Lindy Company's Auditor Discovered Two Errors

question 46

Essay

Lindy Company's auditor discovered two errors. No errors were corrected during 2017. The errors are described as follows:
(1.) Merchandise costing $4,000 was sold to a customer for $9,000 on December 31, 2017, but it was recorded as a sale on January 2, 2018. The merchandise was properly excluded from the 2017 ending inventory. Assume the periodic inventory system is used.
(2.) A machine with a five-year life was purchased on January 1, 2017. The machine cost $20,000 and has no expected salvage value. No depreciation was taken in 2017 or 2018. Assume the straight-line method for depreciation.
Required:
Prepare appropriate journal entries (assume the 2018 books have not been closed). Ignore income taxes.

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Definitions:

Ledger Balance

The total balance in a ledger account at a particular point in time, reflecting all transactions up to that moment.

Available Balance

The amount of funds in a checking or savings account that is accessible for immediate use, taking into account any pending transactions.

Net Collection Float

Net collection float refers to the difference in time between when a check is deposited into a bank account and when the funds are available for use, affecting a company's cash flow.

Net Float

The difference between checks written against and deposited in an account, which affects the balance available in the account.