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Problem 1:Hales Corp. has trouble applying the Revenue Recognition and Matching principles to its accounting records and thus its $30,000 preliminary Net Income contains material errors. You are a member of the outside audit staff. During the course of your examination of the financial statements and accounting records of the Hales Corporation for the year ended December 31, 2016, you discover the following:

Requirement 1: For each item below propose the AJE to fix the misstatement of account balances.

A.An insurance policy covering three years was purchased on January 1, 2016, for $3,000. The entire amount was debited to Insurance Expense and no adjusting journal entry has ever been recorded for this policy.

B.During 2016, the company received a $1,000 cash advance from a customer for services to be performed in 2017. The $1,000 was credited to Delivery Revenue. No AJE was made.

C.Notice there are $-0- Supplies listed in the asset section of the Balance Sheet. However, you discover that Supplies costing $750 were in the storeroom at December 31, 2016.

D.Hales borrowed $50,000 from a local bank on May 1, 2016. Principal and interest at 12% annual rate will be paid on April 30, 2017. No prior accruals for interest have been made.

E.Hales bookkeeper is supposed to adjust for depreciation each month. The bookkeeper has forgotten to record depreciation for December. Note: for all of 2016, Hales acquired no new buildings and equipment and Hales did not dispose any of any buildings and equipment.

F.A review of drivers completed work orders (i.e., delivery records) for December (2016) shows that for the last week of the year drivers made deliveries valued at $4,500. These end of the year work orders did not get invoiced to customers until January of 2017. No accrual for competed but unbilled work orders has been journalized for 2016.