Question

You have been assigned to examine the financial statements of Bonita Company for the year ended December 31, 2017. You discover the following situations.

1.		Depreciation of $3,400 for 2017 on delivery vehicles was not recorded.
2.		The physical inventory count on December 31, 2016, improperly excluded merchandise costing $20,000 that had been temporarily stored in a public warehouse. Bonita uses a periodic inventory system.
3.		A collection of $6,000 on account from a customer received on December 31, 2017, was not recorded until January 2, 2018.
4.		In 2017, the company sold for $3,700 fully depreciated equipment that originally cost $23,500. The company credited the proceeds from the sale to the Equipment account.
5.		During November 2017, a competitor company filed a patent-infringement suit against Bonita claiming damages of $213,500. 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 $136,000. The company has not reflected or disclosed this situation in the financial statements.
6.		Bonita 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, 2016		$89,000		$89,000
December 31, 2017		$90,900		$88,900

7.		At December 31, 2017, an analysis of payroll information shows accrued salaries of $12,700. The Salaries and Wages Payable account had a balance of $15,900 at December 31, 2017, which was unchanged from its balance at December 31, 2016.
8.		A large piece of equipment was purchased on January 3, 2017, for $38,400 and was charged to Maintenance and Repairs Expense. The equipment is estimated to have a service life of 8 years and no residual value. Bonita normally uses the straight-line depreciation method for this type of equipment.
9.		A $12,600 insurance premium paid on July 1, 2016, for a policy that expires on June 30, 2019, was charged to insurance expense.
10.		A trademark was acquired at the beginning of 2016 for $53,800. No amortization has been recorded since its acquisition. The maximum allowable amortization period is 10 years.

Assume the trial balance has been prepared but the books have not been closed for 2017. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

		Bonita Company
Sr.	Date	Journal Entry
		Particular	Debit	Credit
1	31/12/2017	Depreciation A/c ………Dr	3400
		To Accumulated Depreciation- Delivery Vehicle		-3400
		(being Depreciation was not recoreded)
2		Opening Inventory A/c……………Dr	20000
		To cost of Good Sold		-20000
		(Being Value of Invetory was missing in last year invetory)
3	31/12/2017	Advance from Customer	6000
		TO Cash/Bank Account		-6000
		(Being Advance Received from Customer is not recored )
4		Equipment A/C ………….Dr
		To Profit/Loss Account
		(being equipment fully depreciated then it is profit for co. bt wrongly credited to Equipment Account)
5	Nov'17	patent-infringement suit A/c          Dr	136000
		TO Contingent Liabillty		-136000
		(Being estimated award to the competitor have to account0
6	31/12/2017	Unrealized Investment Gain/loss A/c…..Dr	2000
		To Investment A/c		-2000
		(Being it is loss on investment which have to recorded)
7	31/12/2017	Salaries and Wages Payable A/c ….dr	3200
		To Accrued salary/salary A/c		-3200
		(Being current year accrual is $ 12700 only but in accrued account showing last year balance means in current year account is credited for last year salary which we have to reverse, either pass 2 entry or in single entry can be done)
8	03/01/2017	equipment A/c ……………Dr	38,400
		To Maintenance and Repairs Expense A/c		-38,400
		(Being Assets wrongly Debited to exp account rectify entry is being passed)
8A	31/12/2017	Depreciation A/c ………Dr	4800
		To Accumulated Depreciation-Equipment		-4800
		(Being assets have 8 yrs life with no residual value & 3 days in starting years is ignore for depreciation)
9	31/12/2017	Prepaid Insurance Ac………….dr	6300
		TO insurance Exp A/c		-6300
		(Being half next year insurance is included in current is reversed)
10	31/12/2017	Opening Profit & Loss A/c ………dr	5380
		Amortization on trademark Ac…..dr	5380
		to Trademark( Intangile Assets) A/c		-10760
		Being have to record for last year & current year )