Background It is January 2020 and you have just been hired as the Chief Financial Officer for Chen and Sons Inc., a diversified corporation that has just finished a very fast-paced, dynamic year. Your predecessor left the firm in a hurry. Your primary responsibility is to finish the year's balance sheet and income statement. Specifically, you must prepare and present the following. 1) Record any necessary adjusting journal entries and closing journal entries including making any appropriate adjustments if you conclude that there are errors in various parts of your predecessor's work. Add any accounts necessary. Please make sure that you include detailed calculation schedules and any explanation to help understand your adjusting journal entries. Note that the unadjusted trial balance is provided on the next page, showing non-zero balance accounts. 2) Prepare the Trial Balance Worksheet (includes unadjusted trial balance, adjusted trial balance, and final trial balance); 3) Prepare a complete Multi-step Income Statement for the year ended December 31, 2019; 4) Prepare a Balance Sheet for the year ended December 31, 2019. Good luck! Unadjusted Trial Balances at the end of 2019 Chen and Sons Unadjusted Trial Balance 31-Dec 2019 debit credit Cash 24. 205.000 Accounts Receivable 12,000,000 Allowance for Bad debt 20.000 Inventory 12,500,000 Purchases 91.740.000 Construction in Progress Inventory 22,250,000 Billings on Contract 19.000.000 PP&E 48,000,000 Accum. Den 40.000.000 Assets held for sale 1,500,000 Accounts Payable 18.000.000 1,500,000 33.280.000. 150,000,000 ...105.000 Common Stock Retained Earnings... Sales. Sales Returns. Ninja Revenue Safatwirat. Revenue... Cost of Ninja Cost of Software-Safat Firat. General and Admin TOTAL 2,500,000 5.000.000 2,250,000 3.000.000 51,750,000 269.300.000 L 269.300.000 Sales and revenue information: a. Chen and Sons' main operation is the sole distributer of the products of Galaxy Wars that includes toys, stationary, and children clothes etc. Its related sales do not have special label on unadjusted trial balances (that is, "Sales" and "Sales Returns"). b. In addition to its main operations, in October 2019 Chen and Sons launched a new service through its website (labeled with "Ninja" on the unadjusted trial balances). Ninja offers online fitness training through contracted independent trainers. Each trainer sets her own price for a training session. Chen and Sons connects interested individuals with the trainers but does not directly provide any of the training. For its services and per the contract, Chen and Sons is entitled to 10% of the total per session fee. The company records the entire fee (100%) collected from the session as Ninja revenue. The company also recognizes its 90% of the collected fee as cost of Ninja, which is also the part of the collected fee that is remitted to the independent trainers Also, in addition to its main operations, Chen and sons' management entered into an agreement on August 1, 2019 to supply its internally developed home monitoring system, Safety First, and maintenance support to a regional 24 hour fitness chain. The details of the agreement calls for Chen and Sons to be paid $5,000,000 up front for the equipment and 3 years of maintenance support (beginning on agreement date). The fitness chain could have bought just the equipment for $6,000,000 with no support and they could have independently contracted for the maintenance support for $2,000,000 for the three year period. The cost of the equipment sold was $3,000,000 and Chen and Sons has recorded the $5,000,000 as a point-of-sale transaction. d. Finally, in addition to its main operations, Chen and Sons also has a division that builds theme parks. At the end of 2018, there was one building project in process, the $35,000,000 StarKingdom project (SK), which was started in June 2018. The original estimated costs for the SK project totaled $28,000,000 in 2018 but there have been substantial increases in the cost of materials resulting in a current total cost estimate of $28,500,000 for the job in 2019. The contract does not allow for renegotiation of the contracted price. Chen and Sons has a legally binding enforceable contract with both universities and all parties are expected to be able to perform under the contracts. The general ledger account Construction-in-Progress Inventory shows the following before any 2019 year-end adjusting entries. Construction-in-Progress Inventory 2018 9,800,000 2018 gross profit 2,450,000 2019 10,000,000 Billings-on-Contract 2018 10,000,000 2019 9,000,000 22.250.000 19.000.000 Costs and expenses sales information: e. Chen and Sons uses a periodic inventory system for its main operations (i.e., relates to item a above). The company has been using FIFO method. Upper management is contemplating a change in the method used to report the cost of goods sold. Please help the management to choose the method (either FIFO or DVLIFO) that maximizes earnings to shareholders. A physical inventory count indicated 40,000 units on hand at the end of 2019. For price index of a year, you can take the most recent per unit price of the year divided by the base year per unit purchase price. Please make sure that you show you calculation of COGS and ending inventory under both FIFO and DVLIFO and explain the reason(s) for the method chosen .......... Inventory information 2019... Units Unt Price Beg 25,000 500 40.000500 35.000.506 49.000 29 Oct 24.000 520 Nov Dec 30.000 Total purchase 1.. 178.000 Total 203.000 End Inv. units. .... 40.000 f. Chen and Sons uses straight-line depreciation and all fixed assets were purchased at the beginning of 2014 and have a 6 year useful life. No depreciation entries have been recorded in 2019. g. Chen and Sons management expects that there will be no additional sales returns for 2019 sales. h. Chen and Sons management does not expect there to be any change in the collectability of its credit sales related to its normal operations. Chen and Sons uses the Accounts Receivable approach to estimate bad debts, and the aging schedule at 12/31/2019 is summarized below. Day outstanding...% of Accts Res:Estimated % of Uncollectible.. 0-30 days 45%; 0.50% 30-60 days 35% 1.00% 60-90 days.. 90 days. 50% 20% Other information: i. Chen and Sons' tax rate is 30%. Ignore all other taxes. j. Chen and Sons made a decision to sell its Children Clothes operations (considered a "component') to an unaffiliated company on Oct. 31, 2018. The sale will close on April 22, 2020. 1) The carrying value of these operations is $1,500,000 on Oct 31, 2019. The unaffiliated company will pay $1,400,000. 2) From the notes left behind from your predecessor, you can see that in 2019, the Children Clothes operations accounted for 20% of the total main operations' sales and costs, 10% of the total general and administrative expenses and total bad debt expense. Please make sure that you include the details showing how the company's revenues, costs, and expenses are separated by continuing and discontinued operations. Note: There are 150,000 shares of common stock outstanding for all of 2018 and 2019. Background It is January 2020 and you have just been hired as the Chief Financial Officer for Chen and Sons Inc., a diversified corporation that has just finished a very fast-paced, dynamic year. Your predecessor left the firm in a hurry. Your primary responsibility is to finish the year's balance sheet and income statement. Specifically, you must prepare and present the following. 1) Record any necessary adjusting journal entries and closing journal entries including making any appropriate adjustments if you conclude that there are errors in various parts of your predecessor's work. Add any accounts necessary. Please make sure that you include detailed calculation schedules and any explanation to help understand your adjusting journal entries. Note that the unadjusted trial balance is provided on the next page, showing non-zero balance accounts. 2) Prepare the Trial Balance Worksheet (includes unadjusted trial balance, adjusted trial balance, and final trial balance); 3) Prepare a complete Multi-step Income Statement for the year ended December 31, 2019; 4) Prepare a Balance Sheet for the year ended December 31, 2019. Good luck! Unadjusted Trial Balances at the end of 2019 Chen and Sons Unadjusted Trial Balance 31-Dec 2019 debit credit Cash 24. 205.000 Accounts Receivable 12,000,000 Allowance for Bad debt 20.000 Inventory 12,500,000 Purchases 91.740.000 Construction in Progress Inventory 22,250,000 Billings on Contract 19.000.000 PP&E 48,000,000 Accum. Den 40.000.000 Assets held for sale 1,500,000 Accounts Payable 18.000.000 1,500,000 33.280.000. 150,000,000 ...105.000 Common Stock Retained Earnings... Sales. Sales Returns. Ninja Revenue Safatwirat. Revenue... Cost of Ninja Cost of Software-Safat Firat. General and Admin TOTAL 2,500,000 5.000.000 2,250,000 3.000.000 51,750,000 269.300.000 L 269.300.000 Sales and revenue information: a. Chen and Sons' main operation is the sole distributer of the products of Galaxy Wars that includes toys, stationary, and children clothes etc. Its related sales do not have special label on unadjusted trial balances (that is, "Sales" and "Sales Returns"). b. In addition to its main operations, in October 2019 Chen and Sons launched a new service through its website (labeled with "Ninja" on the unadjusted trial balances). Ninja offers online fitness training through contracted independent trainers. Each trainer sets her own price for a training session. Chen and Sons connects interested individuals with the trainers but does not directly provide any of the training. For its services and per the contract, Chen and Sons is entitled to 10% of the total per session fee. The company records the entire fee (100%) collected from the session as Ninja revenue. The company also recognizes its 90% of the collected fee as cost of Ninja, which is also the part of the collected fee that is remitted to the independent trainers Also, in addition to its main operations, Chen and sons' management entered into an agreement on August 1, 2019 to supply its internally developed home monitoring system, Safety First, and maintenance support to a regional 24 hour fitness chain. The details of the agreement calls for Chen and Sons to be paid $5,000,000 up front for the equipment and 3 years of maintenance support (beginning on agreement date). The fitness chain could have bought just the equipment for $6,000,000 with no support and they could have independently contracted for the maintenance support for $2,000,000 for the three year period. The cost of the equipment sold was $3,000,000 and Chen and Sons has recorded the $5,000,000 as a point-of-sale transaction. d. Finally, in addition to its main operations, Chen and Sons also has a division that builds theme parks. At the end of 2018, there was one building project in process, the $35,000,000 StarKingdom project (SK), which was started in June 2018. The original estimated costs for the SK project totaled $28,000,000 in 2018 but there have been substantial increases in the cost of materials resulting in a current total cost estimate of $28,500,000 for the job in 2019. The contract does not allow for renegotiation of the contracted price. Chen and Sons has a legally binding enforceable contract with both universities and all parties are expected to be able to perform under the contracts. The general ledger account Construction-in-Progress Inventory shows the following before any 2019 year-end adjusting entries. Construction-in-Progress Inventory 2018 9,800,000 2018 gross profit 2,450,000 2019 10,000,000 Billings-on-Contract 2018 10,000,000 2019 9,000,000 22.250.000 19.000.000 Costs and expenses sales information: e. Chen and Sons uses a periodic inventory system for its main operations (i.e., relates to item a above). The company has been using FIFO method. Upper management is contemplating a change in the method used to report the cost of goods sold. Please help the management to choose the method (either FIFO or DVLIFO) that maximizes earnings to shareholders. A physical inventory count indicated 40,000 units on hand at the end of 2019. For price index of a year, you can take the most recent per unit price of the year divided by the base year per unit purchase price. Please make sure that you show you calculation of COGS and ending inventory under both FIFO and DVLIFO and explain the reason(s) for the method chosen .......... Inventory information 2019... Units Unt Price Beg 25,000 500 40.000500 35.000.506 49.000 29 Oct 24.000 520 Nov Dec 30.000 Total purchase 1.. 178.000 Total 203.000 End Inv. units. .... 40.000 f. Chen and Sons uses straight-line depreciation and all fixed assets were purchased at the beginning of 2014 and have a 6 year useful life. No depreciation entries have been recorded in 2019. g. Chen and Sons management expects that there will be no additional sales returns for 2019 sales. h. Chen and Sons management does not expect there to be any change in the collectability of its credit sales related to its normal operations. Chen and Sons uses the Accounts Receivable approach to estimate bad debts, and the aging schedule at 12/31/2019 is summarized below. Day outstanding...% of Accts Res:Estimated % of Uncollectible.. 0-30 days 45%; 0.50% 30-60 days 35% 1.00% 60-90 days.. 90 days. 50% 20% Other information: i. Chen and Sons' tax rate is 30%. Ignore all other taxes. j. Chen and Sons made a decision to sell its Children Clothes operations (considered a "component') to an unaffiliated company on Oct. 31, 2018. The sale will close on April 22, 2020. 1) The carrying value of these operations is $1,500,000 on Oct 31, 2019. The unaffiliated company will pay $1,400,000. 2) From the notes left behind from your predecessor, you can see that in 2019, the Children Clothes operations accounted for 20% of the total main operations' sales and costs, 10% of the total general and administrative expenses and total bad debt expense. Please make sure that you include the details showing how the company's revenues, costs, and expenses are separated by continuing and discontinued operations. Note: There are 150,000 shares of common stock outstanding for all of 2018 and 2019