You have been assigned to examine the financial statements for the year ended December 31, 2015. You discover the following situations in February 2016.
1. The company received $24,000 from a customer on a special order on December 22, 2015. It was recorded as a sale on the day the money was received. The merchandise arrived at place of business on January 16, 2016 and shipped it to the customer on January 17, 2016.
2. In 2015, the company sold equipment for $2,200 which originally cost $25,000 and had a book value of $4,000.
The company recorded the following on the date of sale:
Cash 2,200
Equipment 2,200
a) Assume the trial balance has been prepared but the books HAVE NOT been closed for 2015. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations).
b) Assume the trial balance has been prepared but the books HAVE been closed for 2015. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations).
c) Prepare a schedule correcting net incomes for 2013, 2014 and 2015.