Jacobsen Corporation is negotiating a loan for expansion purposes. Jacobsen's books and records have never been audited and the bank has requested that an audit be performed and that IFRS be followed. Jacobsen has prepared the following comparative financial statements for the years ended December 31, 2020 and 2019. JACOBSEN CORPORATION Statement of Financial Position as at December 31, 2020 and 2019 2020 2019 $ 82,000 Assets Current assets Cash Accounts receivable Allowance for doubtful accounts Fair value-net income investments Inventory Total current assets Plant assets Property, plant, and equipment Accumulated depreciation Plant assets (net) $ 163,000 392,000 (37,000) 78,000 207,000 803,000 296,000 (18,000) 78,000 202,000 640,000 167,000 (121,600) 45,400 $848,400 169.500 (106,400) 63,100 $703,100 Total assets Liabilities and Shareholders' Equity Liabilities Accounts payable Shareholders' equity $121,400 $196,100 Common shares, no par value, 50,000 authorized, 20,000 issued and outstanding Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 260,000 467,000 727,000 $848,400 260,000 247,000 507.000 $703,100 JACOBSEN CORPORATION Statement of Income for the Years Ended December 31, 2020 and 2019 2020 Sales $1,000,000 Cost of sales 430,000 Gross profit 570,000 Operating expenses 210,000 Administrative expenses 140,000 350,000 Net income $ 220,000 2019 $900,000 395,000 505,000 205,000 105,000 310,000 $195,000 During the audit, the following additional facts were determined: 1. An analysis of collections and losses on accounts receivable during the past two years indicates a drop in anticipated bad debt losses. Management has decided that the loss experience rate on sales should be reduced from the recorded 2% to 1.5%, beginning with the year ended December 31, 2020. An analysis of the fair value-net income investments revealed that the total fair value for these investments as at the end of each year was as follows: 2. 3. Inventory at December 31, 2019, was overstated by $9,900 and inventory at December 31, 2020, was overstated by $14,000. 4. On January 2, 2019, equipment costing $30,100 (estimated useful life of 10 years and residual value of $6,000) was incorrectly charged to operating expenses. Jacobsen records depreciation on the straight-line basis. In 2020, fully depreciated equipment (with no residual value) that originally cost $18,800 was sold as scrap for $3,700. Jacobsen credited the $3,700 in proceeds to the equipment account. An analysis of 2019 operating expenses revealed that Jacobsen charged to expense a four-year insurance premium of $5,700 on January 1, 2019. The analysis also revealed that operating expenses were incorrectly classified as part of administrative expenses in the amount of $15,000 in 2019 and $35,000 in 2020. 5. 6. Part 1 Prepare the journal entries to correct the books at December 31, 2020. The books for 2020 have not been closed. Ignore income tax effects. (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 O for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1. (To reflect reduction in loss experience rate) Part 1 Prepare the journal entries to correct the books at December 31, 2020. The books for 2020 have not been closed. Ignore income tax effects. (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 O for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1. (To reflect reduction in loss experience rate) 2. (To reduce trading securities to fair value) 3. (To adjust for overstatements in 4. (To correct posting of equipment purchase as expense in 2019) (To correct the disposal of equipment) 5. (To adjust for nonrecognition of prepaid expense in 2019) 6. Beginning with reported net income, prepare a schedule showing the calculation of corrected net income for the years ended December 31, 2020 and 2019, assuming that any adjustments are to be reported on comparative statements for the two years. Ignore income tax effects. (Do not prepare financial statements.) (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45). Do not leave any answer field blank. Enter Ofor amounts.) JACOBSEN CORPORATION Computation of Corrected Net Income For the Years Ended December 31, 2020 and 2019 2020 2019 Reported income $ $ Change in accounts receivable loss experience rate from 2% to 112% Loss on trading securities Ending inventories overstated: December 31, 2019 December 31, 2020 Misposting of equipment purchase Decrease in operating expenses-2019 Increase in operating expenses-2020 Misposting of proceeds of equipment sold Recognition of prepaid insurance Part 3 Prepare a schedule showing the calculation of corrected retained earnings at January 1, 2020. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any answer field blank. Enter O for amounts.) JACOBSEN CORPORATION Calculation of Corrected Retained Earnings At January 1, 2020 Retained earnings, January 1 $ Change in accounts receivable loss experience rate from 2% to 172% Loss on FV-NI investments Ending inventories overstated: December 31, 2019 Misposting of equipment purchase Decrease in operating expenses-2019 Recognition of prepaid insurance Retained earnings, January 1, restated $ e Textbook and Media Jacobsen Corporation is negotiating a loan for expansion purposes. Jacobsen's books and records have never been audited and the bank has requested that an audit be performed and that IFRS be followed. Jacobsen has prepared the following comparative financial statements for the years ended December 31, 2020 and 2019. JACOBSEN CORPORATION Statement of Financial Position as at December 31, 2020 and 2019 2020 2019 $ 82,000 Assets Current assets Cash Accounts receivable Allowance for doubtful accounts Fair value-net income investments Inventory Total current assets Plant assets Property, plant, and equipment Accumulated depreciation Plant assets (net) $ 163,000 392,000 (37,000) 78,000 207,000 803,000 296,000 (18,000) 78,000 202,000 640,000 167,000 (121,600) 45,400 $848,400 169.500 (106,400) 63,100 $703,100 Total assets Liabilities and Shareholders' Equity Liabilities Accounts payable Shareholders' equity $121,400 $196,100 Common shares, no par value, 50,000 authorized, 20,000 issued and outstanding Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 260,000 467,000 727,000 $848,400 260,000 247,000 507.000 $703,100 JACOBSEN CORPORATION Statement of Income for the Years Ended December 31, 2020 and 2019 2020 Sales $1,000,000 Cost of sales 430,000 Gross profit 570,000 Operating expenses 210,000 Administrative expenses 140,000 350,000 Net income $ 220,000 2019 $900,000 395,000 505,000 205,000 105,000 310,000 $195,000 During the audit, the following additional facts were determined: 1. An analysis of collections and losses on accounts receivable during the past two years indicates a drop in anticipated bad debt losses. Management has decided that the loss experience rate on sales should be reduced from the recorded 2% to 1.5%, beginning with the year ended December 31, 2020. An analysis of the fair value-net income investments revealed that the total fair value for these investments as at the end of each year was as follows: 2. 3. Inventory at December 31, 2019, was overstated by $9,900 and inventory at December 31, 2020, was overstated by $14,000. 4. On January 2, 2019, equipment costing $30,100 (estimated useful life of 10 years and residual value of $6,000) was incorrectly charged to operating expenses. Jacobsen records depreciation on the straight-line basis. In 2020, fully depreciated equipment (with no residual value) that originally cost $18,800 was sold as scrap for $3,700. Jacobsen credited the $3,700 in proceeds to the equipment account. An analysis of 2019 operating expenses revealed that Jacobsen charged to expense a four-year insurance premium of $5,700 on January 1, 2019. The analysis also revealed that operating expenses were incorrectly classified as part of administrative expenses in the amount of $15,000 in 2019 and $35,000 in 2020. 5. 6. Part 1 Prepare the journal entries to correct the books at December 31, 2020. The books for 2020 have not been closed. Ignore income tax effects. (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 O for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1. (To reflect reduction in loss experience rate) Part 1 Prepare the journal entries to correct the books at December 31, 2020. The books for 2020 have not been closed. Ignore income tax effects. (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 O for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1. (To reflect reduction in loss experience rate) 2. (To reduce trading securities to fair value) 3. (To adjust for overstatements in 4. (To correct posting of equipment purchase as expense in 2019) (To correct the disposal of equipment) 5. (To adjust for nonrecognition of prepaid expense in 2019) 6. Beginning with reported net income, prepare a schedule showing the calculation of corrected net income for the years ended December 31, 2020 and 2019, assuming that any adjustments are to be reported on comparative statements for the two years. Ignore income tax effects. (Do not prepare financial statements.) (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45). Do not leave any answer field blank. Enter Ofor amounts.) JACOBSEN CORPORATION Computation of Corrected Net Income For the Years Ended December 31, 2020 and 2019 2020 2019 Reported income $ $ Change in accounts receivable loss experience rate from 2% to 112% Loss on trading securities Ending inventories overstated: December 31, 2019 December 31, 2020 Misposting of equipment purchase Decrease in operating expenses-2019 Increase in operating expenses-2020 Misposting of proceeds of equipment sold Recognition of prepaid insurance Part 3 Prepare a schedule showing the calculation of corrected retained earnings at January 1, 2020. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any answer field blank. Enter O for amounts.) JACOBSEN CORPORATION Calculation of Corrected Retained Earnings At January 1, 2020 Retained earnings, January 1 $ Change in accounts receivable loss experience rate from 2% to 172% Loss on FV-NI investments Ending inventories overstated: December 31, 2019 Misposting of equipment purchase Decrease in operating expenses-2019 Recognition of prepaid insurance Retained earnings, January 1, restated $ e Textbook and Media