Bryant Corporation was incorporated on December 1, 2018, and began operations one week later. Before closing the books for the fiscal year ended November 30, 2019, Bryant's controller prepared the following financial statements: BRYANT CORPORATION Balance Sheet November 30, 2019 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 $1,046,000.00 426,000.00 9 Property, plant, and equipment 10 Less: Accumulated depreciation (40,000.00) 120,000.00 11 R&D costs 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 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, 2019 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 Depreciation expense Research and development expense 40,000.00 30,000.00 6 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 were $5,000 of software development expense related to 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, 2019, it was estimated that $36,000 of the receivables will be uncollectible. c. Inventories at November 30, 2019, did not include work-in-process inventory costing $12,000 sent to an outside processor on November 26, 2019. d. A $3,000 insurance premium paid on November 30, 2019, on a policy expiring one year later was charged to insurance expense. e. On June 1, 2019, a production machine purchased for $24,000 was charged repairs and maintenance expense. 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, 2020. Bryant initiated a 5-year amortization of the $150,000 total cost during the fiscal year ended November 30, 2019. g. During December 2019, a competitor company filed suit against Bryant for patent infringement, claiming $200,000 in damages. Bryant's 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 court's award to the plaintiff is $50,000. h. The 21% effective tax rate was determined to be appropriate for calculating the provision for income taxes for the fiscal year ended November 30, 2019. 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, 2019, and a corrected income statement for the year ended November 30, 2019. Chart of Accounts Chall CHART OF ACCOUNTS Bryant Corporation General Ledger ASSETS REVENUE 111 Cash 411 Net Sales 121 Accounts Receivable 122 Allowance for Doubtful Accounts EXPENSES 141 Inventories 500 Cost of Goods Sold 152 Prepaid Insurance 511 Insurance Expense 160 Property, Plant, and Equipment 512 Utilities Expense 180 Research and Development Costs 513 Delivery Expense 186 Software Development Costs 514 Repairs and Maintenance Expense 190 Accumulated Depreciation 515 Supplies Expense 521 Salaries Expense LIABILITIES 526 Research and Development Expense 527 Software Development Expense 211 Accounts Payable and Accrued Expenses 261 Income Taxes Payable 275 Estimated Liability from Lawsuit 531 Bad Debt Expense 532 Depreciation Expense 536 Advertising Expense EQUITY 540 Interest Expense 311 Common Stock 559 Miscellaneous Expenses 331 Retained Earnings 700 Income Tax Expense 892 Loss from Litigation 1. Prepare the necessary journal entries on November 30 to correct Bryant's accounts. General Journal Instructions PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 A 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 2a. Prepare a corrected balance sheet for Bryant as of November 30, 2019. Balance Sheet Instructions BRYANT CORPORATION Balance Sheet November 30, 2019 Assets 2 Current Assets: 3 Cash 4 Accounts receivable 5 Less: Allowance for doubtful accounts 6 Inventories 7 Prepaid insurance & 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 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 Income Statement 2b. Prepare a corrected income statement for the year ended November 30, 2019. Income Statement Instructions BRYANT CORPORATION Income Statement For Year Ended November 30, 2019 1 Net sales 2 Operating expenses: Cost of goods sold 4 Selling and administrative expense 3 5 Depreciation expense 6 Research and development expense 26. Prepare a corrected income statement for the year ended November 30, 2019. Income Statement Instructions BRYANT CORPORATION Income Statement For Year Ended November 30, 2019 1 Net sales 2 Operating expenses: 3 Cost of goods sold 4 Selling and administrative expense 5 Depreciation expense Research and development expense 6 7 Total operating expenses Operating 9 Other items: 10 Loss from litigation 11 Income before income taxes 12 Income tax expense 13 Net income