You have been assigned to examine the financial statements of Zarle Company for the year ended December 31, 2020. You discover the following situations. 1. Depreciation of $3,200 for 2020 on delivery vehicles was not recorded. 2. The physical inventory count on December 31, 2019, improperly excluded merchandise costing $19,000 that had been temporarily stored in a public warehouse. Zarle uses a periodic inventory system. 3. A collection of $5,600 on account from a customer received on December 31, 2020, was not recorded until January 2, 2021. 4. In 2020, the company sold for $3,700 fully depreciated equipment that originally cost $25,000. The company credited the proceeds from the sale to the Equipment account. 5. During November 2020, a competitor company filed a patent-infringement suit against Zarle claiming damages of $220,000. 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 $125,000. The company has not reflected or disclosed this situation in the financial statements. 6. Zarle 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 December 31, 2019 $95,000 $95,000 December 31, 2020 $84,000 $82,000 7. At December 31, 2020, an analysis of payroll information shows accrued salaries of $12,200. The Salaries and Wages Payable account had a balance of $16,000 at December 31, 2020, which was unchanged from its balance at December 31, 2019. 8. A large piece of equipment was purchased on January 3, 2020, for $40,000 and was charged to Maintenance and Repairs Expense. The equipment is estimated to have a service life of 8 years and no residual value. Zarle normally uses the straight-line depreciation method for this type of equipment. 9. A $12,000 insurance premium paid on July 1, 2019, for a policy that expires on June 30, 2022, was charged to insurance expense. 10. A trademark was acquired at the beginning of 2019 for $50,000. No amortization has been recorded since its acquisition. The maximum allowable amortization period is 10 years. Instructions Assume the trial balance has been prepared but the books have not been closed for 2020. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations.)

Question

You have been assigned to examine the financial statements of Zarle Company for the year ended December 31, 2020. You discover the following situations.

  • 1. Depreciation of $3,200 for 2020 on delivery vehicles was not recorded.
  • 2. The physical inventory count on December 31, 2019, improperly excluded merchandise costing $19,000 that had been temporarily stored in a public warehouse. Zarle uses a periodic inventory system.
  • 3. A collection of $5,600 on account from a customer received on December 31, 2020, was not recorded until January 2, 2021.
  • 4. In 2020, the company sold for $3,700 fully depreciated equipment that originally cost $25,000. The company credited the proceeds from the sale to the Equipment account.
  • 5. During November 2020, a competitor company filed a patent-infringement suit against Zarle claiming damages of $220,000. 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 $125,000. The company has not reflected or disclosed this situation in the financial statements.
  • 6. Zarle 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
    December 31, 2019
    $95,000
    $95,000
    December 31, 2020
    $84,000
    $82,000
  • 7. At December 31, 2020, an analysis of payroll information shows accrued salaries of $12,200. The Salaries and Wages Payable account had a balance of $16,000 at December 31, 2020, which was unchanged from its balance at December 31, 2019.
  • 8. A large piece of equipment was purchased on January 3, 2020, for $40,000 and was charged to Maintenance and Repairs Expense. The equipment is estimated to have a service life of 8 years and no residual value. Zarle normally uses the straight-line depreciation method for this type of equipment.
  • 9. A $12,000 insurance premium paid on July 1, 2019, for a policy that expires on June 30, 2022, was charged to insurance expense.
  • 10. A trademark was acquired at the beginning of 2019 for $50,000. No amortization has been recorded since its acquisition. The maximum allowable amortization period is 10 years.

Instructions

Assume the trial balance has been prepared but the books have not been closed for 2020. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations.)

 

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: Irwin, Inc., constructed a machine at a total cost of $35 million. Construction was completed at the...

A: Click to see the answer

Q: Cost-plus, time and materials, ethics. C & S Mechanical sells and services plumbing, heating, an...

A: Cost-plus pricing is a pricing mechanism where a certain % of mark-up value is added to the cost of ...

Q: Journalizing cash and stock dividends Self-Defense Schools, Inc. is authorized to issue 200,000 shar...

A: 1. 

Q: Identify the major disclosures in the auditor's report and understand management's responsibilities ...

A: An audit is an independent examination of the books of the accounts and financial statements whether...

Q: Module 2 Homework T-AccountsWould you please solve the following T-Account problems. Please show the...

A: T-account: The condensed form of a ledger is referred to as T-account. The left-hand side of this ac...

Q: Broussard Company reported net income of $3.5 million in 2020. Depreciation for the year was $520,00...

A: A Cash flow statement is a financial statement that provides the summarised information regarding ca...

Q: DRS Corporation changed the way it depreciates its computers from the sum-of-the-year’s-digits metho...

A: 1.Indicate the type of change and how DRS should report the change. 

Q: The Antonescu Sporting Goods leased equipment from Chapman Industries on January 1, 2016. The agreem...

A: 1. Record journal entries for equipment taken on lease in the books of Antonescu sporting (Lessee) a...

Q: Jackson Health Foods has 8,000 shares of $2 par common stock outstanding, which were issued at $15 p...

A: Depreciation: Depreciation expense is a non-cash expense, which is recorded on the income statement ...

Q: Identify and describe the approach the FASB requires forreporting changes in accounting principles.

A: Accounting method: A set of rules and guidelines through which the organization records and analyzes...

Q: Agee Storage issued 35 million shares of its $1 par common stock at $16 per share several years ago....

A: Retired stock: Buy back of shares from the shareholders by paying cash and obtaining the status of “...

Q: Balanced scorecard. Pineway Electric manufactures electric motors. It competes and plans to grow by ...

A:  

Q: Identify reporting issues related to fraudulent financial reporting and financial forecasts

A: Financial reporting: The financial results of an organization related to a period are declared and r...

Q: Palmer Co. is evaluating the appropriate accounting for the following items. 1. Management has deci...

A:  

Q: Customer profitability. Bracelet Delights is a new company that manufactures custom jewelry. Bracele...

A: Customer Profitability Analysis: Customer profitability analysis is the process of ascertaining the ...

Q: How should consolidated financial statements be reported this year when statements of individual com...

A: Click to see the answer

Q: Discuss briefly the three approaches that have been suggested for reporting changes in accounting pr...

A: Accounting changes are the alterations made to the accounting methods, accounting estimates, account...

Q: At January 1, 2020, Beidler Company reported retained earnings of $2,000,000. In 2020, Beidler disco...

A: The corrected net income is the difference of the net income and the amount of depreciation after ta...

Q: CMOS Chips is hedging a 20-year, $10 million, 7% bond payable with a 20-year interest rate swap and ...

A: 1.Effect of decrease in interest rates on derivative, the hedged bonds, and on the earnings:The deri...

Q: The controller for Lafayette Inc. recently commented, “If I have to disclose our segments individual...

A: Accounting Policy: It refers to the set of rules, regulations, principle and procedure followed by a...

Q: The shareholders’ equity of Core Technologies Company on June 30, 2015, included the following: Comm...

A: Click to see the answer

Q: Balanced scorecard. (R. Kaplan, adapted) Petrocal, Inc., refines gasoline and sells it through its o...

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and s...

Q: Jane Ellerby and Sam Callison are discussing the recent fraud that occurred at LowRental Leasing, In...

A: Fraudulent financial reporting: Intentional misrepresentation of financial statements to mislead the...

Q: Lenexa State Bank has followed the practice of capitalizing certain marketing costs and amortizing t...

A: Accounting Policy: It refers to the set of rules, regulations, principle and procedure followed by a...

Q: During 2018, P started manufacturing and selling a new product with a three-year warranty. Based upo...

A: Expected warranty liability

Q: Anti-trust laws and pricing. Global Airlines is a major low-price airline carrier for both domestic ...

A: Requirement 1:Determine the pricing policies of the company are violating the anti-trust laws or not...

Q: At December 31, 2015, the balance sheet of Meca International included the following shareholders’ e...

A: 1.

Q: Determining paid-in capital for a corporation Aruba Corporation recently organized. The company issu...

A: Capital Stock of CorporationCapital stock is issued by the corporation to raise funds from the inves...

Q: With regard to the correction of accounting errors, what is the difference between U.S. GAAP and IFR...

A: IFRS: International Financial Reporting Standard is abbreviated as IFRS. The IFRS is set up to bring...

Q: A Type A lease agreement calls for annual lease payments of $26,269 over a six-year lease term, with...

A: Finance lease Sales type/Finance lease in parallel type of direct financing whereby the owner (lesso...

Q: Which of the following is not included in continuing operations? Loss on the sale of equipment Gain...

A:  

Q: PARRISH 3-3 POSTING TO SUB LEDGERS Pleae post the following transactions to the appropriate Sub Gene...

A: Prepare sub-general ledgers for the transactions as shown below:

Q: A lease that has a lease term (including any options to terminate or renew that are reasonably certa...

A: Short-term LeaseThis is a type of leasing which has a maximum lease term ranging from 1 year or less...

Q: Considerations other than cost in pricing decisions. Happy Times Hotel operates a 100-room hotel nea...

A: 1.Calculate Happy Times Hotel's operating income or loss for the month.

Q: Cost-hierarchy income statement and allocation of corporate, division, and channel costs to customer...

A: Requirement 1: To compute the operating income for each distribution channel as percentage of revenu...

Q: Alcoa is the world’s leading producer of primary aluminum, fabricated aluminum, and alumina. The fol...

A: Explain the answer for the given requirements.

Q: Jim Sandrolini is an accountant for a local manufacturing company. Jim's good friend, Dan Carruthers...

A: Accounting: Business ethics are business policies and practices which are made to conduct a business...

Q: In 2015, Quapau Products introduced a new line of hot water heaters that carry a one-year warranty a...

A: Change in accounting estimate: A change in accounting estimate is the change in the expected future ...

Q: Strategy, balanced scorecard, merchandising operation. Gianni & Sons buys T-shirts in bulk, appl...

A: 1.The Company’s product strategyThe company’s t-shirt production with different styles tends to make...

Q: Cost-plus, target pricing, working backward. The new CEO of Rusty Manufacturing has asked for a vari...

A: We are authorized to answer one question at a time, since you have not mentioned which question you ...

Q: What approaches have been suggested to overcome the seasonality problem related to interim reporting...

A: Interim report: When the financial results are published for the year shorter than the fiscal year, ...

Q: Strategic analysis of operating income (continuation of 12-21). Refer to Exercise 12-21. Calculate ...

A: 1. 

Q: What is an operating segment, and when can information about two operating segments be aggregated?

A: Click to see the answer

Q: You are the new controller for Engineered Solutions. The company treasurer, Randy Patey, believes th...

A: Income Tax Expenses: The expenses which are related to the taxable income of the individuals and bus...

Q: At January 1, 2016, Café Med leased restaurant equipment from Crescent Corporation under a nine-year...

A: The depreciation expenses for year 1 is calculated by dividing the value of asset with the expected ...