The first audit of the books of Ayayai Company was made for the year ended December 31, 2021. 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 2019, the company purchased a machine for $468k (salvage value of $46,800) 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 2020, the company failed to accrue sales salaries of $50k. 3. A tax lawsuit that involved the year 2019 was settled late in 2021. It was determined that the company owed an additional $80k in taxes related to 2019. The company did not record a liability in 2019 or 2020 because the possibility of loss was considered remote, and charged the $80k to a loss account in 2021. 4. Ayayai Company purchased the copyright from another company early in 2019 for $51k. Ayayai had not amortized the copyright because its value had not diminished. The copyright has a useful life at the purchase of 20 years. 5. In 2021, the company wrote off $85k of inventory considered to be obsolete; this loss was charged directly to Retained Earnings. Prepare the journal entries necessary in 2021 to correct the books, assuming that the books have not been closed. Disregard effects of corrections on income tax. Use whole numbers, & if an entry isn't needed type "No Entry". No. Account Titles and Explanation Debit Credit 1. (Space for 3 account titles) 2. (Space for 2 account titles) 3. (Space for 2 account titles) 4. (Space for 3 account titles) 5. (Space for 2 account titles)
The first audit of the books of Ayayai Company was made for the year ended December 31, 2021. 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 2019, the company purchased a machine for $468k (salvage value of $46,800) that had a useful life of 6 years. The bookkeeper used straight-line
2. At the end of 2020, the company failed to accrue sales salaries of $50k.
3. A tax lawsuit that involved the year 2019 was settled late in 2021. It was determined that the company owed an additional $80k in taxes related to 2019. The company did not record a liability in 2019 or 2020 because the possibility of loss was considered remote, and charged the $80k to a loss account in 2021.
4. Ayayai Company purchased the copyright from another company early in 2019 for $51k. Ayayai had not amortized the copyright because its value had not diminished. The copyright has a useful life at the purchase of 20 years.
5. In 2021, the company wrote off $85k of inventory considered to be obsolete; this loss was charged directly to
Prepare the
No. Account Titles and Explanation Debit Credit
1. (Space for 3 account titles)
2. (Space for 2 account titles)
3. (Space for 2 account titles)
4. (Space for 3 account titles)
5. (Space for 2 account titles)
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