On April 1, 2020, you were hired by Binus Inc., a closely held company, as a staff member of its newly created internal auditing department. While reviewing the company’s records for 2018 and 2019, you discover that no adjustments have yet been made for the items listed below:Required:Explain the problems for each items and prepare journal entries showing the adjustments that are required! 1. Interest income of $20,000 was not accrued at the end of 2018. It was recorded when receivedin January 2019.2. A computer costing $10,000 was expensed when purchased on July 1, 2018. It is expected tohave a 4-year life with no residual value. The company typically uses straight-line depreciationfor all fixed assets.3. Research costs of $45,000 were incurred early in 2018. They were capitalized and were to beamortized over a 3-year period. Amortization was recorded for 2018 and 2019.4. On January 2, 2018, Binus leased a building for 5 years at a monthly rental of $11,000. On thatdate, the company paid the following amounts, which were expensed when paid.Security deposit$35,000First month's rent$11,000$11,000$57,0005. The company received $60,000 from a customer at the beginning of 2018 for services that it isLast month's rentto perform evenly over a 3-year period beginning in 2018. None of the amount received wasreported as unearned revenue at the end of 2018.6. Merchandise inventory costing $24,000 was in the warehouse at December 31, 2018, but wasincorrectly omitted from the physical count at that date. The company uses the periodicinventory method.

Journal entry is a record of financial transactions in the books of accounts. It contains debit and…

Answered: On April 1, 2020, you were hired by…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On April 1, 2020, you were hired by Binus Inc., a closely held company, as a staff member of its newly created internal auditing department. While reviewing the company’s records for 2018 and 2019, you discover that no adjustments have yet been made for the items listed below:

Required:
Explain the problems for each items and prepare journal entries showing the adjustments that are required!

1. Interest income of $20,000 was not accrued at the end of 2018. It was recorded when received
in January 2019.
2. A computer costing $10,000 was expensed when purchased on July 1, 2018. It is expected to
have a 4-year life with no residual value. The company typically uses straight-line depreciation
for all fixed assets.
3. Research costs of $45,000 were incurred early in 2018. They were capitalized and were to be
amortized over a 3-year period. Amortization was recorded for 2018 and 2019.
4. On January 2, 2018, Binus leased a building for 5 years at a monthly rental of $11,000. On that
date, the company paid the following amounts, which were expensed when paid.
Security deposit
$35,000
First month's rent
$11,000
$11,000
$57,000
5. The company received $60,000 from a customer at the beginning of 2018 for services that it is
Last month's rent
to perform evenly over a 3-year period beginning in 2018. None of the amount received was
reported as unearned revenue at the end of 2018.
6. Merchandise inventory costing $24,000 was in the warehouse at December 31, 2018, but was
incorrectly omitted from the physical count at that date. The company uses the periodic
inventory method.

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