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1) The Coco Bongo Show & Disco company has completed its preliminary review of its financial statements. Its three-year comparative Income Statement is listed below. 2020 Revenue 675,000 COGS 405,000 Gross Profit 270,000 Operational Expenses 108,000 Profit (Loss) 162,000 Taxes 40,500 Net Income 121,500 2019 558,000 334,800 223,200 98,000 125,200 31,300 93,900 2018 508,000 304,800 203,200 56,000 147,200 36,800 110,400 Based on the review, three changes have been highlighted and you have been tasked with updating the financial statements. a) A piece of equipment that was purchased at the start of the year in 2019 was capitalized when it should have been expensed. The cost of the equipment was $175,000 and it was assumed at the time that the equipment would have a useful life of 8 years and a scrap value of $8,000. Coco uses the straight-line depreciation method. b) Coco has decided it would make their statements more reflective of their performance if it started accruing for the replacement costs for defective returns. Based on their analysis, an additional 10% of COGS should be accrued for potential defective returns. c) Based on a change to its product mix, Coco has decided to change its revenue recognition criteria. The result of its analysis concludes that Coco's unearned revenue would have increased by $15,000, 10,000, and 5,000 for 2020, 2019, and 2018 respectively. Assume all journal entries have been completed for 2020. Coco's year-end is December 31st. Coco does not use the half-year rule. For simplicity, assume there are no timing differences between tax calculation and payment (no deferred taxes). Cocos started operations in 2018. Required: Prepare all necessary journal entries for the noted items. If necessary, restate the three-year comparative Income Statement

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