Whaley Distributors is a wholesale distributor of electronic components. Financial statements for the years ended December 31, 2019 and 2020, reported the following amounts and subtotals ($ in millions): Assets Liabilities Shareholders' Equity $740 820 420 2019 2020 $330 400 $410 Net Income $210 23e Expenses $15e 175 In 2021, the following situations occurred or came to light a Internal auditors discovered that ending inventories reported on the financial statements the two previous years were misstated due to faulty internal controls. The errors were in the following amounts: 2019 Inventory 2020 Inventory Overstated by Understated by $12 million $10 million b. A lability was accrued in 2019 for a probable payment of $7 million in connection with a lawsuit ultimately settled in December 2021 for $4 million A patent costing $18 million at the beginning of 2019, expected to benefit operations for a total of six years, has not been amortized since acquired d. Whaley's conveyer equipment was depreciated by the sum of the years -digits (SYD) basis since it was acquired at the beginning of 2019 at a cost of $30 million It has an expected useful life of five years and no expected residual value. At the beginning of 2021, Whaley decided to switch to straight-line depreciation Required: For each situation 1. Prepare any Journal entry necessary as a direct result of the change or error correction, as well as any adjusting entry for 2021 related to the situation described. (Ignore tax effects) 2. Determine the amounts to be reported for each of the five items shown above from the 2019 and 2020 financial statements when those amounts are reported again in the 2019-2021 comparative financial statements Answer is not complete. Complete this question by entering your answers in the tabs below. C raw > > 2 a(2) No journal entry required b(1) 7 X Liability - litigation Gain - litigation Cash 3X 4 4 b(2) No journal entry required * 5 c(1) 6 Retained earnings Patent 6 (2) Amortization expense Patent 3 7 d(1) 4 Depreciation expense Accumulated depreciation 8 d(2) 18 % Depreciation expense Accumulated depreciation 188 Required 1 Required 2 > Required 1 Required 2 Determine the amounts to be reported for each of the five items shown above from the 2019 and 2020 f when those amounts are reported again in the 2019-2021 comparative financial statements. (Do not rou calculations. Amounts to be deducted should be indicated with a minus sign. Enter your answers in millio Assets Liabilities Net Income Expenses $ 330 150 Shareholders Equity $ 410 S (12) 0 741 X $ (12) 0 2019 2019 inventory Loss contingency Patent amortization Depreciation 0 210 (12) 0 12 0 0 0 (3) 3 0 OS 0 0 395 $ 0 195 IS 330 $ IS 000 000 726 820 $ Is $ 400 $ 420 $ $ 0 0 165 175 (12) (10) 0 0 0 230 12 10 0 10 2020 2019 inventory 2020 inventory Loss contingency Patent amortization Depreciation 0 10 0 0 (6) 0 0 SISISIS 000 (3) 3 0 (6) 0 424 0 0 $ 824 $ 400 $ $ 249 $ 156
