A partial trial balance of Lindy Corporation at December 31, 2014, follows:
Dr. .......................Cr.
Supplies ................................. $ 4,100
Salaries and wages payable ...................................... $ 3,900
Interest receivable ........................5,500
Prepaid insurance ..................... 93,000
Unearned rent revenue ............................................ -0-
Interest payable ....................................................15,000
Additional adjusting data:
1. A physical count of supplies on hand on December 31, 2014, totalled $2,100. Through an oversight, the Salaries and Wages Payable account was not changed during 2014. Unpaid salaries and wages on December 31, 2014, amounted to $5,100.
2. The Interest Receivable account was also left unchanged during 2014. Interest earned but not received on investments amounted to $4,750 on December 31, 2014.
3. The unexpired portions of the insurance policies totalled $65,000 as at December 31, 2014.
4. A cheque for $44,000 was received on January 1, 2014, for the rent of a building for both 2014 and 2015. The entire amount was credited to rental income.
5. Depreciation for the year was recorded in error as $5,350 rather than the correct figure of $53,500.
6. A further review of prior years' depreciation calculations revealed that depreciation of $13,500 had not been recorded. It was decided that this oversight should be corrected by adjusting prior years' income.
Assume that Lindy applies IFRS.
Instructions
(a) Assuming that the books have not been closed, what adjusting entries are necessary at December 31, 2014? Ignore income tax considerations.
(b) Assuming that the books have been closed, what adjusting entries are necessary at December 31, 2014? Ignore income tax considerations.
(c) Discuss the nature of the adjustments that are needed and how the situations could have occurred. Are they all accounting errors, or are they part of the normal accounting cycle? How should management present the adjustments for these items on its financial statements and in the notes?