Avian Company
December 31, 2012
Trial Balance
	Book trial balance
	Debit	Credit
Assets:
Cash	125,340
Accounts Receivable	1,698,056
Allowance for Bad Debts		42,106
Estimated U.S. Income Tax Prepayments	240,000
Inventories	497,748
Other Assets	255,494
Buildings & Equipment	2,607,242
Accum. Depreciation		831,444
Liabilities & Equity:
Accounts Payable & Accruals		767,872
Common Stock		3,000,000
Retained Earnings (beginning of year, 1/1/12)		160,041
Dividends Declared and Paid	130,000
Revenue:
Sales		8,092,761
Sales Returns & Allowances	201,812
Interest Income		24,813
Dividend Income		4,200
Miscellaneous Income		33,890
Cost of Goods Sold
Beginning Inventory	510,423
Purchases (net of R & A)	5,134,522
Ending Inventory		497,748
Other Costs & Expenses
Officers Salaries	500,000
Sales Salaries	317,919
Administrative Salaries and Wages	230,081
Repairs & Maintenance	35,030
Bad Debts Expense	17,667
Payroll Taxes	93,728
Property Taxes	36,153
Charitable Contributions	10,500
Depreciation	177,000
Advertising Expense	265,249
Pension Plan Expense	36,650
Employee Group Health Insurance	26,432
Entertainment & Meals Expense	16,900
Officer's Key Person Life Insurance	26,670
Other Expenses	264,259
Federal income tax expense (books)
Totals	13,454,875	13,454,875

Information:

1. Analysis of the Allowance for Doubtful Accounts shows:

Beginning of year balance	$38,476
Provision for the year	17,667
Write-offs in the year	(14,037)
End of year balance on 12/31	$42,106

2. All charitable contributions were made in cash to qualified organizations.

3. Four estimated federal income tax payments of $60,000 were made timely.

4. Entertainment expenses consist only of reimbursements for business meals & entertainment incurred by the company's officers & sales force.

5. $3,560 of the interest income was earned on investments in tax-exempt state bonds. The rest of the interest income was earned from investments in taxable corporate bonds. Dividend income is from shares of Microsoft Corporation. The company owns much less that 1% of the outstanding shares.

6. The company owns several insurance policies on the lives of its officers and key employees. The company is the beneficiary of these policies. Premiums on these policies cost $26,670 this year.

7. MACRS depreciation for tax purposes is $253,000.

8. All appropriate financial reporting adjustments have been made to the trial balance except for the provision for income taxes. You will need to calculate and record an adjusting journal entry for the book income tax expense to complete the book basis trial balance in order to produce the GAAp basis financial statements..

Requirements:

Part 1. A. Write the adjusting journal entry [in proper journal entry form] for book tax expense & tax liability AND prepare financial statements, specifically, a [book basis] balance sheet, income statement and retained earnings statement. Your tax expense adjusting entry should include a debit to book tax expense, a credit to tax prepayments and a debit or credit to deferred tax and a credit to tax liability (if any). Note: as per (3) above, the company has made timely estimated tax payments. Do you see these on the company