You have been assigned to examine the financial statements of Buffalo Company for the year ended December 31, 2020. You discover the following situations. 1. Depreciation of $3,200 for 2014 on delivery vehicles was not recorded.
2. The physical inventory count on December 31, 2013, improperly excluded merchandise costing $19,000 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 $3,700 fully depreciated equipment that originally cost $25,000. The company credited 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 $220,000. 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 $125,000. The company has not reflected or disclosed this situation in the financial statement.
6. Zarle has a portfolio of trading securities. No entry has been made to adjust the market. Information on cost and fair value is as follows. December 31, 2013 Cost $95,000 Fair Value $ 95,000 December 31, 2014 Cost $84,000 Fair Value $82,000.
7. At December 31, 2014, an analysis of payroll information shows accrued salaries of $12,200. The Salaries and Wages Payable account had a balance of $16,000 at December 31, 2014, which was unchanged from its balance December 31, 2013.
8. A large piece of equipment was purchased on January 3, 2014 for $40,000 and was charged to maintenance and repairs expense. The equipment is estimated to have a service life of 8 years and no residual value. Zarle normally uses the straight-line depreciation method for this type of equipment.
9. A $12,000 insurance premium paid on July 1, 2013, for a policy that expires on June 30, 2016, was charged to insurance expense.
10. A trademark was acquired at the beginning of 2013 for $50,000. No amortization has been recorded since its acquisition. The maximum allowable amortization period is 10 years. Instructions:
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.