You have been assigned to examine the financial statements of Picard Corporation for the year ended December 31, 2011, as prepared following IFRS. You discover the following situations:
1. The physical inventory count on December 31, 2010, improperly excluded merchandise costing $26,000 that had been temporarily stored in a public warehouse. Picard uses a periodic inventory system.
2. The physical inventory count on December 31, 2011, improperly included merchandise with a cost of $15,400 that had been recorded as a sale on December 27, 2011, and was being held for the customer to pick up on January 4, 2012.
3. A collection of $6,700 on account from a customer received on December 31, 2011, was not recorded until January 2, 2012.
4. Depreciation of $4,600 for 2011 on delivery vehicles was not recorded.
5. In 2011, the company received $3,700 on a sale of fully depreciated equipment that originally cost $25,000. The company credited the proceeds from the sale to the Equipment account.
6. During November 2011, a competitor company filed a patent infringement suit against Picard, claiming damages of $620,000. The company’s legal counsel has indicated that an unfavourable verdict is probable and a reasonable estimate of the court’s award to the competitor is $450,000. The company has not reflected or disclosed this situation in the financial statements.
7. A large piece of equipment was purchased on January 3, 2011, for $41,000 and was charged in error to Repairs Expense. The equipment is estimated to have a service life of eight years and no residual value. Picard normally uses the straight-line depreciation method for this type of equipment.
8. Picard has a portfolio of temporary investments reported as trading investments at fair value. No adjusting entry has been made yet in 2011. Information on carrying amounts and fair value is as follows:
9. At December 31, 2011, an analysis of payroll information showed accrued salaries of $10,600. The Accrued Salaries Payable account had a balance of $16,000 at December 31, 2011, which was unchanged from its balance at December 31, 2010.
10. An $18,000 insurance premium paid on July 1, 2010, for a policy that expires on June 30, 2013, was charged to insurance expense.
11. A trademark was acquired at the beginning of 2010 for $36,000. Through an oversight, no amortization has been recorded since its acquisition. Picard expected the trademark to benefit the company for a total of approximately 12 years.
Assume that the trial balance has been prepared, the ending inventory has not yet been recorded, and the books have not been closed for 2011. Assuming also that all amounts are material, prepare journal entries showing the adjustments that are required. Ignore income tax considerations.

  • CreatedAugust 23, 2015
  • Files Included
Post your question