You have been assigned to examine the financial statements of
Picard Corporation for the year ended December 31, 2020, as
prepared following IFRS. Picard uses a periodic inventory system.
You discover the following situations:
1. |
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The physical inventory count on December 31, 2019, improperly
excluded merchandise costing $26,700 that had been temporarily
stored in a public warehouse. |
2. |
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The physical inventory count on December 31, 2020, improperly
included merchandise with a cost of $15,650 that had been recorded
as a sale on December 27, 2020, and was being held for the customer
to pick up on January 4, 2021. |
3. |
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A collection of $7,200 on account from a customer received on
December 31, 2020, was not recorded in 2020. |
4. |
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Depreciation of $5,300 for 2020 on delivery trucks was not
recorded. |
5. |
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In 2020, the company received $3,900 on a sale of fully
depreciated equipment that originally cost $25,700. The company
credited the proceeds from the sale to the Equipment account. |
6. |
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During November 2020, a competitor company filed a patent
infringement suit against Picard, claiming damages of $629,000.
Picard’s legal counsel has indicated that an unfavourable verdict
is probable and a reasonable estimate of the court’s award to the
competitor is $471,000. Picard has not reflected or disclosed this
situation in the financial statements. |
7. |
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A large piece of equipment was purchased on January 3, 2020,
for $41,400 and was charged in error to Repairs and Maintenance
Expense. The equipment is estimated to have a service life of eight
years and no residual value. Picard normally uses the straight-line
depreciation method for this type of equipment. |
8. |
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Picard has a portfolio of temporary trading investments
reported at fair value. No adjusting entry has been made yet in
2020. Information on carrying amount and fair value is as
follows: |
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Carrying Amount |
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Fair Value |
Dec. 31, 2019 |
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$98,000 |
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$98,000 |
Dec. 31, 2020 |
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$97,000 |
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$82,600 |
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9. |
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At December 31, 2020, an analysis of payroll information showed
accrued salaries of $12,700. The Salaries and Wages Payable account
had a balance of $17,900 at December 31, 2020, which was unchanged
from its balance at December 31, 2019. |
10. |
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An $21,000 insurance premium paid on July 1, 2019, for a policy
that expires on June 30, 2022 was charged to insurance
expense. |
11. |
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A trademark was acquired at the beginning of 2019 for $39,840.
Through an oversight, no amortization has been recorded since its
acquisition. Picard expected the trademark to benefit the company
for a total of approximately 12 years with no residual value. |
QUESTION:
Assume that the trial balance has been prepared, the ending
inventory has not yet been recorded, and the books have not been
closed for 2020. Assuming also that all amounts are material,
prepare journal entries showing the adjustments that are required.
Ignore income tax considerations.
No.
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Account Titles and Explanation
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Debit
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Credit
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