You have been assigned to examine the financial statements of Jordan, Inc. for the year ended December 31, 2023. You discover the following situations in February 2024.

1. The physical inventory has been incorrectly counted resulting in the following errors.

December 2021 Understated $12,600

December 2022 Overstated $9,200

December 2023 Understated $8,000

2. Jordan, Inc. purchased $5,600 of supplies on May 12, 2023, recording a debit to Supplies Expense and credit to Cash. The Supplies account had a balance of $2,100 on January 1, 2023. A count revealed there were $3,200 on hand on December 31, 2023. No entries have been made to the Supplies account all year.

3. At December 31, 2021 Jordan, Inc. decided to change the depreciation method on its machinery from double-declining-balance to straight-line. The Machinery had an original cost of $100,000 when purchased on July 1, 2019. It has a 10-year useful life and no salvage value. Depreciation expense recorded prior to 2021 under the double-declining-balance method was $28,000. Jordan, Inc. has already recorded 2021 depreciation expense of $14,400 using the double-declining balance.

4. During November 2021, a competitor company filed a patent-infringement suit against Jordan, Inc. claiming damages of $110,000. In December 2021 the companys legal counsel has indicated that an unfavorable verdict is probable and a reasonable estimate of the courts award to the competitor is $60,000. The company made the following entry in 2022.

Patent-infringement Expense 60,000

Lawsuit Liability 60,000

5. Jordan, Inc. has not accrued commissions payable at the end of each of the last 3 years, as follows. Salaries are expensed when paid the 1^st week of January in 2024.

December 2021 $3,800

December 2022 $5,300

December 2023 $4,200

6. The December utilities bills have been expensed in January, the following month, when paid. Utilities payable on December 31 of each year were as follows.

2021 $900

2022 920

2023 1,100

7. Jordan, Inc. has not recorded any depreciation for a machine they purchased on July 1, 2021. They paid $132,000 for the machine which has a useful life of 6 years.

8. The company has estimated warranty expense to be 2% in the past and made an entry for $200,000 in 2023. However, the company decided that it should only be 1.8% this year which amounts to $180,000.

9. In 2023, the company sold equipment for $5,800 cash that had a book value of $6,400 and originally cost $55,000. The company credited the proceeds from the sale to the Equipment account. The company made the following entry:

Cash 5,800

Loss on Sale of Equipment 600

Equipment 6,400

10 A $24,000 insurance premium paid on July 1, 2022, for a policy that expires on June 30, 2023, was charged to prepaid insurance when paid. No further entries have been made regarding this insurance.

Reported Net Income is:

2021	$670,000
2022	$580,000
2023	$620,000

Instructions

1. Assume the trial balance has been prepared but the books HAVE NOT been closed for 2023. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations).
2. Assume the trial balance has been prepared but the books HAVE been closed for 2023. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations).
3. Prepare a schedule correcting net incomes for 2021, 2022 and 2023 assuming the books HAVE NOT been closed for 2023.