You have been assigned to examine the financial statements of Zarle Company for

Question

You have been assigned to examine the financial statements of Zarle Company for the year ended December 31, 2014. You discover the following situations.

Cost

Market

Assume the trial balance has been prepared but the books have not been closed for 2014. 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.)

No.

Account Titles and Explanation

Debit

Credit

1. Depreciation of $4,120 for 2014 on delivery vehicles was not recorded. 2. The physical inventory count on December 31, 2013, improperly excluded merchandise costing $25,100 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, 2014, was not recorded until January 2, 2015. 4. In 2014, the company sold for $3,260 fully depreciated equipment that originally cost $28,500. The company credited the proceeds from the sale to the Equipment account. 5. During November 2014, a competitor company filed a patent-infringement suit against Zarle claiming damages of $207,000. 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 $123,000. The company has not reflected or disclosed this situation in the financial statements. 6. Zarle has a portfolio of trading securities. No entry has been made to adjust to market. Information on cost and market value is as follows.

Explanation / Answer

Journal Entries:

Particulars Debit Credit 1.) Dec 31, 2014 Depreciation 4120          Delivery Vehicles 4120 2.) No Entry 3.) Dec 31, 2014 Cash 5600      Accounts Receivable 5600 Jan 1, 2015 Accounts Receivable 5600       Cash 5600 4.) Dec 31, 2014 Equipment 3260      Profit on Sale of Equipment 3260 5.) Dec 31, 2014 Profit & Loss 123000       Provision for Contingent Liability 123000 6.) No Entry 7.) Dec 31, 2014 Salaries and Wages Payable 4900         Profit and Loss 4900 8.) Dec 31, 2014 Equipment (41680- 5210) 36470        Profit and Loss 36470 9.) Dec 31, 2014 Insurance [{13440 - (13440*6/36)} * 12/30] 4480         Prepaid Insurance 4480 10.) Dec 31, 2014 Profit and loss 11540          Trade mark (57700/10 *2) 11540

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.