PREPARE ANY ADJUSTING ENTRIES YOU FEEL ARE NECESSARY IN A SEPARATE TAB SHEET, IN A PROPER ADJUSTING JOURNAL ENTRY FORMAT, INCLUDING EXPLANATIONS

04 Jun PREPARE ANY ADJUSTING ENTRIES YOU FEEL ARE NECESSARY IN A SEPARATE TAB SHEET, IN A PROPER ADJUSTING JOURNAL ENTRY FORMAT, INCLUDING EXPLANATIONS

Question

Problem #1- You must use an “Excel” spreadsheet for
your answer.

Axion Corporation

Balance Sheet

December 31, 201X

Assets

Cash $ 32,500

Accounts
receivable 174,175

Land 140,000

Building 400,000

Equipment 100,000

Less: Accumulated depreciation
(80,000)

Prepaid expenses
14,000

Patent 20,000

Inventory 50,000

Total
Assets $
850,675

Liabilities and Owners’ Equity

Accounts
payable $ 77,300

Mortgage
payable 150,000

Taxes
payable 40,000

Unearned
revenue 11,000

Common
stock 50,000

Retained
earnings 522,375

Total
Liabilities and

Owners’ Equity $ 830,675

The books have been closed for the year. Any
changes in revenues or expenses will be adjusted to Retained Earnings.

Additional
Information:

1) Cash
included a customer’s check in the amount of $2,000 that was deposited on
December 28th, but was returned marked “NSF” on January 4th,
the following year. The customer has gone out of business and cannot be
located.

2) It
is estimated at 5% of the receivables will be uncollectible.

3) A
review of the land, building and equipment account indicated the land cost
$140,000. The building cost was $400,000, and the equipment cost $100,000.
Depreciation on the building has been calculated on the straight-line method
using a 40 year useful life and has been on the books for eight years. The
equipment was purchased two years ago and is being depreciated on the straight-line
method with a useful life of 10 years. The depreciation has not been recorded
for this year.

4) The
patent was purchased on January 2nd of the current year and has a legal life of
20 years. No amortization has been recorded for the current period.

5) $5,000
of the mortgage payable is due within the next 12 months.

6) $11,000
was recorded as unearned revenue when it was received in advance for a
customer’s order back in September. The goods were shipped on October 15th
of the current year.

7) Common
stock represents 5,000 shares of $1 par common. It was all sold for $10 per
share.

8) The
company was notified on January 15th (after the year end) that it is
being sued for $10,000,000.

Note: In
order to determine how some of these items are accounted for, you will have to
refer to other chapters in your book. For example, “Bad Debts” are discussed in
Chapter 7; Patents are discussed in Chapter 10 & 11, etc. You can find the
location of the information by referring to the index in the back of your book.

Required: a) Prepare a worksheet (Use the format from Exerc.3-28).
Post the numbers from the original balance sheet in the first two columns (as
if it were a trial balance).

b) Prepare any adjusting entries you feel are
necessary in a separate tab sheet, in a
proper adjusting journal entry format, including explanations.

c) Post the
adjusting journal entries to the worksheet, in the “Adjustments”columns.

d) Complete the
worksheet by putting the adjusted balances in the “Balance Sheet” columns.

(Note: There is no income statement)

Also- since there will be “multiple” adjusting entries
to retained earnings, you will need to sub-total the debits/credits as one
amount in order to enter them on the worksheet.

e) Prepare a
“corrected” Balance Sheet, in proper format . Use the following categories on
the Bal. Sheet:

– Current Assets

– Property,
Plant & Equipment (separate the three assets, and reflect the accumulated
depreciation for the building and the equipment)

–
Other
Assets

–
Current
Liabilities

–
Long-Term
Debt

–
Stockholder’s
Equity

NOTE: You can save all three worksheets in one file by
using the “Sheet 1, Sheet 2 & Sheet 3” tabs on the lower left corner of the
spreadsheet.

As a result of
your corrections, what is the overall dollar amount change

(Increase or Decrease)
to the net income? (Ignore the income tax effect).

Answer: __________________