As at December 31, 2020, Kendrick Corporation is having its financial statements audited for the first time ever. The auditor has found the following items that might have an effect on previous years.

1.

Kendrick purchased equipment on January 2, 2017, for $122,200. At that time, the equipment had an estimated useful life of 10 years, with a $9,400 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of additional information, the company determined that the equipment had a total useful life of seven years with a $5,640 residual value.

2.

During 2020, Kendrick changed from the double-declining-balance method for its building to the straight-line method because the company thinks the straight-line method now more closely follows the benefits received from using the assets. The current year depreciation was calculated using the new method following straight-line depreciation. In case the following information was needed, the auditor provided calculations that present depreciation on both bases. The building had originally cost $1.13 million when purchased at the beginning of 2018 and has a residual value of $113,000. It is depreciated over 20 years. The original estimates of useful life and residual value are still accurate.

		2020		2019		2018
Straight-line		$50,850		$50,850		$50,850
Double-declining-balance		91,530		101,700		113,000

3.

Kendrick purchased a machine on July 1, 2017, at a cost of $160,000. The machine has a residual value of $16,000 and a useful life of eight years. Kendricks bookkeeper recorded straight-line depreciation during each year but failed to consider the residual value.

4.

Prior to 2020, development costs were expensed immediately because they were immaterial. Due to an increase in development phase projects, development costs have now become material and management has decided to capitalize and depreciate them over three years. The development costs meet all six specific conditions for capitalization of development phase costs. Amounts expensed in 2017, 2018, and 2019 were $600, $400, and $1,000, respectively. During 2020, $4,800 was spent and the amount was debited to Deferred Development Costs (an asset account).

(a)

Prepare the necessary journal entries to record each of the changes or errors. The books for 2020 have been adjusted but not closed. Ignore income tax effects. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.	Account Titles and Explanation	Debit	Credit
1.
2.
3.
4.

List of Accounts

Assistance Used

• Accounts Payable
• Accounts Receivable
• Accumulated Amortization - Licences
• Accumulated Amortization - Patents
• Accumulated Amortization - Trademarks
• Accumulated Depreciation - Buildings
• Accumulated Depreciation - Equipment
• Accumulated Depreciation - Leasehold Improvements
• Accumulated Depreciation - Machinery
• Accumulated Depreciation - Vehicles
• Accumulated Other Comprehensive Income
• Allowance for Doubtful Accounts
• Amortization Expense
• Bad Debt Expense
• Bond Investment at Amortized Cost
• Bonds Payable
• Buildings
• Cash
• Construction in Process
• Construction Expenses
• Contract Asset/Liability
• Cost of Goods Sold
• Current Tax Expense
• Deferred Development Costs
• Deferred Tax Asset
• Deferred Tax Benefit
• Deferred Tax Expense
• Deferred Tax Liability
• Depreciation Expense
• Dividends
• Dividends Payable
• Equipment
• Fair Value - NI Investments
• Finance Expense
• Finance Revenue
• Future Tax Asset
• Future Tax Liability
• Gain on Discontinued Operations
• Gain on Disposal of Assets
• Gain on Disposal of Equipment
• Gain or Loss on Investment Property
• Goodwill
• Income Tax Expense
• Income Tax Payable
• Income Tax Receivable
• Insurance Expense
• Insurance Payable
• Interest Expense
• Interest Income
• Interest Payable
• Interest Receivable
• Inventory
• Investment Income or Loss
• Investment Property
• Land
• Litigation Expense
• Litigation Liability
• Loss
• Loss on Discontinued Operations
• Loss on Disposal of Assets
• Loss on Impairment
• Machinery
• No Entry
• Office Expense
• Patents
• Prepaid Expenses
• Prepaid Insurance
• Rent Receivable
• Rent Revenue
• Repairs and Maintenance Expense
• Retained Earnings
• Revaluation Surplus (OCI)
• Revenue from Long-Term Contracts
• Salaries and Wages Expense
• Salaries and Wages Payable
• Sales Commission Expense
• Sales Commission Payable
• Sales Revenue
• Sales Tax Expense
• Sales Tax Payable
• Supplies
• Supplies Expense
• Vehicles
• Unearned Rent Revenue
• Unrealized Gain or Loss
• Warranty Expense
• Warranty Liability