The first audit of the books for Ringer Company was made for the year ended December 31, 2013. In reviewing the books, the auditor discovered that certain adjustments had been overlooked at the end of 2012 and 2013 and that other items had been improperly recorded. Omissions and other failures for each year are summarized as follows:
2012 2013
Sales Salaries Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$1,800..........$1,400
Interest Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .700..............550
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .450..............250
Advances from Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,900............2,200
(Collections from customers had been included in sales but
should have been recognized as advances from customers
because goods were not shipped until the following year.)
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,600...........1,300
(Expenditures had been recognized as repairs but should have been recognized as cost of equipment; the depreciation rate on such equipment is 10% per year, but depreciation in the year of the expenditure is to be recognized at 5%.)
Prepare journal entries to correct revenue and expense accounts for 2013, and record assets and liabilities that require recognition on the balance sheet as of December 31, 2013. Assume that the nominal accounts for 2013 have not yet been closed into the income summary account.