Error Correction: At the end of 2014, while auditing Sandlin Company's books, before the books have been closed, you find the following items:
(a) A building with a 30-year life (no residual value, straight line depreciation) was purchase January 1, 2014, by issuing a $90,000 non-interest bearing, 4 year note. The entry made to record the purchase was a debut to Building and a credit to Notes Payable for $90,000; 12% is a fair rate of interest on the note.
(b) The inventory at the end of 2014 was found to be overstated by $15,000. At the time, it was discovered that the inventory at the end of 2013 had been overstated by $35,000. The company uses the perpetual inventory system.
(c) For the last 3 years, the company has failed to accrue salaries and wages. The correct amount at the end of each year were: 2012, $12,000; 2013, $18,000; and 2014, $10,000
Required:
1. Prepare journal entries to correct the errors, Ignore income taxes.
2. Assume, instead, that the company discovered the errors after it had closed the books. Prepare the journal entries to correct the errors. Ignote income taxes.