Your answer is partially correct. The first audit of the books of Vaughn Company was made for the year ended December 31, 2026. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: 1. At the beginning of 2024, the company purchased a machine for $534,000 (salvage value of $53,400) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years. 2. At the end of 2025, the company failed to accrue sales salaries of $42,000. 3. 4. 5. A tax lawsuit that involved the year 2024 was settled late in 2026. It was determined that the company owed an additional $90,000 in taxes related to 2024. The company did not record a liability in 2024 or 2025 because the possibility of loss was considered remote, and charged the $90,000 to a loss account in 2026. Vaughn Company purchased a copyright from another company early in 2024 for $54,000. Vaughn had not amortized the copyright because its value had not diminished. The copyright has a useful life at purchase of 20 years. In 2026, the company wrote off $81,000 of inventory considered to be obsolete; this loss was charged directly to Retained Earnings.