Any evidence of collaboration with other students in the class will result In a

Question

Any evidence of collaboration with other students in the class will result In a grade of zero on the assignment for all the perpetrators. The solution must be entered In this area. Please do not send the solution by email. In order to avoid any last minute technical emergencies, please try to submit the solution veil before the deadline. Critical Thinking Skills: The books of Adelphi Corporation are still open for the year ended December 31. 2015. In examining the books, the auditor found that certain Items had been overlooked or Incorrectly handled In the 3-year period 2013-201 S. These Items are: (Ignoring income tax) Adelphi Corp. recorded goodwill of $400,000 from a business acquisition In 2014. The goodwill is being amortized over 40 years starting with 2014. [Note, if you remember from ACC201. goodwill is not to be amortized; instead it is assessed for impairment in value on annual basis. There is no indication of an Impairment since the acquisition of the business] The company did not record the estimated warranty expense of $66,000 at the end of 2015.A patent Infringement lawsuit filed against the company in &13 was settled late In 2015 after it was determined that the company owed $100,000. The company had recorded a liability in 2014 based on its assessment at that time, and had debited Litigation Expense and credited Litigation Liability for $50,000. The actual payment in 2015 was debited to Litigation Liability for $100,000. On 1/1/2014, the company purchased equipment for $220,000 (salvage value of $20,000) that had a useful life of 5 years. The bookkeeper did not deduct the salvage value from the cost before applying the straight line depreciation method in each year. In 2015, the company wrote off $100,000 of accounts receivable believed to be uncollectible: this loss was debited directly to Retained Earnings. The company uses the allowance method for recording doubtful debts. Please provide the journal entries to correct each of the above errors.

Explanation / Answer

Adelphi Corp. JOURNAL As on December 31, 2015 Date Account Tiltles and Explanation Debit ($) Credit ($) 1) Profit & Loss a/c …………………Dr       2,00,000 (400,000*2/40)                   TO Goodwill a/c       2,00,000 (Being the impairment of goodwill for the year 2014 & 2015. 2) Warranty expenses a/c …………….Dr           66,000                   To Outstanding expenses a/c           66,000 (Being the estimated warranty expenses) 3) Litigation expenses a/c ………Dr           50,000                       To Litigation liability a/c           50,000 (Being the additional provision for litigaion expenses booked) 4) Depreciation a/c ………………..Dr           36,000 ((220,000-20000)/5*2 - (220,000/5)                       To Accumulated depreciaion a/c           36,000 (Being the depreciaton for the year 2015 & adjustment of excess depreciation charged on 2014) 5) Provision for doubtfull debts a/c …………..Dr       1,00,000                          To Retained earnings a/c       1,00,000 (Being provision for doubtfull debts )

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