IHI 88.doc


The following financial information is made available to you by the management of TrueFinance Co.
1.At the beginning of 2009, the company purchased equipment for $700,000(salvage value of $50,000) that had a useful life of 5 years. The bookkeeper used straight-line depreciation, but failed to deduct the salvage value in computing the depreciation base for the 3 years.
2.At the end of 2010, the company failed to accrue wages of $26,000.
3.There was a law suit pending against the company from 2009. It was settled late in 2011 and the company is required to pay $50,000. The company did not record a liability in 2009 or 2010 because the possibility of loss was considered remote, and debited the $50,000 to a loss account in 2011 and credited Cash for the same amount.
4.TruFinance Co purchased a Patent from another company early in 2009 for $50,000. During 2009 and 2010 TruFinance had amortized the Patent for a useful life of 10 years. At the beginning of 2010 TruFinance estimated that the useful life of the Patent to be 20 years.
5. In 2009, the company overstated $9,000 of inventory
Prepare the journal entries necessary in 2011 to correct the books, assuming that the books have not been closed. Disregard effects of corrections on income tax.