ACFI-492/592 Advanced Financial Reporting Fall 2023 Project #2 You have been assigned to examine the financial statements of Mari, Inc. for the year ended December 31, 2023. You discover the following situations in February 2024. On December 31, 2023, Mari, Inc. decided to change the depreciation method on its machinery from double-declining-balance to straight-line. The Machinery had an original cost of $100,000 when purchased on January 2, 2022. It has a 10-year useful life and $5,300 salvage value. Depreciation expense recorded prior to 2023 under the double-declining-balance method was $20,000. Mari, Inc. has already recorded 2023 depreciation expense of $16,000. The physical inventory count has been incorrectly counted resulting in the following errors. December 2021 Overstated $7,600 December 2022 Understated $5,200 December 2023 Overstated $5,600 Mari, Inc. purchased $3,400 of supplies on September 4, 2023, recording a debit to Supplies Expense and credit to Cash. The Supplies account had a balance of $450 on January 1, 2023. A count revealed there were $700 on hand on December 31, 2023. No entries have been made to Supplies all year.In 2023, the company sold equipment for $7,200 that had a book value of $4,200 and originally cost $60,000. The company credited the proceeds from the sale to the Equipment account. The company made the following entry: Cash 7,200 Gain on Sale of Equipment 7,200 Mari, Inc. has not recorded any depreciation for a machine they purchased on October 1, 2021. They paid $250,000 for the machine which has a salvage value of $10,000 and useful life of 6 years. The company has estimated warranty expense to be 1.8% in the past and made an entry for $145,00 in 2023. However, the company decided that it should only be 1.6% this year which amounts to $125,000. A trademark was acquired January 2, 2022 for $40,000. No amortization has been recorded since its acquisition. The maximum allowable amortization period is 10 years. A $24,000 insurance premium was paid on September 1, 2022, for a six month policy that expires on February 28, 2023, was charged to insurance expense in 2022. In July 2021, a competitor company filed a patent-infringement suit against Jordan, Inc. claiming damages of $140,000. In December 2021 the company’s legal counsel has indicated that an unfavorable verdict is probable and a reasonable estimate of the court’s award to the competitor is $85,000. The company made the following entry in 2023. Patent-infringement Expense 85,000 Lawsuit Liability 85,000 Mari, Inc. has not accrued commissions payable at the end of each of the last 3 years, as follows. Salaries are expensed when paid the 1st week of January in 2024. December 2021 $3,800 December 2022 $5,300 December 2023 $4,200 Reported Net Income is: 2021 $745,000 2022 $720,000 2023 $690,000 Instructions Assume the trial balance has been prepared but the books HAVE NOT been closed for 2023. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations). Assume the trial balance has been prepared but the books HAVE been closed for 2023. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations). Prepare a schedule correcting net incomes for 2021, 2022 and 2023 assuming the books HAVE NOT been closed for 2023.