E21.15 (LO 3, 4) (Error Correction Entries) The first audit of the books of Fenimore Company was conducted for the year ended December 31, 2025. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items were:

1. At the beginning of 2023, the company purchased a machine for $510,000 (residual value of $51,000)

that had a useful life of 5 years. The bookkeeper used straight-line depreciation but failed to deduct the residual value in computing the depreciation base for the 3 years.

2. At the end of 2024, the company failed to accrue sales salaries of $45,000.

3. A tax lawsuit that involved the year 2023 was settled late in 2025. It was determined that the company owed an additional $85,000 in taxes related to 2023. The company did not record a liability in 2023 or 2024 because the possibility of loss was considered remote. Fenimore debited the $85,000 to a loss account in 2025 and credited Cash for the same amount.

4. Fenimore Company purchased a copyright from another company early in 2023 for $50,000.

Fenimore had not amortized the copyright because its value had not diminished. The copyright has a useful life at purchase of 20 years.

5. In 2025, the company wrote off $87,000 of inventory considered to be obsolete; this loss was charged directly to Retained Earnings and credited to Inventory Additional adjusting data:
1. A physical count of supplies on hand on December 31, 2025, totaled R1,100.
2. Through oversight, the Salaries and Wages Payable account was not changed during 2025. Accrued salaries and wages on December 31, 2025, amounted to R4,400.
3. The Interest Receivable account was also left unchanged during 2025. Accrued interest on investments amounts to R4,350 on December 31, 2025.
4. The unexpired portions of the insurance policies totaled R65,000 as of December 31, 2025.
5. R24,000 was received on January 1, 2025, for the rent of a building for both 2025 and 2026. The entire amount was credited to rental income.
6. Depreciation for the year on equipment was erroneously recorded as R5,000 rather than the correct figure of R50,000.
7. A further review of depreciation calculations of prior years revealed that depreciation of R7,200 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.
Instructions

a. Assuming that the books have not been closed, what are the adjusting entries necessary at December 31, 2025? (Ignore income tax considerations.)

b. Assuming that the books have been closed, what are the adjusting entries necessary at December 31, 2025? (Ignore income tax considerations.)