Problem 22 04 Splish 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 Splish has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows December 31, 2019 $3,800 December 31, 2020 $2,600 2 In reviewing the December 31, 2020, inventory, Splish discovered errors in its inventory taking procedures that have caused inventories for the last 3 years to be incorrect, as follows December 31, 2018 Understated $15,300 December 31, 2019 Understated $19,800 December 31, 2020 Overstated $7,200 Splish has already made an entry that established the incorrect December 31, 2020, inventory amount 3 At December 31, 2020, Splish decided to change the depreciation method on its office equipment from double declining balance to straight line The equipment had an original cost of $106,000 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 $39,400 Splish has already recorded 2020 depreciation expense of $13,900 using the double declining balance method 4 Before 2020, Splish accounted for its income from long term construction contracts on the completed contract basis Early in 2020, Splish 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 Prior to 2020 $139,100 $109,400 2020 54,500 22,000 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 Splish 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

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Problem 22-04 Splish Company is in the process of adjusting and correcting its books at the end of 2020. In reviewing its records, the following

Problem 22-04

Splish 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.

Splish has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows.

December 31, 2019		$3,800
December 31, 2020		$2,600

In reviewing the December 31, 2020, inventory, Splish discovered errors in its inventory-taking procedures that have caused inventories for the last 3 years to be incorrect, as follows.

December 31, 2018	Understated	$15,300
December 31, 2019	Understated	$19,800
December 31, 2020	Overstated	$7,200

Splish has already made an entry that established the incorrect December 31, 2020, inventory amount.

3.		At December 31, 2020, Splish decided to change the depreciation method on its office equipment from double-declining-balance to straight-line. The equipment had an original cost of $106,000 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 $39,400. Splish has already recorded 2020 depreciation expense of $13,900 using the double-declining-balance method.
4.		Before 2020, Splish accounted for its income from long-term construction contracts on the completed-contract basis. Early in 2020, Splish 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
Prior to 2020	$139,100	$109,400
2020	54,500	22,000

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%. Splish 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.