Reference no: EM132657576

Question - The unadjusted trial balance of Skysong, Inc., a private company following ASPE, at December 31, 2020, is as follows:

	Debit	Credit
Cash	$17,330
Accounts receivable	102,600
Allowance for doubtful accounts		$3,430
Inventory	59,600
Prepaid insurance	4,708
Bond investment at amortized cost	56,400
Land	31,900
Building	151,205
Accumulated depreciation - building		15,934
Equipment	34,200
Accumulated depreciation - equipment		5,700
Goodwill	16,550
Accounts payable		100,900
Bonds payable (20-year, 8%)		180,000
Common shares		115,300
Retained earnings		45,329
Sales revenue		192,500
Rent revenue		11,250
Rent expense	19,800
Supplies expense	10,600
Purchases	98,200
Purchase discount		800
Salaries and wages expense	55,900
Interest expense	12,150
	$671,143	$671,143

Additional information:

1. Actual rent costs amounted to $1,320 per month. The company has already paid for rent for the first quarter of 2021.

2. The building was purchased and occupied on January 1, 2018, with an estimated useful life of 15 years, and residual value of $31,700. (The company uses straight-line depreciation.)

3. Prepaid insurance contains the premium costs of several policies, including Policy A, cost of $2,656, one-year term, taken out on April 1, 2020; and Policy B, cost of $2,052, three-year term, taken out on September 1, 2020.

4. A portion of Skysong's building has been converted into a snack bar that has been rented to the Concord Corporation since July 1, 2019, at a rate of $7,500 per year payable each July 1 in advance.

5. One of the company's customers declared bankruptcy on December 30, 2020. It is now certain that the $2,600 the customer owes will never be collected. This fact has not been recorded. In addition, Skysong estimates that 5% of the Accounts Receivable balance on December 31, 2020, will become uncollectible.

6. An advance of $570 to a salesperson on December 31, 2020, was charged to Salaries and Wages Expense.

7. On November 1, 2018, Skysong issued 180 $1,000 bonds at par value. Interest is paid semi-annually on April 30 and October 31.

8. The equipment was purchased on January 1, 2018, with an estimated useful life of 12 years, and no residual value. (The company uses straight-line depreciation.)

9. On August 1, 2020, Skysong purchased at par value 40 $1,410, 8% bonds maturing on July 31, 2022. Interest is paid on July 31 and January 31.

10. The inventory on hand at December 31, 2020, was $88,800 after a physical inventory count. (Use "Inventory" account for closing out the beginning inventory amount and recording the ending inventory amount.)

Required - Prepare adjusting and correcting entries for December 31, 2020, using the information given. Record the adjusting entry for inventory using a Cost of Goods Sold account.