You have been assigned to examine the financial statements of Indigo Company for the year ended...

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Accounting

You have been assigned to examine the financial statements ofIndigo Company for the year ended December 31, 2017. You discoverthe following situations.
1. Depreciation of $3,200 for 2017 on delivery vehicles was notrecorded.
2. The physical inventory count on December 31, 2016, improperlyexcluded merchandise costing $17,800 that had been temporarilystored in a public warehouse. Indigo uses a periodic inventorysystem.
3. A collection of $5,900 on account from a customer received onDecember 31, 2017, was not recorded until January 2, 2018.
4. In 2017, the company sold for $4,000 fully depreciatedequipment that originally cost $26,100. The company credited theproceeds from the sale to the Equipment account.
5. During November 2017, a competitor company filed apatent-infringement suit against Indigo claiming damages of$210,000. The company’s legal counsel has indicated that anunfavorable verdict is probable and a reasonable estimate of thecourt’s award to the competitor is $126,000. The company has notreflected or disclosed this situation in the financialstatements.
6. Indigo has a portfolio of trading investments. No entry hasbeen made to adjust to market. Information on cost and fair valueis as follows.
Cost
Fair Value
December 31, 2016 $99,600 $99,600
December 31, 2017 $79,000 $76,800
7. At December 31, 2017, an analysis of payroll information showsaccrued salaries of $13,200. The Salaries and Wages Payable accounthad a balance of $15,700 at December 31, 2017, which was unchangedfrom its balance at December 31, 2016.
8. A large piece of equipment was purchased on January 3, 2017,for $41,400 and was charged to Maintenance and Repairs Expense. Theequipment is estimated to have a service life of 8 years and noresidual value. Indigo normally uses the straight-line depreciationmethod for this type of equipment.
9. A $12,900 insurance premium paid on July 1, 2016, for a policythat expires on June 30, 2019, was charged to insuranceexpense.
10. A trademark was acquired at the beginning of 2016 for $46,300.No amortization has been recorded since its acquisition. Themaximum allowable amortization period is 10 years.

Assume the trial balance has been prepared but the books have notbeen closed for 2017. Assuming all amounts are material, preparejournal entries showing the adjustments that are required. (Ignoreincome tax considerations.) (Credit account titles areautomatically indented when amount is entered. Do not indentmanually. If no entry is required, select "No Entry" for theaccount titles and enter 0 for the amounts.)

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4.4 Ratings (700 Votes)

Journal Entries S No Particulars Debit Credit 1 Depreciation Expense Ac Dr 3200 To Accumulated Depreciation Ac 3200 2 Cost of Goods Sold 17800 To Retained Earnings Ac 17800 3 Cash Ac Dr 5900 To Accounts Receivable See Answer

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You have been assigned to examine the financial statements ofIndigo Company for the year ended December 31, 2017. You discoverthe following situations.1.Depreciation of $3,200 for 2017 on delivery vehicles was notrecorded.2.The physical inventory count on December 31, 2016, improperlyexcluded merchandise costing $17,800 that had been temporarilystored in a public warehouse. Indigo uses a periodic inventorysystem.3.A collection of $5,900 on account from a customer received onDecember 31, 2017, was not recorded until January 2, 2018.4.In 2017, the company sold for $4,000 fully depreciatedequipment that originally cost $26,100. The company credited theproceeds from the sale to the Equipment account.5.During November 2017, a competitor company filed apatent-infringement suit against Indigo claiming damages of$210,000. The company’s legal counsel has indicated that anunfavorable verdict is probable and a reasonable estimate of thecourt’s award to the competitor is $126,000. The company has notreflected or disclosed this situation in the financialstatements.6.Indigo has a portfolio of trading investments. No entry hasbeen made to adjust to market. Information on cost and fair valueis as follows.CostFair ValueDecember 31, 2016$99,600$99,600December 31, 2017$79,000$76,8007.At December 31, 2017, an analysis of payroll information showsaccrued salaries of $13,200. The Salaries and Wages Payable accounthad a balance of $15,700 at December 31, 2017, which was unchangedfrom its balance at December 31, 2016.8.A large piece of equipment was purchased on January 3, 2017,for $41,400 and was charged to Maintenance and Repairs Expense. Theequipment is estimated to have a service life of 8 years and noresidual value. Indigo normally uses the straight-line depreciationmethod for this type of equipment.9.A $12,900 insurance premium paid on July 1, 2016, for a policythat expires on June 30, 2019, was charged to insuranceexpense.10.A trademark was acquired at the beginning of 2016 for $46,300.No amortization has been recorded since its acquisition. Themaximum allowable amortization period is 10 years.Assume the trial balance has been prepared but the books have notbeen closed for 2017. Assuming all amounts are material, preparejournal entries showing the adjustments that are required. (Ignoreincome tax considerations.) (Credit account titles areautomatically indented when amount is entered. Do not indentmanually. If no entry is required, select "No Entry" for theaccount titles and enter 0 for the amounts.)

1.		Depreciation of $3,200 for 2017 on delivery vehicles was notrecorded.
2.		The physical inventory count on December 31, 2016, improperlyexcluded merchandise costing $17,800 that had been temporarilystored in a public warehouse. Indigo uses a periodic inventorysystem.
3.		A collection of $5,900 on account from a customer received onDecember 31, 2017, was not recorded until January 2, 2018.
4.		In 2017, the company sold for $4,000 fully depreciatedequipment that originally cost $26,100. The company credited theproceeds from the sale to the Equipment account.
5.		During November 2017, a competitor company filed apatent-infringement suit against Indigo claiming damages of$210,000. The company’s legal counsel has indicated that anunfavorable verdict is probable and a reasonable estimate of thecourt’s award to the competitor is $126,000. The company has notreflected or disclosed this situation in the financialstatements.
6.		Indigo has a portfolio of trading investments. No entry hasbeen made to adjust to market. Information on cost and fair valueis as follows.

	Cost	Fair Value
December 31, 2016	$99,600	$99,600
December 31, 2017	$79,000	$76,800

7.		At December 31, 2017, an analysis of payroll information showsaccrued salaries of $13,200. The Salaries and Wages Payable accounthad a balance of $15,700 at December 31, 2017, which was unchangedfrom its balance at December 31, 2016.
8.		A large piece of equipment was purchased on January 3, 2017,for $41,400 and was charged to Maintenance and Repairs Expense. Theequipment is estimated to have a service life of 8 years and noresidual value. Indigo normally uses the straight-line depreciationmethod for this type of equipment.
9.		A $12,900 insurance premium paid on July 1, 2016, for a policythat expires on June 30, 2019, was charged to insuranceexpense.
10.		A trademark was acquired at the beginning of 2016 for $46,300.No amortization has been recorded since its acquisition. Themaximum allowable amortization period is 10 years.