Additional information 1 On November 1, 2020, Imagine received $10,200 rent from its lessee for a 12 month lease beginning on that date This was credited to Rent Revenue 2 Imagine estimates that 7 of the Accounts Receivable balances on December 31, 2020, will be uncollectible On December 28, 2020, the bookkeeper incorrectly credited Sales Revenue for a receipt of $1,000 on account This error had not yet been corrected on December 31 3 After a physical count, inventory on hand at December 31, 2020, was $77,000 4 Prepaid insurance contains the premium costs of two policies Policy A, cost of $1,320, two year term, taken out on April 1, 2020 Policy B, cost of $1,620, three year term, taken out on September 1, 2020 5 The regular rate of depreciation is 10 of cost per year Acquisitions and retirements during a year are depreciated at half this rate There were no retirements during the year On December 31, 2019, the balance of Equipment was $90,000 6 On April 1, 2020, Imagine issued at par value 50 $1,000, 11 bonds maturing on April 1, 2024 Interest is paid on April 1 and October 1 7 On August 1, 2020, Imagine purchased at par value 18 $1,000, 12 Legume Inc bonds, maturing on July 31, 2022 Interest is paid on July 31 and January 31 8 On May 30, 2020, Imagine rented a warehouse for $1,100 per month and debited Prepaid Rent for an advance payment of $13,200 9 Imagine's FV NI investments consist of shares with total market value of $9,400 as at December 31, 2020 10 The FV OCI investment is an investment of 500 shares in Yop Inc , with current market value of $25 per share as at December 31, 2020 Instructions a Prepare the year end adjusting and correcting entries for December 31, 2020, using the information given Record the adjusting entry for inventory using a Cost of Goods Sold account The unadjusted trial balance of Imagine Ltd , a private company following ASPE, at December 31, 2020 is as follows Debit Credit Cash $10,850 Accounts receivable 56,500 Allowance for doubtful accounts $750 FV Nl investments 8,600 Inventory 58,000 Prepaid insurance 2,940 Prepaid rent 13,200 FV OCI investments 14,000 Bond investment at amortized cost 18,000 Land 10,000 Equipment 104,000 Accumulated depreciationequipment 18,000 Accounts payable 9,310 Bonds payable 50,000 Common shares 100,000 Retained earnings 103,260 Sales revenue 223,310 Rent revenue 10,200 Purchases 170,000 Purchase discounts 2,400 Freight out 9,000 Freight in 3,500 Salaries and wages expense 31,000 Interest expense 6,750 Miscellaneous expense 890 $517,230 $517,230

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Additional information: 1. On November 1, 2020, Imagine received $10,200 rent from its lessee for a 12-month lease beginning on that date. This was credited

Additional information:

1.On November 1, 2020, Imagine received $10,200 rent from its lessee for a 12-month lease beginning on that date. This was credited to Rent Revenue.
2.Imagine estimates that 7% of the Accounts Receivable balances on December 31, 2020, will be uncollectible. On December 28, 2020, the bookkeeper incorrectly credited Sales Revenue for a receipt of $1,000 on account. This error had not yet been corrected on December 31.
3.After a physical count, inventory on hand at December 31, 2020, was $77,000.
4.Prepaid insurance contains the premium costs of two policies: Policy A, cost of $1,320, two-year term, taken out on April 1, 2020; Policy B, cost of $1,620, three-year term, taken out on September 1, 2020.
5.The regular rate of depreciation is 10% of cost per year. Acquisitions and retirements during a year are depreciated at half this rate. There were no retirements during the year. On December 31, 2019, the balance of Equipment was $90,000.
6.On April 1, 2020, Imagine issued at par value 50 $1,000, 11% bonds maturing on April 1, 2024. Interest is paid on April 1 and October 1.
7.On August 1, 2020, Imagine purchased at par value 18 $1,000, 12% Legume Inc. bonds, maturing on July 31, 2022. Interest is paid on July 31 and January 31.
8.On May 30, 2020, Imagine rented a warehouse for $1,100 per month and debited Prepaid Rent for an advance payment of $13,200.
9.Imagine's FV-NI investments consist of shares with total market value of $9,400 as at December 31, 2020.
10.The FV-OCI investment is an investment of 500 shares in Yop Inc., with current market value of $25 per share as at December 31, 2020.

Instructions

a.Prepare the year-end adjusting and correcting entries for December 31, 2020, using the information given. Record the adjusting entry for inventory using a Cost of Goods Sold account.

The unadjusted trial balance of Imagine Ltd., a private company following ASPE, at December 31, 2020 is as follows: Debit Credit Cash $10,850 Accounts receivable 56,500 Allowance for doubtful accounts $750 FV-Nl investments 8,600 Inventory 58,000 Prepaid insurance 2,940 Prepaid rent 13,200 FV-OCI investments 14,000 Bond investment at amortized cost 18,000 Land 10,000 Equipment 104,000 Accumulated depreciationequipment 18,000 Accounts payable 9,310 Bonds payable 50,000 Common shares 100,000 Retained earnings 103,260 Sales revenue 223,310 Rent revenue 10,200 Purchases 170,000 Purchase discounts 2,400 Freight out 9,000 Freight in 3,500 Salaries and wages expense 31,000 Interest expense 6,750 Miscellaneous expense 890 $517,230 $517,230