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 Assets Current assets Cash $163,000 $82,000 Accounts receivable 392 000 296.000 Allowance for doubtful accounts (37.000 (18,000 Fair valut-net income investments 78,000 78,000 Inventor 207.000 202.000 Tot current assets 803.000 640.000 Plant assets Property, plant, and equipment 167,000 169,500 Accumulated depreciation (121,600 (106,400 Plant assets (net) 45.400 63,100 Total assets $848,400 $703,100 Liabilities and Shareholders' Equity Liabilities Accounts payable $121,400 $196,100 Shareholders' equity Common shares, no par value. 50,000 authorized 20.000 issued and outstanding 260.000 260,000 Retained earnings 467,000 247,000 Total shareholders' equity 727,000 507,000 Total liabilities and shareholders equity $848,400 $703.100 COCO Statement of Income for the Years Ended December 31, 2020 and 2019 2020 2019 Sales $1,000,000 $900,000 Cost of sales 430,000 395.000 Gross profit 570,000 SOS.000 Operating expenses 210,000 202.000 Administrative expenses 140,000 105,000 350,000 350,000 Net Income $ 220,000 $195.000 During the audit, the following additionalfacts were determined: 1 An analysis of collections and losses an 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 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 Dec 31, 2019 $78,000 Dec 31, 2020 $64,900 3 Inventory at December 31, 2019, was overstated by $9,000 and inventory at December 31, 2020, was overstated by $15,600 On January 2, 2019, equipment costing $30.500 (estimated useful life of 10 years and residual value of $7100) was incorrectly charged to operating expenses. Jacobsen records depreciation pn the straight line basis. In 2020, fully depreciated equipment (with no residual value) that originally cost $18,600 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 55.900 on January 1, 2019. 5. 6 The analysis also revealed that operating expenses were incorrectly classified as part of administrative expenses in the amount of $15,000 in 2019 and 535,000 in 2020, Part 1 Prepare the journal entries to correct the books at December 31, 2020. The books for 2020 have not been closed. Ignore income taxeffects. (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 for the amounts. Record journal entries in the order presented in the problem Date Account Titles and Explanation Debit Credit 1. Allowance for Doubtful Accounts To reflect reduction in loss experience rate) 2. To reduce trading securities to fair value 3 of Good So I (To correct posting of equipment purchase as expense in 2019) (To correct the disposal of equipment) 5. Prepaid Expenses Succes pense 5. Prepaid Expenses Supplies Epense Retained Earnings 1 To adjust for nonrecognition of prepaid expense in 2019) 6. No Entry 0 No Entry a Texthon
