale of FA PL -1500 Comection entry Equipment Gain from sale of FA PL 1500 -1500 Comection entry Equipment PIL Suspense 2019 Patent claim 70000 PIL Accoun DR Claims for damages BS 70000 70000 PAL suspense accu PL Account Claims for damages BS 2019 Insurance Wrong entry entered Wrong entry entered Insurance Payblavender 24000 24000 Insurance Payble/vendor BS 24000 corect entry comect entry D Prepaid account Payblavender BS OS R CR 24000 24000 Prepaid account Payblevendor 24000 24000 Comection entry Comection entry gs 10000 Prepaid Prepaid Insurance PIL -10000 PAL Suspense 10000 -10000 PL -5000 PL Sheet1 Sheet3 Sheet2 + Ready Assume all amounts are material, prepare journal entries showing the adjustments that are @ 0 - - + 61% Pored orientovaneidation

IKI w 32% O E Mon 3:46 AM Q Search Sheet Q + Share - Σ ' Α Excel File Edit View Insert Format Tools Data Window Help o. À si 5: Book1 Home Insert Draw Page Layout Formulas Data Review View Calibri (Body) - 12 A A Wrap Text General Paste BI U L A EE333 Merge & Center % E22 . X fx A B C D E F G H I Insert * Delete . ) Conditional Format Formatting as Table Cell Styles | Format Sort & Filter J MLN0PQ Assumption: changes without retrospective effect 0.5 1 1 1 20% 20% Depreciation Cost Depreciation 2017 100000 10000 20%/2 2018 90000 18000 2019 72000 14400 2020 57600 7680 2021 57600 7680 2022 57600 7680 2023 57600 7680 2024 57600 7680 2025 57600 7680 2026 57600 7680 2027 57600 3840 100000 0.5 Sheet1 Sheet3 Sheet2 + Ready billed and in the hands of consignees amounted to: @ - + 100%

2019 620000 2017 560000 -5500 -20000 2018 580000 -7800 4200 3 Year 4 Net Income 5 Salary 6 Inventory Count 7 supplies 8 Gain from Equitment 9 Claim petent 10 Prepain insurance 11 Trade mark - Amor 12 Commision -6000 -4500 2000 - 70000 10000 -5000 620 -5000 -800 -1400 15 Net Income after adjustment 533100 570600 547120