1. Rent expense was inappropriately recorded as a short-term lease (debit to rent expense and credit to cash). The lease was signed at the beginning of the current year and requires annual payments made at the beginning of each period. The purchase price at the end of the lease period under the Bargain Purchase Option is $9,000. The market value of the leased asset was $491,000 and it had an estimated useful life of 5 years with no salvage value. The lease is for 3 years with annual payments of $170,520. Grenada's marginal borrowing rate is 8.%

2. A customer paid $167,000 for a special order on 9/22. The cash receipt was appropriately recorded (debit to cash and credit to unearned revenue), but no entry was made on 12/31 when the order was shipped. The inventory cost $130,300 to produce.

3. Members of the sales force are paid their commissions twice a year. Commissions on sales from January - June are paid on July 10th and commissions from July - December are paid on January 10th. No entry has been made for the commissions earned during the last half of the year. Total sales from July to December were $12,149,700, but only 25.% of the sales are subject to the 7.5% commission.