Bearcat, LLP is auditing Dumbledore Manufacturing, Inc. (DMI), a privately-held company, for the year ended December 31, 2019. You are the staff auditor responsible for preparing the financial statements. With the unadjusted trial balance provided, you are responsible for the following:

1. Recording any adjusting journal entries based on audit findings on both the trial balance and the AJE report. Dont forget to add a description.
2. Accumulating any passed adjusting journal entries based on audit findings and determining whether income effect of entries is below materiality.
3. Creating the financial statements, including the Balance Sheets, Income Statements, Statements of Comprehensive Income, Changes in Stockholders Equity and Cash Flows for the years ending December 31, 2019 and 2018.
   1. In the excel file provided, you are to use formulas for every input cell to show where you got each number. Some of the formulas have been provided for you as a start (dont change any of the pre-populated formulas!).

Deliverable:

You must turn in the excel file Financial Statement Exercise by Thursday July 30^th at 11:59PM.

General Audit Planning Information:

Materiality = $40,000

PAJE Scope = $2,000

Audit Findings:

1. When auditing accounts receivable, it was determined that DMI incorrectly billed a customer. Invoice #4H9JMP should have been for 100 crates, but instead it was for 1,000 crates (keying error). DMI was contacted by the customer in January and realized this was an error which they wanted to correct on the 2019 trial balance and Bearcat LLP will record an adjusting entry for. Sales price per crate was $190 and the cost per crate was $100.

2. When auditing prepaid expenses, it was discovered that the prepaid insurance account was overstated by $7,500. DMI does not want to record an adjusting entry to correct for the outage.

3. When auditing other assets, it was determined that DMI did not amortize goodwill in 2019 as they intended to for the acquisition that occurred on 12/31/18. Goodwill is amortized over 10 years. DMI realized that in order to keep the account on track for the 10 year amortization they needed to record an entry to correct this in 2019 and Bearcat LLP will record an adjusting entry.

4. When auditing accrued expenses, it was discovered that DMI failed to accrue for the last pay period of December wages. DMIs pay schedule is bi-weekly (10 working days) and the payroll report for that full 2-week period leading up to the end of the year totaled $352,000. Per review of the calendar, 7 days should have been accrued for at December 31, 2019. Payroll expenses are allocated in the following manner:
   1. COGS 50%
   2. Salary 30%
   3. Hourly 20%

Due to the magnitude of the error, DMI needs to record an adjusting entry to correct.

5. When performing the search for unrecorded liabilities test, it was discovered that an invoice relating to 2019 services was incorrectly excluded from the accounts payable aging. Total additional expense to record dues/subscription/seminars expense #74650 was $1,850 which extrapolated to $25,674. DMI does not want to record an adjusting entry to correct as this is an extrapolated number versus an actual known error.

6. When auditing the bank reconciliation for the Cash Operating account at Chase, a $450 error was discovered. The client will not correct until the January 2020 bank reconciliation process.

2019 Information needed for Cash Flow Statement:

• There were no sales of investment securities. The only two items effecting the investment line will be purchases of $875,410 and change in unrealized gain. (Unrealized change will equal OCI change and should be a non-cash item)
• Information needed for fixed assets is on the fixed asset rollforward tab
• There were no additional borrowings on notes payable
• There were no additional borrowings on long-term debt

All I need is what the Adjusting Journal Entries would be and the PAJE's would be. Above is the Trial Balance with all transactions.

AJE FINAL 12/31/18 251,746.00 3,500.00 100.00 618,507.00 (80,000.00) 9,330,682.00 595,838.00 Grouping Cash Cash Cash Accounts receivable Accounts receivable Inventory Inventory Prepaid expenses Prepaid expenses Prepaid expenses Investments Investments Land Office equipment Buildings and improvements Autos and trucks Machinery and equipment Office equipment Office equipment Office equipment Accumulated depreciation Accumulated depreciation Accumulated depreciation Accumulated depreciation Accumulated depreciation Accumulated depreciation Cash surrender value of life insurance Goodwill Goodwill Accounts payable Line of credit Current portion of notes payable Notes payable Current portion of long-term debt Long-term debt Accrued expenses Accrued expenses Accrued wages Accrued wages Accrued wages Accrued wages Accrued expenses Acct # Acct Description 10050 Cash - Operating Chase 1684 10070 Cash in Bank - PNC 10080 Petty Cash 11100 A/R - TRADE 11150 ALLOW DOUBTFUL ACCOUNTS 12010 INVENTORY 12500 W.I.P.-PARTS & LABOR 13120 PPD. LIABILITY INSURANCE 13160 PPD. WORKERS' COMP. 13350 PPD. OTHER 14500 INVESTMENTS - VANGUARD 14600 INVESTMENTS -VALUATION ACCOUNT 15100 LAND 15170 COMPUTER/CATALOG EQUIPMENT 15180 Buildings & Improvements 15190 Autos & Trucks 15200 Machinery & Equipment 15250 Office Equipment 15300 Phone System 15330 Computer System 16180 A/D - Buildings & Improvements 16190 A/D-Autos & Trucks 16200 A/D - Machinery & Equipment 16250 A/D - Office Equipment 16300 A/D - Phone System 16330 A/D - Computer System 17150 CASH SURRENDER VALUE-LF 17600 GOODWILL 17650 ACCUM W/DOWN-GOODWILL 20380 Accounts Payable 21110 Line of Credit - Chase 21250 N/P-INSURANCE/AUTO LOANS - CURRENT 21260 N/P-INSURANCE/AUTO LOANS 21290 LONG-TERM DEBT - HUNTINGTON - CURRENT 21300 LONG-TERM DEBT - HUNTINGTON 24150 SALES TAX-OHIO 27400 ACCRUED INTEREST EXP 27550 ACCRUED SALARIES 27560 ACCRUED BONUS-MGMT 27580 ACCRUED BONUS - EXEC 27600 ACCRUED COMMISSIONS 27610 ACCRUED LEGAL FEES UNADJ 12/31/19 947,251.00 2,000.00 100.00 789,185.00 (80,000.00) 7,533,433.00 664,950.00 90,000.00 7,580.00 41,600.00 3,975,410.00 90,000.00 100,000.00 42,710.00 1,385,000.00 651,458.00 3,285,460.00 78,850.00 35,854.00 204,785.00 (654,060.00) (370,646.00) (2,323,294.00) (100,962.00) (25,911.00) (143,002.00) 2,500,588.00 100,000.00 FINAL 12/31/19 947,251.00 2,000.00 100.00 789,185.00 (80,000.00) 7,533,433.00 664,950.00 90,000.00 7,580.00 41,600.00 3,975,410.00 90,000.00 100,000.00 42,710.00 1,385,000.00 651,458.00 3,285,460.00 78,850.00 35,854.00 204,785.00 1654,060.00) 370,646.00) 12,323,294.00) (100,962.00) (25,911.00) (143,002.00) 2,500,588.00 100,000.00 18,680.00 31,800.00 3,100,000.00 80,000.00 100,000.00 30,850.00 1,350,000.00 835,602.00 3,684,105.00 78,850.00 35,854.00 145,650.00 (536,460.00) (505,152.00) (2,818,238.00) (74,951.00) (22,114.00) (123,926.00) 2,400,588.00 100,000.00 (214,940.00) (848,621.00) (17,500.00) (172,286.00) (150,000.00) (524,000.00) (8,339.00) (12,575.00) (214,940.00) (848,621.00) (17,500.00) (172,286.00) (150,000.00) (524,000.00) (8,339.00) (12,575.00) 435,505.00) (1,125,475.00) (15,000.00) (189,786.00) (100,000.00) (635,000.00) (7,896.00) (14,585.00) (247,759.00) (374,000.00) (184,000.00) (27,410.00) (15,000.00) (345,000.00) (281,000.00) (34,812.00) (15,000.00) (345,000.00) (281,000.00) (34,812.00) (15,000.00) (30,000.00) (1.000.00) (320,400.00) 190,000.00) 750,000.00 (14,795,441.00) (27,560,510.00) (195,863.00) (8,598.00) (178,814.00) (61,865.00) 35,875.00 22,485,174.00 567,290.00 285,367.00 121,028.00 249,027.00 57,065.00 594,152.00 (30,000.00) (1,000.00) (320,400.00) 190,000.00) 750,000.00 (14,795,441.00) (27,560,510.00) (195,863.00) (9,598.00) (178,814.00) 161,865.00) 35,875.00 22,485,174.00 562,290.00 295.367.00 121,028.00 249,027.00 57,065.00 594,152.00 132,000.00) (1,000.00) (320,400.00) (80,000.00) 650,000.00 (14,157,456.00) (25,961,652.00) (194,258.00) 19,254.00) (150,359.00) (70,255.00) 40,800.00 21.530,131.00 474,921.00 285,486.00 135,149.00 250,258.00 52,486,00 486,705.00 Accrued expenses Common stock Additional paid in capital Accumulated other comprehensive (income) loss Retained earnings Retained earnings Sales Sales Sales Sales Sales Sales Cost of Goods Sold Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Interest Expense Other Income Gain on Sale of Assets neatina Furance 29200 STATE INCOME TAXES 30010 COMMON STOCK 30020 ADDTL PAID IN CAPITAL 30100 ACCUMULATED OTHER COMPREHENSIVE INCOME 30200 DISTRIBUTIONS-SHAREHOLDERS 33110 RETAINED FARNINGS 40110 SALES 40130 OTHER OPERATING REVENUE 40310 LAROR INCOME 40520 FREIGHT INCOME 40650 LANVIN INCOME 40900 SALES DISCOUNTS 50110 COST OF SALES 60000 SALARIES & WAGES-SALARY 60010 SALARIES & WAGES-HOURLY 50100 PAYROLL TAXES 60200 EMPLOYEE BENEFITS 61350 ADVERTISING 52200 DEPRECIATION EXPENSE 62210 AMORTIZATION EXPENSE 62320 TRUCK EXPENSES/REPAIRS 52350 INSURANCE 62400 BUILDING RENT 62540 REPAIRS & MAINT-PARTS 52590 REAL ESTATE TAX 62600 SHOP/WAREHOUSE LABOR 62620 UNIFORMS $2660 UTILITIES 64650 DUES/SUBSCRPTN/SEMINARS 55450 MEALS 65460 ENTERTAINMENT 67590 CELLULAR PHONES/PAGING 69250 COMMISSION EXP. 69750 OTHER OPERATING EXP. 70500 WORKERS' COMPENSATION 71400 PROMOTION 71700 COMMISSION EXP 73500 AUTO REPAIRS & EXPENSES 74100 POSTAGE & OVERNIGHT MAIL 74650 DUES/SUBSCRPTN/SEMINARS 90200 INTEREST EXP. 90250 CHANGE IN CASH SURRENDER VALUE OF LIFE INS 90300 (GAIN) LOSS ON SALE OF ASSETS 0750 RONIS OR WISION MGMIT 64,568.00 95,306.00 210,000.00 12,515.00 29,561.00 210,741.00 4,650.00 90,816.00 1,745.00 41,842.00 4,029.00 883.00 85,759.00 10,347.00 10,107.00 192,926.00 120,358.00 62,075.00 367.00 101,721.00 26,940.00 (100,000.00) (4,987.00) 2.45 nnnnn 64,568.00 95,306.00 210,000.00 12,515 DD 29,561.00 210,741.00 4,650.00 90,816.00 1,745.00 41,842.00 4,029.00 883.00 85,759.00 10,347.00 10,107.00 192,926.00 120,358.00 62,075.00 367.00 101,721.00 26,940.00 (100,000.00) (4,987.00) 345 nnnnn 55,584.00 93,258.00 210,000.00 19,586.00 28,000.00 267,371,00 4,700.00 90,135.00 1,800.00 38,471.00 5,000.00 958.00 145,825.00 12,584,00 10,800.00 196,582.00 125,487.00 62,584.00 358.00 87,745.00 31,841.00 190,000.00) (140,297.00) 274 nnnnn Other Income Gain on Sale of Assets Operating Expenses Operating Expenses Operating Expenses 90250 CHANGE IN CASH SURRENDER VALUE OF LIFE INS 90300 (GAIN) LOSS ON SALE OF ASSETS 92500 BONUS PROVISION - MGMT. 92510 BONUS PROVISION - EXEC. 97150 STATE & LOCAL INC. TAX (100,000.00) (4,987.00) 345,000.00 281,000.00 24,875.00 (100,000.00) (4,987.00) 345,000.00 281,000.00 24,875.00 (90,000.00) (140,297.00) 374,000.00 184,000.00 25,485.00 AJE FINAL 12/31/18 251,746.00 3,500.00 100.00 618,507.00 (80,000.00) 9,330,682.00 595,838.00 Grouping Cash Cash Cash Accounts receivable Accounts receivable Inventory Inventory Prepaid expenses Prepaid expenses Prepaid expenses Investments Investments Land Office equipment Buildings and improvements Autos and trucks Machinery and equipment Office equipment Office equipment Office equipment Accumulated depreciation Accumulated depreciation Accumulated depreciation Accumulated depreciation Accumulated depreciation Accumulated depreciation Cash surrender value of life insurance Goodwill Goodwill Accounts payable Line of credit Current portion of notes payable Notes payable Current portion of long-term debt Long-term debt Accrued expenses Accrued expenses Accrued wages Accrued wages Accrued wages Accrued wages Accrued expenses Acct # Acct Description 10050 Cash - Operating Chase 1684 10070 Cash in Bank - PNC 10080 Petty Cash 11100 A/R - TRADE 11150 ALLOW DOUBTFUL ACCOUNTS 12010 INVENTORY 12500 W.I.P.-PARTS & LABOR 13120 PPD. LIABILITY INSURANCE 13160 PPD. WORKERS' COMP. 13350 PPD. OTHER 14500 INVESTMENTS - VANGUARD 14600 INVESTMENTS -VALUATION ACCOUNT 15100 LAND 15170 COMPUTER/CATALOG EQUIPMENT 15180 Buildings & Improvements 15190 Autos & Trucks 15200 Machinery & Equipment 15250 Office Equipment 15300 Phone System 15330 Computer System 16180 A/D - Buildings & Improvements 16190 A/D-Autos & Trucks 16200 A/D - Machinery & Equipment 16250 A/D - Office Equipment 16300 A/D - Phone System 16330 A/D - Computer System 17150 CASH SURRENDER VALUE-LF 17600 GOODWILL 17650 ACCUM W/DOWN-GOODWILL 20380 Accounts Payable 21110 Line of Credit - Chase 21250 N/P-INSURANCE/AUTO LOANS - CURRENT 21260 N/P-INSURANCE/AUTO LOANS 21290 LONG-TERM DEBT - HUNTINGTON - CURRENT 21300 LONG-TERM DEBT - HUNTINGTON 24150 SALES TAX-OHIO 27400 ACCRUED INTEREST EXP 27550 ACCRUED SALARIES 27560 ACCRUED BONUS-MGMT 27580 ACCRUED BONUS - EXEC 27600 ACCRUED COMMISSIONS 27610 ACCRUED LEGAL FEES UNADJ 12/31/19 947,251.00 2,000.00 100.00 789,185.00 (80,000.00) 7,533,433.00 664,950.00 90,000.00 7,580.00 41,600.00 3,975,410.00 90,000.00 100,000.00 42,710.00 1,385,000.00 651,458.00 3,285,460.00 78,850.00 35,854.00 204,785.00 (654,060.00) (370,646.00) (2,323,294.00) (100,962.00) (25,911.00) (143,002.00) 2,500,588.00 100,000.00 FINAL 12/31/19 947,251.00 2,000.00 100.00 789,185.00 (80,000.00) 7,533,433.00 664,950.00 90,000.00 7,580.00 41,600.00 3,975,410.00 90,000.00 100,000.00 42,710.00 1,385,000.00 651,458.00 3,285,460.00 78,850.00 35,854.00 204,785.00 1654,060.00) 370,646.00) 12,323,294.00) (100,962.00) (25,911.00) (143,002.00) 2,500,588.00 100,000.00 18,680.00 31,800.00 3,100,000.00 80,000.00 100,000.00 30,850.00 1,350,000.00 835,602.00 3,684,105.00 78,850.00 35,854.00 145,650.00 (536,460.00) (505,152.00) (2,818,238.00) (74,951.00) (22,114.00) (123,926.00) 2,400,588.00 100,000.00 (214,940.00) (848,621.00) (17,500.00) (172,286.00) (150,000.00) (524,000.00) (8,339.00) (12,575.00) (214,940.00) (848,621.00) (17,500.00) (172,286.00) (150,000.00) (524,000.00) (8,339.00) (12,575.00) 435,505.00) (1,125,475.00) (15,000.00) (189,786.00) (100,000.00) (635,000.00) (7,896.00) (14,585.00) (247,759.00) (374,000.00) (184,000.00) (27,410.00) (15,000.00) (345,000.00) (281,000.00) (34,812.00) (15,000.00) (345,000.00) (281,000.00) (34,812.00) (15,000.00) (30,000.00) (1.000.00) (320,400.00) 190,000.00) 750,000.00 (14,795,441.00) (27,560,510.00) (195,863.00) (8,598.00) (178,814.00) (61,865.00) 35,875.00 22,485,174.00 567,290.00 285,367.00 121,028.00 249,027.00 57,065.00 594,152.00 (30,000.00) (1,000.00) (320,400.00) 190,000.00) 750,000.00 (14,795,441.00) (27,560,510.00) (195,863.00) (9,598.00) (178,814.00) 161,865.00) 35,875.00 22,485,174.00 562,290.00 295.367.00 121,028.00 249,027.00 57,065.00 594,152.00 132,000.00) (1,000.00) (320,400.00) (80,000.00) 650,000.00 (14,157,456.00) (25,961,652.00) (194,258.00) 19,254.00) (150,359.00) (70,255.00) 40,800.00 21.530,131.00 474,921.00 285,486.00 135,149.00 250,258.00 52,486,00 486,705.00 Accrued expenses Common stock Additional paid in capital Accumulated other comprehensive (income) loss Retained earnings Retained earnings Sales Sales Sales Sales Sales Sales Cost of Goods Sold Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Interest Expense Other Income Gain on Sale of Assets neatina Furance 29200 STATE INCOME TAXES 30010 COMMON STOCK 30020 ADDTL PAID IN CAPITAL 30100 ACCUMULATED OTHER COMPREHENSIVE INCOME 30200 DISTRIBUTIONS-SHAREHOLDERS 33110 RETAINED FARNINGS 40110 SALES 40130 OTHER OPERATING REVENUE 40310 LAROR INCOME 40520 FREIGHT INCOME 40650 LANVIN INCOME 40900 SALES DISCOUNTS 50110 COST OF SALES 60000 SALARIES & WAGES-SALARY 60010 SALARIES & WAGES-HOURLY 50100 PAYROLL TAXES 60200 EMPLOYEE BENEFITS 61350 ADVERTISING 52200 DEPRECIATION EXPENSE 62210 AMORTIZATION EXPENSE 62320 TRUCK EXPENSES/REPAIRS 52350 INSURANCE 62400 BUILDING RENT 62540 REPAIRS & MAINT-PARTS 52590 REAL ESTATE TAX 62600 SHOP/WAREHOUSE LABOR 62620 UNIFORMS $2660 UTILITIES 64650 DUES/SUBSCRPTN/SEMINARS 55450 MEALS 65460 ENTERTAINMENT 67590 CELLULAR PHONES/PAGING 69250 COMMISSION EXP. 69750 OTHER OPERATING EXP. 70500 WORKERS' COMPENSATION 71400 PROMOTION 71700 COMMISSION EXP 73500 AUTO REPAIRS & EXPENSES 74100 POSTAGE & OVERNIGHT MAIL 74650 DUES/SUBSCRPTN/SEMINARS 90200 INTEREST EXP. 90250 CHANGE IN CASH SURRENDER VALUE OF LIFE INS 90300 (GAIN) LOSS ON SALE OF ASSETS 0750 RONIS OR WISION MGMIT 64,568.00 95,306.00 210,000.00 12,515.00 29,561.00 210,741.00 4,650.00 90,816.00 1,745.00 41,842.00 4,029.00 883.00 85,759.00 10,347.00 10,107.00 192,926.00 120,358.00 62,075.00 367.00 101,721.00 26,940.00 (100,000.00) (4,987.00) 2.45 nnnnn 64,568.00 95,306.00 210,000.00 12,515 DD 29,561.00 210,741.00 4,650.00 90,816.00 1,745.00 41,842.00 4,029.00 883.00 85,759.00 10,347.00 10,107.00 192,926.00 120,358.00 62,075.00 367.00 101,721.00 26,940.00 (100,000.00) (4,987.00) 345 nnnnn 55,584.00 93,258.00 210,000.00 19,586.00 28,000.00 267,371,00 4,700.00 90,135.00 1,800.00 38,471.00 5,000.00 958.00 145,825.00 12,584,00 10,800.00 196,582.00 125,487.00 62,584.00 358.00 87,745.00 31,841.00 190,000.00) (140,297.00) 274 nnnnn Other Income Gain on Sale of Assets Operating Expenses Operating Expenses Operating Expenses 90250 CHANGE IN CASH SURRENDER VALUE OF LIFE INS 90300 (GAIN) LOSS ON SALE OF ASSETS 92500 BONUS PROVISION - MGMT. 92510 BONUS PROVISION - EXEC. 97150 STATE & LOCAL INC. TAX (100,000.00) (4,987.00) 345,000.00 281,000.00 24,875.00 (100,000.00) (4,987.00) 345,000.00 281,000.00 24,875.00 (90,000.00) (140,297.00) 374,000.00 184,000.00 25,485.00