Witherfork Company Was Recently Acquired by a New Owner Who

question 83

Essay

Witherfork Company was recently acquired by a new owner who has decided to correct the prior accounting records during the current reporting period ending December 31,2014.The accounts have been partially adjusted but have not been closed for 2014.The following items have been discovered:
1.The merchandise inventory at December 31,2013,was overstated by $10,000; the company uses a periodic inventory system.
2.During January 2012,extraordinary repairs on machinery were debited to repair expense; the $15,000 amount should have been debited to machinery,which is being depreciated 15 percent per year on cost,with no residual value.
3.A patent that cost $9,350 has been amortized using the straight-line method for the past 10 years (excluding 2014)over its legal life of 20 years.Management has determined that the economic life will not be more than 15 years from the initial acquisition date.
4.At the end of 2013,sales revenue collected in advance of $3,000 was included in 2013 sales revenue,despite the fact that the amount was earned in 2014.
5.The company paid $8,000 during January 2012 for ordinary repairs on a machine that was acquired during January 2012.The repairs were incorrectly capitalized.The machine has an estimated life of five years and no residual value.The company plans to use straight-line depreciation for this machine.
6.The rate used for bad debts has been 1/2 percent of credit sales,which has proved to be too low.As a result,for 2014 and thereafter,the rate used will be 1 percent of credit sales.The amount of expense per year recorded under the old rate was $800 in 2012 and $1,000 in 2013.The amount for 2014 has not been entered into the accounts since the adjusting entries have not been made.Credit sales for 2014 exceeded 2013 credit sales by 20 percent.
7.During January 2012,a five-year insurance premium of $750 was paid.This amount was debited in full to insurance expense at that time.
8.At the end of 2013,accrued wages payable of $1,800 were not recorded.These wages were first recorded when paid in early 2014.Unpaid wages at the end of 2014 were $2,100.
Required:
Provide the appropriate entry to record any change or correction and give any adjusting entry needed in each instance at the end of 2014.Show computations for entries made,and provide explanations for situations for which no entry is required.