Problem 22-04 Flounder Company is in the process of adjusting and correcting its books at the end of 2020. In reviewing its records, the following information is compiled. 1. Flounder has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows. December 31, 2019 December 31, 2020 $3,400 $2,400 2. In reviewing the December 31, 2020, inventory, Flounder discovered errors in its inventory-taking procedures that have caused inventories for the last 3 years to be incorrect, as follows. December 31, 2018 December 31, 2019 December 31, 2020 Understated Understated Overstated $15,100 $20,800 $6,800 Flounder has already made an entry that established the incorrect December 31, 2020, inventory amount. 3. At December 31, 2020, Flounder decided to change the depreciation method on its office equipment from double-declining-balance to straight-line. The equipment had an original cost of $104,000 when purchased on January 1, 2018. It has a 10-year useful life and no salvage value. Depreciation expense recorded prior to 2020 under the double-declining-balance method was $38,200. Flounder has already recorded 2020 depreciation expense of $13,800 using the double-declining-balance method. 4. Before 2020, Flounder accounted for its income from long-term construction contracts on the completed-contract basis. Early in 2020, Flounder changed to the percentage-of-completion basis for accounting purposes. It continues to use the completed-contract method for tax purposes. Income for 2020 has been recorded using the percentage-of-completion method. The following information is available. Pretax Income Percentage-of-Completion Completed-Contract $144,600 $99,300 59,100 19,100 Prior to 2020 2020 Prepare the journal entries necessary at December 31, 2020, to record the above corrections and changes. The books are still open for 2020. The income tax rate is 20%. Flounder has not yet recorded its 2020 income tax expense and payable amounts so current-year tax effects may be ignored. Prior-year tax effects must be considered in item 4. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit 1. 2. 3. 4. Accounts Payable Accounts Receivable Accumulated Depreciation-Buildings Accumulated Depreciation-Equipment Accumulated Depreciation-Machinery Advertising Expense Amortization Expense Allowance for Doubtful Accounts Bad Debt Expense Cash Compensation Expense Consignment Out Construction in Process Copyrights Cost of Goods Sold Deferred Gross Profit Deferred Tax Liability Depreciation Expense Dividend Revenue Due to Customer Discount on Bonds Payable Equipment Equity Investments Equity Investments (Available-for-Sale) Equity Investments (Equity Method) Fair Value Adjustment Finance Expense Gain on Disposal of Plant Assets Holding Gain or Loss-Investments Income Tax Receivable Insurance Expense Interest Expense Interest Payable Interest Receivable Interest Revenue Inventory Inventory on Consignment Investment Revenue Lawsuit Liability Lawsuit Loss Loss Due to Market Decline of Inventory Machinery Maintenance and Repairs Expense No Entry Prepaid Insurance Property, Plant and Equipment Purchases Rent Revenue Retained Earnings Revenue from Investment Salaries and Wages Expense Salaries and Wages Payable Sales Sales Commission Expense Sales Commission Payable Sales Revenue Sales Tax Expense Sales Tax Payable Share Capital Supplies Supplies Expenses Trademarks Unearned Rent Revenue Unrealized Holding Gain or Loss-Equity Unre Holding Gain or Loss-Income Warranty Expense Warranty Liability