4. (L.O. 4) Wolochuck Company is in the process of having its financial statements audited for the first time as of 12/31/20. The Company is in its 5th year of operations and has always relied on its bookkeeper to prepare annual financial statements. The auditor has found the following incorrect or overlooked items that occurred over the past 5 years.

a. Wolochuck purchased a machine on June 30, 2017 at a cost of $45,000. The machine has a salvage value of $3,000 and a useful life of 6 years. The bookkeeper recorded straight-line depreciation during each year, but failed to consider the salvage value.

b. During 2020, Wolochuck changed from the straight-line method of depreciation for its building to the double-declining balance method. The auditor provided the following computations which present depreciation on both bases: 2020 2019 2018 Straight-line $36,000 $36,000 $36,000 Declining-balance $47,360 $59,200 $74,000

c. The physical inventory count on December 31, 2019, improperly excluded merchandise costing $20,000 that had been temporarily stored in a public warehouse. Wolochuck uses a periodic inventory system.

d. A $18,000 insurance premium paid on October 1, 2019, for a policy that expires on September 30, 2022. The premium was charged to insurance expense when paid.

e. Accrued wages of $3,500 were not recorded on December 31, 2018.

f. The auditor discovered that a sale of land on February 20, 2018 resulted in a gain of $5,000. The land was purchased in 2012 for $27,000. When the bookkeeper recorded the sale in 2018 the gain was credited to common stock.

g. An advance payment for rent was received on January 1, 2019. The payment was for $36,000 and covers 4 years of rent for a warehouse owned by Wolochuck. When the cash payment was received the bookkeeper recorded the following entry:

Cash 36,000

Rent Payable 36,000

The Rent Payable account has not been altered since its original recording.

Instructions:

Prepare the journal entries necessary at 12/31/20 to correct the books for the items found by the auditor. Assume the books have not been closed for 2020. Ignore income tax considerations