Williams-Santana Inc. is a manufacturer of high-tech industrial parts that was started in 2007 by two talented engineers with little business training. In 2021, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2021 before any adjusting entries or closing entries were prepared. The income tax rate is 25% for all years. a. A five-year casualty insurance policy was purchased at the beginning of 2019 for $35,000. The full amount was debited to insurance expense at the time. b. On December 31, 2020, merchandise inventory was overstated by $25,000 due to a mistake in the physical inventory count using the periodic Inventory system. C. The company changed inventory cost methods to FIFO from LIFO at the end of 2021 for both financial statement and income tax purposes. The change will cause a $960,000 increase in the beginning inventory at January 1, 2020. d. At the end of 2020, the company failed to accrue $15,500 of sales commissions earned by employees during 2020. The expense was recorded when the commissions were paid in early 2021. e. At the beginning of 2019, the company purchased a machine at a cost of $720,000. Its useful life was estimated to be 10 years with no salvage value. The machine has been depreciated by the double declining balance method. Its carrying amount on December 31, 2020, was $460,800. On January 1, 2021, the company changed to the straight-line method. f. Additional industrial robots were acquired at the beginning of 2018 and added to the company's assembly process. The $1,000,000 cost of the equipment was inadvertently recorded as repair expense. The robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for both financial reporting and income tax reporting. Required: For each situation: 1. Identify whether it represents an accounting type of change or an error. 2. 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. Any tax effects should be adjusted for through the deferred tax liability account 3. Select the option that best describes any bther steps that should be taken to appropriately report each situation. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Identify whether it represents an accounting type of change or an error Required: For each situation: 1. Identify whether it represents an accounting type of change or an error. 2. 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. Any tax effects should be adjusted for through the deferred tax liability account. 3. Select the option that best describes any other steps that should be taken to appropriately report each situation. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Identify whether it represents an accounting type of change or an error. a b c. d e f Required Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 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. Any tax effects should be adjusted for through the deferred tax liability account. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet
