You have been asked by a client to review the records of Marigold Corporation, a small manufacturer of precision tools and machines that follows ASPE. Your client is interested in buying the business, and arrangements were made for you to review the accounting records. Your examination reveals the following. 1. Marigold Corporation started business on April 1, 2017, and has been reporting on a fiscal year ending March 31. The company has never been audited, but the annual statements prepared by the bookkeeper reflect the following income before closing and before deducting income tax: Year Ended March 31 Income Before Taxes 2018 $65,872 2019 102,488 2020 95,294 2. A relatively small number of machines have been shipped on consignment. These transactions were recorded as ordinary sales and billed in this way, with the gross profit on each sale recognized when the machine was shipped. On March 31 of each year, the amounts for machines billed and in the hands of consignees were as follows: 2018 $5,980 2019 none 2020 5,200 3. The sales price was determined by adding 30% to cost. Assume that the consigned machines are sold the following year. On March 30, 2019, two machines were shipped to a customer on a C.O.D. basis. The sale was not entered until April 5, 2019, when $5,612 cash was received. The machines were not included in the inventory at March 31, 2019. (Title passed on March 30, 2019.) All machines are sold subject to a five-year warranty. It is estimated that the expense ultimately to be incurred in connection with the warranty will amount to 0.5% of sales. The company has charged an expense account for actual warranty costs incurred. Sales per books and warranty costs were as follows: 4. Actual Warranty Costs Incurred for Sales Made in Year Ended March 31 Sales Total 2018 $864,800 2018 $699 $699 2019 929,200 2019 331 $1.205 1,536 2020 1,651,400 2020 294 1,490 $1,757 3,541 5. A review of the corporate minutes reveals that the manager is entitled to a bonus of 0.5% of the income before deducting income tax and the bonus. The bonuses have never been recorded or paid. 6. Bad debts have been recorded on a direct write-off basis. Experience of similar enterprises indicates that losses will approximate 0.25% of sales. Bad debts written off and expensed were as follows: Bad Debts incurred on Sales Made in Total 2018 $690 $690 2019 736 $478 1,214 2020 322 1,656 $1,564 3,542 7. The bank deducts 6% on all contracts that it finances. Of this amount, 0.5% is placed in a reserve to the credit of Marigold Corporation and is refunded to Marigold as financed contracts are paid in full. The reserve established by the bank has not been reflected in Marigold's books. On the books of the bank for each fiscal year, the excess of credits over debits (the net increase) to the reserve account for Marigold was as follows: 2018 $2,760 2019 3,588 2020 4,692 $11,040 8. Commissions on sales have been entered when paid. Commissions payable on March 31 of each year were as follows: 2018 $1,288 2019 736 2020 1.030 Present a schedule showing the revised income before income tax for each of the years ended March 31, 2018, 2019, and 2020. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45). Do not leave any answer field blank. Enter Ofor amounts. Round answers to O decimal places, e.g. 5,125.) MARIGOLD CORPORATION Schedule of Revised Income Before Income Tax For the Years Ended March 31, 2018, 2019, and 2020 (Increases (Decreases) in Income) 2018 2019 2020 Income before tax, as reported $ $ $ $ Elimination of profit on consignments To correct C.O.D. sale Adjustment of warranty expense Bad debt adjustments Adjustment for contract financing Adjustment for commissions Adjustment for bonus, one-half of 1% of income before tax and bonus Revised income before income tax $ $ $ List of Accounts Prepare the journal entry or entries that you would give the bookkeeper to correct the books. Assume that the books have not yet been closed for the fiscal year ended March 31, 2020. Disregard corrections of income tax. (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 for the amounts. Round answers to decimal places, eg. 5,125.) Account Titles and Explanation Debit Credit (To adjust for consignments treated as sales, 3/31/20) (To adjust for C.O.D. sales not recorded, 3/31/19) (To set up allowance for warranty expense) (To set up accrued bonus payable to manager) (To set up allowance for uncollectible accounts) (To record finance charge reserve held by bank) (To adjust for accrued commissions) You have been asked by a client to review the records of Marigold Corporation, a small manufacturer of precision tools and machines that follows ASPE. Your client is interested in buying the business, and arrangements were made for you to review the accounting records. Your examination reveals the following. 1. Marigold Corporation started business on April 1, 2017, and has been reporting on a fiscal year ending March 31. The company has never been audited, but the annual statements prepared by the bookkeeper reflect the following income before closing and before deducting income tax: Year Ended March 31 Income Before Taxes 2018 $65,872 2019 102,488 2020 95,294 2. A relatively small number of machines have been shipped on consignment. These transactions were recorded as ordinary sales and billed in this way, with the gross profit on each sale recognized when the machine was shipped. On March 31 of each year, the amounts for machines billed and in the hands of consignees were as follows: 2018 $5,980 2019 none 2020 5,200 3. The sales price was determined by adding 30% to cost. Assume that the consigned machines are sold the following year. On March 30, 2019, two machines were shipped to a customer on a C.O.D. basis. The sale was not entered until April 5, 2019, when $5,612 cash was received. The machines were not included in the inventory at March 31, 2019. (Title passed on March 30, 2019.) All machines are sold subject to a five-year warranty. It is estimated that the expense ultimately to be incurred in connection with the warranty will amount to 0.5% of sales. The company has charged an expense account for actual warranty costs incurred. Sales per books and warranty costs were as follows: 4. Actual Warranty Costs Incurred for Sales Made in Year Ended March 31 Sales Total 2018 $864,800 2018 $699 $699 2019 929,200 2019 331 $1.205 1,536 2020 1,651,400 2020 294 1,490 $1,757 3,541 5. A review of the corporate minutes reveals that the manager is entitled to a bonus of 0.5% of the income before deducting income tax and the bonus. The bonuses have never been recorded or paid. 6. Bad debts have been recorded on a direct write-off basis. Experience of similar enterprises indicates that losses will approximate 0.25% of sales. Bad debts written off and expensed were as follows: Bad Debts incurred on Sales Made in Total 2018 $690 $690 2019 736 $478 1,214 2020 322 1,656 $1,564 3,542 7. The bank deducts 6% on all contracts that it finances. Of this amount, 0.5% is placed in a reserve to the credit of Marigold Corporation and is refunded to Marigold as financed contracts are paid in full. The reserve established by the bank has not been reflected in Marigold's books. On the books of the bank for each fiscal year, the excess of credits over debits (the net increase) to the reserve account for Marigold was as follows: 2018 $2,760 2019 3,588 2020 4,692 $11,040 8. Commissions on sales have been entered when paid. Commissions payable on March 31 of each year were as follows: 2018 $1,288 2019 736 2020 1.030 Present a schedule showing the revised income before income tax for each of the years ended March 31, 2018, 2019, and 2020. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45). Do not leave any answer field blank. Enter Ofor amounts. Round answers to O decimal places, e.g. 5,125.) MARIGOLD CORPORATION Schedule of Revised Income Before Income Tax For the Years Ended March 31, 2018, 2019, and 2020 (Increases (Decreases) in Income) 2018 2019 2020 Income before tax, as reported $ $ $ $ Elimination of profit on consignments To correct C.O.D. sale Adjustment of warranty expense Bad debt adjustments Adjustment for contract financing Adjustment for commissions Adjustment for bonus, one-half of 1% of income before tax and bonus Revised income before income tax $ $ $ List of Accounts Prepare the journal entry or entries that you would give the bookkeeper to correct the books. Assume that the books have not yet been closed for the fiscal year ended March 31, 2020. Disregard corrections of income tax. (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 for the amounts. Round answers to decimal places, eg. 5,125.) Account Titles and Explanation Debit Credit (To adjust for consignments treated as sales, 3/31/20) (To adjust for C.O.D. sales not recorded, 3/31/19) (To set up allowance for warranty expense) (To set up accrued bonus payable to manager) (To set up allowance for uncollectible accounts) (To record finance charge reserve held by bank) (To adjust for accrued commissions)