Lindy Company's auditor discovered two errors. No errors were corrected during 2020. The errors are described as follows:
(1) Merchandise costing $4,100 was sold to a customer for $9,100 on December 31, 2020, but it was recorded as a sale on January 2, 2021. The merchandise was properly excluded from the 2020 ending inventory. Assume the periodic inventory system is used.
(2) A machine with a four-year life was purchased on January 1, 2020. The machine cost $21,000 and has no expected salvage value. No depreciation was taken in 2020 or 2021. Assume the straight-line method for depreciation.
Required:
Prepare appropriate journal entries (assume the 2021books have not been closed). Ignore income taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1) We need to reverse the sales entry because the sale actually took place during 2020, not 2021. Since the sale was made in 2020, it should have increased net profit (retained earnings) during 2020, so we now correct both mistakes with the following entry:

Dr Sales revenue 9,100  (sales revenue decreases)

     Cr Cost of goods sold 4,100  (COGS decreases)

     Cr Retained earnings 5,000 (retained earnings increase)

2) The journal entry must record the depreciation expense during 2021, and must decrease net profits 2020 (retained earnings), depreciation expense per year = $21,000 / 4 = $5,250:

Dr Retained earnings 5,250 (retained earnings decrease)

Dr Depreciation expense 5,250 (expenses decrease)

    Cr Accumulated depreciation 10,500 (asset carrying value decreases)

answer; /// i believe the correct answer is first in, first out(fifo); //