Sheridan Consulting Ltd. has been in business for several years, providing software consulting to its customers on an annual contract or special assignment basis. All work is done over the Internet, although some travel is occasionally required for meeting with customers to negotiate contracts and renewals of contracts, as well as resolving possible disputes in invoicing for their services. Sheridan operates out of rented premises and has a modest investment in equipment that is used by the consulting team. Sheridan is a private company that follows ASPE and that has a calendar year end.

At the end of each year, Sheridan obtains the services of an accountant to complete the annual accounting cycle of the business and prepare any year-end adjusting of journal entries, financial statements, and corporate tax returns.

Upon arrival in early 2020, the accountant was given an unadjusted trial balance and obtained the following additional information to complete his work.

Additional information:

1.		Management has been going over the list of accounts receivable for possible accounts that are not collectible. One account for $602 must be written off. In the past, 5% of the balance of all accounts receivable has been the basis of an estimate for the required balance in the allowance for doubtful accounts. Management feels that this estimate should be followed for 2020.
2.		After doing a count of supplies on hand, management determined that $344 of supplies remained unused at December 31, 2020.
3.		The account balance in Prepaid Insurance of $3,440 represents the annual cost of the renewal of all of Sheridan’s insurance policies that expire in one year. The policies’ coverage started April 1, 2020.
4.		FV-NI Investments are long-term investments. The fair value of the portfolio of investments was $19,350 at December 31, 2020, based on quoted market values on the TSX.
5.		In January 2020, some old equipment was sold for proceeds of $258 cash. The entry made when depositing the cash was debit Cash, credit Gain on Disposal of Equipment. The original cost of the equipment was $3,698 and the accumulated depreciation was $3,612.
6.		The depreciation expense for the remaining equipment was calculated to be $6,192 for the 2020 fiscal year.
7.		The notes receivable from customers are due October 31, 2023, and bear interest at 5%, with interest paid semi-annually. The last interest collected related to the notes was for the six months ended October 31, 2020.
8.		Bank loans are demand bank loans for working capital needs and vary in amount as the needs arise. The bank advised that the interest charge for December 2020 that will go through on the January 2021 bank statement is in the amount of $172.
9.		Unpaid salaries and wages at December 31, 2020, totalled $679. These will be paid as part of the first payroll of 2021.
10.		After some analysis, management informs the accountant that the Unearned Revenue account should have a balance of $860.
11.		Sheridan was sued by one of its former clients for $43,000 for giving bad advice and instructions. Upon discussion with legal counsel, it has been agreed that it will likely take $4,300 to settle this dispute out of court, in the next fiscal year. No entry has yet been recorded.
12.		The accountant is told that a sublet lease arrangement for some excess office space has been negotiated and signed. It will provide Sheridan with rent revenue starting on February 1, 2021, at a rate of $344 per month.
13.		Sheridan has been making income tax instalments as required by the Canada Revenue Agency. All instalment payments have been debited to the Income Taxes Payable account.
14.		After recording all of the necessary adjustments and posting to the general ledger, management drafted a new trial balance to arrive at the income before income taxes. Using this result, the accountant prepared the tax returns, and determined that a tax rate of 30% needed to be applied to the income before income tax amount. The necessary adjusting entry for taxes has not yet been recorded.

Prepare all necessary adjusting and correcting entries required based on the information given. (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 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)
 

Interest expense 1,118 Sheridan Consulting Ltd. Unadjusted Trial Balance December 31, 2020 Salaries and wages payable Utilities expense 645 Interest payable Rent expense 46,440 Account Debit Credit Unearned revenue 3.612 Salaries and wages expense 42,579 Petty cash $516 Litigation liability Supplies expense Cash 15,910 Income tax payable 25,800 Bad debt expense Accounts receivable 38,442 Common shares 30,960 Telephone and Internet expense 2,752 Allowance for doubtful accounts 1,548 Retained earnings 51,428 Repairs and maintenance expense 516 Interest receivable Dividends 22,360 Litigation expense Prepaid insurance 3,440 Service revenue 208,781 Income tax expense Supplies 1,720 Interest income 896 $350,760 $350,760 FV-NI investments 17,200 Unrealized gain or loss Notes receivable 21,500 Gain on disposal of equipment 258 Equipment 80,840 Depreciation expense Accumulated depreciation-equipment 30,960 Office expense 3,526 Goodwill 18,920 Travel expense 5,762 Bank loans 15,480 Insurance expense 774 Accounts payable 6,837 Interest expense 1,118