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.
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.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...
Related questions
Topic Video
Question
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 respectivejournal 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.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Managerial Accounting: The Cornerstone of Busines…](https://www.bartleby.com/isbn_cover_images/9781337115773/9781337115773_smallCoverImage.gif)
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
![Financial Accounting](https://www.bartleby.com/isbn_cover_images/9781337272124/9781337272124_smallCoverImage.gif)
Financial Accounting
Accounting
ISBN:
9781337272124
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
![Managerial Accounting: The Cornerstone of Busines…](https://www.bartleby.com/isbn_cover_images/9781337115773/9781337115773_smallCoverImage.gif)
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
![Financial Accounting](https://www.bartleby.com/isbn_cover_images/9781337272124/9781337272124_smallCoverImage.gif)
Financial Accounting
Accounting
ISBN:
9781337272124
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
![Individual Income Taxes](https://www.bartleby.com/isbn_cover_images/9780357109731/9780357109731_smallCoverImage.gif)
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Financial Accounting: The Impact on Decision Make…](https://www.bartleby.com/isbn_cover_images/9781305654174/9781305654174_smallCoverImage.gif)
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning