SOLUTION GUIDE 2014 2015 WORKING NET WORKING NET ASSETS LIBILITIES SHE CAPITAL INCOME ASSETS LIBILITIES SHE CAPITAL INCOMEBased on the data below compute the following required: A.Prepare the necessary adjusting journal entries as at the end of audit period, December 31, 2015. B. State the effects of the errors on the 2014 and 2015 assets, liabilities, SHE, Working Capital and Net Income. 0 Overstated U Understated NE No Effect A. Omissions of the following in the current year, 2015 and in prior year 2014: 2014 2015 a Accrued sales salaries 1,000 2,000 b Accrued interest income 3,000 4,000 C Prepaid insurance 5,000 6,000 d Unearned rent income 7,000 8,000 Advances from customers (Liability) 9,000 10,000 Cash received from customers had been included in sales, but should have been recognized as advances from customers, since goods were not shipped until the following year. Ending inventory (not counted 11,000 12,000 Accounts payable for purchases made 13,000 14,000 h Accounts receivable for sales made 15,000 16,000 B. Other errors noted: Goods shipped to consignee were immediately recognized as sales at 17,000 18,000 selling price and were likewise excluded from inventories at cost. Company recognizes profit equal to 20% of Sales. Unsold inventories at the end of each year, at selling prices were: Major repairs on the Equipment had been recognized as Expense, but 19,000 20,000 should have been capitalized as cost of Equipment. Annual depreciation rate on such equipment is 20%, but only 10% in the year of incurrence