During the 2016 year-end audit, the following items come to your attention. Assume that the books have not been closed in 2016. Prepare journal entries for each of the following items.

1. Quigley Co. bought a machine on January 1, 2014 for $875,000. It had a $75,000 estimated residual value and a ten-year life. An expense account was debited on the purchase date. Quigley uses straight-line depreciation. This was discovered in 2016.

Machinery 875,000

Retained Earning 715000

Accumulated Dep 160,000

2. In 2016, Quigley changed from finished contract method to the percentage-of-completion method for certain of its long-term construction contracts. Income under finished contract Income under percentage of completion 2015 $760,000 $975,000 2016 825,000 1,000,000

3. In 2014, Quigley recorded a litigation loss of $40,000 as it was probable that they had to clean up the river behind the plant. In 2016, the actual clean-up costs totaled $65,000 when the clean-up was finished.

4. Quigley changed its reporting for warranty costs from 2% of sales to 3% of sales in 2016. Sales in 2015 totaled $500,000, and in 2016, totaled $750,000.