During 2021, the Following Independent Events Occurred at Sarajavo Corporation

question 15

Essay

During 2021, the following independent events occurred at Sarajavo Corporation on the dates indicated:
1. Sales were understated by $ 145,000 for 2020. This error was discovered on January 20, 2021, when trying to reconcile the accounts receivable balance.
2. On March 31, 2021, Sarajavo Corporation discovered that Depreciation Expense on factory equipment for the year ended December 31, 2020, had been recorded twice, for a total amount of $ 60,000 instead of the correct amount of $ 30,000.
3. On June 30, 2021, Sarajavo Corporation discovered that its 2020 cost of goods sold was overstated by $ 14,500 as a result in counting inventory.
Assume Sarajavo has a 20% income tax rate.
Instructions
Prepare any journal entries required as a result of the information provided.

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Definitions:

Prepaid Expenses

Expenses paid in advance for goods or services, which are recognized as assets until they are consumed or the term of use expires.

Bonds Issued

Long-term securities issued by corporations or governments to raise capital, with a promise to pay back with interest.

Financing Activities

Transactions that result in changes in the size and composition of the equity capital or borrowings of a company.

Cash Flow

The net amount of cash and cash equivalents being transferred into and out of a business.