Chem-Lite, Inc., maintains its accounts on the basis of a fiscal year ending March 31. At March 31, 20X1, the Equipment account in the general ledger appeared as shown below. The company uses straight-line depreciation, a 10-year life, and 10 percent salvage value for all its equipment. It is the companys policy to take a full years depreciation on all additions to equipment occurring during the fiscal year, and you may treat this policy as a satisfactory one for the purpose of this problem. The company has recorded depreciation for the fiscal year ended March 31, 20X1.

Equipment
4/1/X0 Bal. forward	110,000
12/1/X0	10,600
1/2/X1	1,026
2/1/X1	1,026
3/1/X1	1,026

Upon further investigation, you find the following contract dated December 1, 20X0, covering the acquisition of equipment:

List price $32,000

5% sales tax 1,600

Total $33,600

Down payment 10,600

Balance 23,000

9% interest, 24 months 4,140

Contract amount $27,140

Required:

Prepare the adjusting entries you would propose as auditor of Chem-Lite, Inc., with respect to the equipment and related depreciation accounts at March 31, 20X1. (Assume that all amounts given are material.) (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate computations to the nearest whole dollar value.)

1- Record the entry to correct the entries to the Equipment account for the payments on the installment contract originating on December 1, 20X0.

Journal entry worksheet

2- Record the entry to correct the depreciation taken of the equipment purchased under the installment contract originating on December 1, 20X0.

Journal entry worksheet