Journal Entries to Correct Accounts
The first audit of the books for Hintze Corporation was made for the year ended December 31, 2008. In reviewing the books, the auditor discovered that certain adjustments had been overlooked at the end of 2007 and 2008 and that other items had been improperly recorded. Omissions and other failures for each year are summarized as follows:
|
|
2007 |
2008 |
|
Sales Salaries Payable |
$2,100 |
$1,900 |
|
Interest Receivable |
450 |
250 |
|
Prepaid Insurance |
500 |
200 |
|
Advances from Customers |
1,400 |
1,900 |
|
(Collections from customers had been included in sales but |
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should have been recognized as advances from customers |
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because goods were not shipped until the following year) |
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|
|
Equipment |
1,100 |
900 |
|
(Expenditures had been recognized as repairs but should |
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have been recognized as cost of equipment; the depreciation |
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rate on such equipment is 10% per year, but depreciation in |
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the year of the expenditure is to be recognized at 5%) |
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Prepare journal entries to correct revenue and expense accounts for 2008,and record assets and liabilities that require recognition on the balance sheet as of December 31, 2008. Assume that the nominal accounts for 2008 have not yet been closed into the income summary account.