Question 2.Richerfold Ltd had the following transactions and 2020:inventory valued at $3,500,000 as at January 1, 2020 with an obsolete/spoilage stock provision of 4%. In May 2020 the company upgraded its refrigeration storage facilities which allowed the business to store items longer and reduce spoilage. The obsolete stock provision was reviewed and changed to 2%. The inventory balance at December 31, 2020 was $2,250,000.The accounts receivable as at January 1, 2020 was $245,000 and the bad provision was 3% however due to the economic downturn in 2020 the company increased the provision to 5%. The accounts receivable was $800,000 at Dec 31, 2020. Calculate the provision for obsolete stock and bad debts and prepare the respective journal entries at December 31, 2020 The following errors were discovered in 2021:A compressor costing $250,000 for the refrigeration storage facilities purchased on April 1, 2020 was expensed in 2020. Depreciate straight line for 10 years.Cheques issued in December 2020 totalling $186,225 to pay expenses were cashed in January 2021 and were not recorded in 2020. The expenses were recorded in accounts payable in 2020. Prepare the adjusting journal entries required to correct these items given that the books for 2020 are not closed. Prepare the journal entries for the year ended December 31, 2021.

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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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Question 2.

Richerfold Ltd had the following transactions and 2020:

inventory valued at $3,500,000 as at January 1, 2020 with an obsolete/spoilage stock provision of 4%. In May 2020 the company upgraded its refrigeration storage facilities which allowed the business to store items longer and reduce spoilage. The obsolete stock provision was reviewed and changed to 2%. The inventory balance at December 31, 2020 was $2,250,000.
The accounts receivable as at January 1, 2020 was $245,000 and the bad provision was 3% however due to the economic downturn in 2020 the company increased the provision to 5%. The accounts receivable was $800,000 at Dec 31, 2020.

Calculate the provision for obsolete stock and bad debts and prepare the respective journal entries at December 31, 2020

The following errors were discovered in 2021:

A compressor costing $250,000 for the refrigeration storage facilities purchased on April 1, 2020 was expensed in 2020. Depreciate straight line for 10 years.
Cheques issued in December 2020 totalling $186,225 to pay expenses were cashed in January 2021 and were not recorded in 2020. The expenses were recorded in accounts payable in 2020.

Prepare the adjusting journal entries required to correct these items given that the books for 2020 are not closed.
Prepare the journal entries for the year ended December 31, 2021.

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