PROBLEM (Recommended Time Allocation: 35 Minutes, 21 Marks) The controller for Stork Corp. is concerned about certain business transactions that the company experienced which might affect 2020. The controller, after discussing these matters with various individuals, has come to you for advice. The transactions at issue are presented below: 1. The company has decided to switch from the direct write-off method of accounting for bad debts to the percentage-of-sales approach. The direct write-off method was an error. The direct write-off method resulted in Stork recognizing bad debt expense as the receivables actually became uncollectible, which was as follows: Year in which receivable actually became uncollectible> 2019 2020 From 2019 sales $10,600 $4,000 From 2020 sales $15,000 The controller estimates that an additional $ 21,800 in bad debts will be written off in 2021: $3,800 applicable to 2019 sales and $18,000 applicable to 2020 sales. 2. Inventory has been shipped on consignment. These transactions have been recorded as ordinary sales and billed as such (on account). At December 31, 2020, goods invoiced and in the hands of consignees amounted to $ 160,000. The percentage markup on selling price is 20%. Assume that the consigned inventory is sold the following year. The company uses the perpetual inventory system. 3. Stork bought a truck on January 1, 2017 for $ 98,000 cash, with an $ 8,000 estimated residual value and a six-year life. The company debited an expense account in 2017 for the entire cost of the asset Stork uses straight-line depreciation for all trucks. Instructions a) Assume that Stork Corp. reported pre-tax income of $ 500,000 for 2020. Present a schedule showing the corrected pre-tax income after the above transactions are taken into account. Ignore income tax effects. b) Prepare the correcting journal entries required at December 31, 2020, assuming that the books have been closed. Prepare a separate correcting entry for each of the three issues described above