You have been assigned to examine the financial statements of Kobe, Inc for the year ended December 31, 2020 You discover the following situations in February 2021 Kobe, Inc has not accrued salaries payable at the end of each of the last 3 years, as follows Salaries are expensed when paid December 2018 $4,900 December 2019 $5,800 December 2020 $3,900 The physical inventory count has been incorrectly counted resulting in the following errors December 2018 Understated $16,400 December 2019 Overstated $ 6,800 December 2020 Overstated $ 8,000 Kobe, Inc purchased $4,500 of supplies on December 2, 2020 recording a debit to Supplies and credit to Accounts Payable The bill was paid on December 29, 2020, but not recorded until January 2, 2021 In 2020, the company sold for $3,500 equipment that had a book value of $2,000 and originally cost $30,000 The company credited the proceeds from the sale to the Equipment account The company made the following entry Cash 3,500 Equipment 3,500 At December 31, 2020 Kobe, 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, 2018 It has a 10 year useful life and no salvage value Depreciation expense recorded prior to 2020 under the double declining balance method was $28,000 Kobe, Inc has already recorded 2020 depreciation expense of $14,400 using the double declining balance During November 2019 , a competitor company filed a patent infringement suit against Kobe, Inc claiming damages of $150,000 In December 2019 the companys legal counsel has indicated that an unfavorable verdict is probable and a reasonable estimate of the courts award to the competitor is $70,000 The company has not reflected or disclosed this situation in the financial statements A $24,000 insurance premium paid on June 1, 2020 for a policy that expires on May 31, 2021, was charged to insurance expense A trademark was acquired January 5, 2018 for $50,000 No amortization has been recorded since its acquisition The maximum allowable amortization period is 10 years Kobe, Inc has not recorded any depreciation on their computer equipment for 2018 2020 It was acquired at the beginning of 2018 for $130,000, has a salvage value of $10,000 and useful life of 4 years 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 2018 $750 2019 800 2020 880 Reported Net Income is 2018 $750,000 2019 $630,000 2020 $580,000 Instructions b Assume the trial balance has been prepared but the books HAVE been closed for 2020 Assuming all amounts are material, prepare journal entries showing the adjustments that are required (Ignore income tax considerations) 5 ERA Project 2 Student Answer Sheet Summer 2021 a Base Inserir Desenhar Esquema da Pgina Frmulas Dados Rever Ver Partilhar Comentrios Arial AF A 11 Inserir V ab Moldar Texto LIL P1 Geral X LO AY O DX Eliminar Colar NIS Av Unir e Centrar LE 000 8 Formatao Formatar Estilos Condicional como Tabela de Clula Formatar Ordenar Localizar e e Filtrar Selecionar V fx E F G H 1 L M N O P Q R S T U V K14 4x A B D 1 Project 2 Part B 2 3 Prepare the adjusting entries assuming the Books HAVE been closed for 2020 may need to add an additional column 4 Note that you 5 6 1) 7 Debit Credit 8 9 10 11 12 2) 13 Debit Credit 14 15 16 Debit Credit Debit Credit 17 18 3) 19 20 21 22 23 24 4) 25 26 27 28 29 29 30 5) 31 32 Debit Credit Scoring Sheet Part A Books OPEN Part B Books CLOSED Part 100 5 ERA Project 2 Student Answer Sheet Summer 2021 Base Inserir Desenhar Esquema da Pgina Frmulas Dados Rever Ver Partilhar Comentrios X Inserir Arial AF A 11 V a Moldar Texto LIL P1 Geral III III 48 Ou DX Eliminar Colar NIS V Unir e Centrar CE V 000 8 Formatao Formatar Estilos Condicional como Tabela de Clula Formatar Ordenar Localizar e e Filtrar Selecionar K14 4x fx A B D E E F G H 1 L M N O P Q R s T U V Debit Credit Debit Credit 35 36 6) 37 37 38 20 39 40 41 42 7) 43 44 45 46 47 48 8) 49 50 51 52 53 Debit Credit 54 9) Debit Credit 55 56 57 58 59 60 10) 61 62 63 Debit Credit 64 65 66 67 Scoring Sheet Part A Books OPEN Part B Books CLOSED Part 100

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You have been assigned to examine the financial statements of Kobe, Inc. for the year ended December 31, 2020. You discover the following situations in

You have been assigned to examine the financial statements of Kobe, Inc. for the year ended December 31, 2020. You discover the following situations in February 2021.

Kobe, Inc. has not accrued salaries payable at the end of each of the last 3 years, as follows.

Salaries are expensed when paid.

December 2018 $4,900

December 2019 $5,800

December 2020 $3,900

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

December 2018 Understated $16,400

December 2019 Overstated $ 6,800

December 2020 Overstated $ 8,000

Kobe, Inc. purchased $4,500 of supplies on December 2, 2020 recording a debit to Supplies and credit to Accounts Payable. The bill was paid on December 29, 2020, but not recorded until January 2, 2021.

In 2020, the company sold for $3,500 equipment that had a book value of $2,000 and originally cost $30,000. The company credited the proceeds from the sale to the Equipment account. The company made the following entry:

Cash 3,500

Equipment 3,500

At December 31, 2020 Kobe, 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, 2018. It has a 10-year useful life and no salvage value. Depreciation expense recorded prior to 2020 under the double-declining-balance method was $28,000. Kobe, Inc. has already recorded 2020 depreciation expense of $14,400 using the double-declining balance.

During November 2019, a competitor company filed a patent-infringement suit against Kobe, Inc. claiming damages of $150,000. In December 2019 the companys legal counsel has indicated that an unfavorable verdict is probable and a reasonable estimate of the courts award to the competitor is $70,000. The company has not reflected or disclosed this situation in the financial statements.

A $24,000 insurance premium paid on June 1, 2020 for a policy that expires on May 31, 2021, was charged to insurance expense.

A trademark was acquired January 5, 2018 for $50,000. No amortization has been recorded since its acquisition. The maximum allowable amortization period is 10 years.

Kobe, Inc. has not recorded any depreciation on their computer equipment for 2018-2020. It was acquired at the beginning of 2018 for $130,000, has a salvage value of $10,000 and useful life of 4 years.

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.

2018 $750

2019 800

2020 880

Reported Net Income is:

2018	$750,000
2019	$630,000
2020	$580,000

Instructions

b.Assume the trial balance has been prepared but the books HAVE been closed for 2020. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations).

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5 ERA = Project #2 Student Answer Sheet Summer 2021 a Base Inserir Desenhar Esquema da Pgina Frmulas Dados Rever Ver Partilhar Comentrios Arial AF A 11 Inserir = = V ab Moldar Texto LIL P1 Geral X LO * AY O DX Eliminar Colar NIS Av = = = Unir e Centrar LE % 000 8 Formatao Formatar Estilos Condicional como Tabela de Clula Formatar Ordenar Localizar e e Filtrar Selecionar V fx E F G H 1 L M N O P Q R S T U V K14 4x A B D 1 Project #2 Part B 2 3 Prepare the adjusting entries assuming the Books HAVE been closed for 2020. may need to add an additional column. 4 Note that you 5 6 1) 7 Debit Credit 8 9 10 11 12 2) 13 Debit Credit 14 15 16 Debit Credit Debit Credit 17 18 3) 19 20 21 22 23 24 4) 25 26 27 28 29 29 30 5) 31 32 Debit Credit Scoring Sheet Part A Books OPEN Part B Books CLOSED Part + + 100% 5 ERA = Project #2 Student Answer Sheet Summer 2021 Base Inserir Desenhar Esquema da Pgina Frmulas Dados Rever Ver Partilhar Comentrios X Inserir Arial AF A 11 V a Moldar Texto LIL P1 Geral III|III 48- Ou DX Eliminar Colar NIS V + Unir e Centrar CE V * % 000 8 Formatao Formatar Estilos Condicional como Tabela de Clula Formatar Ordenar Localizar e e Filtrar Selecionar K14 4x fx A B D E E F G H 1 L M N O P Q R s T U V Debit Credit Debit Credit 35 36 6) 37 37 38 20 39 40 41 42 7) 43 44 45 46 47 48 8) 49 50 51 52 53 Debit Credit 54 9) Debit Credit 55 56 57 58 59 60 10) 61 62 63 Debit Credit 64 65 66 67 Scoring Sheet Part A Books OPEN Part B Books CLOSED Part + + 100%