Bryant Corporation was incorporated on December 1, 2015, and began operations one week later. Before closing the books for the fiscal year ended November 30, 2016, Bryants controller prepared the following financial statements:

BRYANT CORPORATION Balance Sheet November 30, 2016

1 Assets

2 Current Assets:

3 Cash $180,000.00

4 Accounts receivable 480,000.00

5 Less: Allowance for doubtful accounts (59,000.00)

6 Inventories 430,000.00

7 Prepaid insurance 15,000.00

8 Total current assets $1,046,000.00

9 Property, plant, and equipment 426,000.00

10 Less: Accumulated depreciation (40,000.00)

11 R&D costs 120,000.00

12 Total Assets $1,552,000.00

13 Liabilities and Shareholders Equity

14 Current Liabilities:

15 Accounts payable and accrued expenses $592,000.00

16 Income taxes payable 168,000.00

17 Total current liabilities $760,000.00

18 Shareholders Equity:

19 Common stock, $10 par value $400,000.00

20 Retained earnings 392,000.00

21 Total shareholders equity $792,000.00

22 Total Liabilities and Shareholders Equity $1,552,000.00

BRYANT CORPORATION Income Statement For Year Ended November 30, 2016

1 Net sales $2,950,000.00

2 Operating expenses:

3 Cost of goods sold $1,670,000.00

4 Selling and administrative expense 650,000.00

5 Depreciation expense 40,000.00

6 Research and development expense 30,000.00

7 Total expenses $2,390,000.00

8 Income before income taxes $560,000.00

9 Income tax expense 168,000.00

10 Net income $392,000.00

Bryant is in the process of negotiating a loan for expansion purposes, and the bank has requested audited financial statements. During the course of the audit, the following additional information was obtained:

a. Included in selling and administrative expenses (specific account: software development expense) were $5,000 of costs incurred on software being developed for sale to others. The technological feasibility of the software has been established.

b. Based on an aging of the accounts receivable as of November 30, 2016, it was estimated that $36,000 of the receivables will be uncollectible.

c. Inventories at November 30, 2016, did not include work-in-process inventory costing $12,000 sent to an outside processor on November 26, 2016.

d. A $3,000 insurance premium paid on November 30, 2016, on a policy expiring one year later was charged to insurance expense.

e. On June 1, 2016, a production machine purchased for $24,000 was charged to factory repairs and maintenance. For financial and tax purposes, Bryant depreciates machines of this type using the straight-line method over a 5-year life with no salvage value.

f. R&D costs of $150,000 were incurred in the development of a patent that Bryant expects to be granted during the fiscal year ending November 30, 2017. Bryant capitalized R&D costs and initiated a 5-year amortization of the $150,000 total cost during the fiscal year ended November 30, 2016.

g. During December 2016, a competitor company filed suit against Bryant for patent infringement, claiming $200,000 in damages. Bryants legal counsel believes that an unfavorable outcome is probable. This lawsuit is deemed to be a subsequent event that should be recognized in the current fiscal year and a reasonable accrual based on an estimate of the courts award to the plaintiff is $50,000.

h. The 30% effective tax rate was determined to be appropriate for calculating the provision for income taxes for the fiscal year ended November 30, 2016. Ignore computation of the deferred portion of income taxes.

Required: 1. Prepare the necessary correcting entries. 2. Prepare a corrected balance sheet for Bryant as of November 30, 2016, and a corrected income statement for the year ended November 30, 2016.

Prepare the necessary journal entries on November 30 to correct Bryants accounts.

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Prepare a corrected balance sheet for Bryant as of November 30, 2016.

BRYANT CORPORATION Balance Sheet November 30, 2016

1 Assets

2 Current Assets:

3 Cash

4 Accounts receivable

5 Less: Allowance for doubtful accounts

6 Inventories

7 Prepaid insurance

8 Total current assets

9 Property, plant, and equipment

10 Less: Accumulated depreciation

11 Software development costs

12 Total Assets

13 Liabilities and Shareholders Equity

14 Current Liabilities:

15 Accounts payable and accrued expenses

16 Estimated liability from lawsuit

17 Income taxes payable

18 Total current liabilities

19 Shareholders Equity:

20 Common stock

21 Retained earnings

22 Total Shareholders Equity

23 Total Liabilities and Shareholders Equity

Prepare a corrected income statement for the year ended November 30, 2016.

BRYANT CORPORATION Income Statement For Year Ended November 30, 2016

1 Net sales

2 Operating expenses:

3 Cost of goods sold

4 Selling and administrative expense

5 Depreciation expense

6 Research and development expense

7 Total operating expenses

8 Operating income

9 Other items:

10 Loss from litigation

11 Income before income taxes

12 Income tax expense

13 Net income