70.2K

Verified Solution

Link Copied!

You have been assigned to examine the financial statements of Jones, Inc. for the year ended December 31, 2018. You discover the following situations in February 2019.

1. Jones, Inc. has not accrued salaries payable at the end of each of the last 2 years, as follows.

December 2016 6000

December 2017 0

December 2018 4,100

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

December 2016 Understated $12,000

December 2017 Understated $14,000

December 2018 No Error $0

3. The company received 24,000 from a customer on a special order on December 22, 2018. It was recorded as a sale on the ay the money was received. The merchandise arrived at Jones, Inc.s of business on January 16, 2019 and shipped it to the customer on January 17, 2019. The inventory was not included in the ending inventory on December 31, 2018.

4. In 2018, the company sold equipment for $3,100 which originally cost $30,000 and had a book value of $4,000. the company recorded the following on the date of sale:

Cash 3,100

Equipment 3,100

5. At December 31, 2018 Jones Inc decided to change the depreciation method on its machinery from double declining balance to straight line. The machinery had an original cost $150,000 when purchased on January 1, 2016. It has 10 year useful life and no salvage value. Depreciation expense has been recorded each year including 2018 using double declining method.

6. In 2017 a competitor company filed a patent-patent-infringement suit against Jones, claiming damages of $150,000. During December 2018 the companys legal counsel indicated that an unfavorable verdict is probably and estimated to be a loss of $135,000. The company has not reflected or disclosed this situation in the financial statements.

7. A $24,000 insurance premium paid of July 1, 2017 for a policy that expires on June 30, 2019, was charged to Prepaid Insurance. The trial balance at 12/31/18 shows the $24,000 in the Prepaid Insurance account.

8. A trademark was acquired at the beginning of 2016 for $40,000. The trademark was expensed when purchased. The trademark should be amortized over 10 years.

9. Commisions on sales have been entered when paid. Commissions payable on December 31 of each year were:

2016 1,400

2017 800

2018 1,120

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

2016 none

2017 none

2018 4,800

11. Reported Net Income is

2016 815,000

2017 760,000

2018 890,000

The inventory was properly included in the inventory on the Balance Sheet at December 31

Instructions

1. Assume the trial balance has been prepared but the books HAVE NOT been closed for 2018. Prepare journal entries showing adjustments that are required. (Ignore income tax)
2. Assume the trial balance has been prepared but the books HAVE been closed for 2018. Prepare journal entries showing the adjustments that are required. (Ignore income tax)

Answer & Explanation Solved by verified expert

See Answer