Problem 22-7 You have been assigned to examine the financial statements of Novak Company for the year ended December 31, 2017. You discover the following situaions. 1. Depreciation of $2,900 for 2017 on delivery vehicles was not recorded 2. The physical inventory count on December 31, 2016, Improperly excluded merchandise costing $20,200 that had been temporarlly stored in a public warehouse. Novak uses a perlodic inventory 3. 4. 5. system A collection of $5,900 on account from a customer received on December 31, 2017, was not recorded until January 2, 2018 In 2017, the company sold for $3,600 fully depreciated equipment that originally cost $22,500. The company credited the proceeds from the sale to the Equipment account. During November 2017, a competitor company filed a patent-infringement suit against Novak claiming damages of $240,100. The company's legal counsel has indicated that an unfavorable verdict is probable and a reasonable estimate of the court's award to the competitor ls $126,000. The company has not reflected or dlsclosed this sltuation in the financial statements. Novak has a portfolio of trading investments. No entry has been made to adjust to market. Information on cost and fair value is as follows. 6. Cost Fair Value December 31, 2016 December 31, 2017 $86,500 $88,600 $86,500 $86,700 7. At December 31, 2017, an analysis of payroll information shows accrued salaries of $11,800. The Salaries and wages Payable account had a balance of $17,400 at December 31, 2017, which was unchanged from its balance at December 31, 2016 A large piece of equipment was purchased on January 3, 2017, for $40,000 and was charged to Maintenance and Repairs Expense. The equipment is estimated to have a service life of 8 years and no residual value. Novak normally uses the straight-line depreciation method for this type of equipment. A $12,600 insurance premium paid on July 1, 2016, for a policy that expires on June 30, 2019, was charged to insurance expense A trademark was acquired at the beginning of 2016 for 45,900. No amortization has been recorded since its acquisition. The maximum allowable amortization period is 10 years. 8. 9. 10. Assume the trial balance has been prepared but the books have not been closed for 2017. Assuming all amounts are material, preparejonal entries showing the adjustments that are required. (Ignore income tax considerations.) (Credit account titles are automatically Indented when amount is entered. Do not indent manually. If no entry is requlred, select "No Entry" for the account titles and enter 0 for the amounts.)