BUS 320 Financial Reporting Project Green Dog Products Inc. Requirements: Step 1: Adjusting and correcting journal entries as of 12-31-19 (the fiscal year end). Prepare the adjusting entries (including the income tax adjustment) on a separate sheet of paper. Submit the Income Tax Adjustment Worksheet with your entries. If the company would have already recorded a transaction during the year do not record it again. Adjusting entries never involve cash Step 2: 12 column spread sheet. (See Canvas for Excel spreadsheet.) Green Dog Products Inc. is a San Francisco-based retailer of organic dog food products. These products are sold in the company's own retail outlets and other retailers. The fiscal year end is December 31 and the accounts for the year ended 12-31-19 are unaudited. The company's routine adjusting procedures have been completed. The available information consists of the preliminary adjusted accounts and additional information about the company's accounting policies. Information about the company's accounting policies and resolved issmes: VA. Bad Debt Expense is estimated at 2% of credit sales. During 2019,80% of sales were on credit and the other 20% of sales were for cash. B. Inventory is accounted for using the last in, first out method. 20.000 cases of Green Dog's peanut butter dog cookies were not included in the physical inventory count because they were on consignment at various pet food retailers. The cases have a cost of $61.000. Total inventory at January 1, 2019 was $450,000. Consignment transactions involve another company having our inventory at their locations but our company retains ownership. The other company tries to sell the inventory for us and when the inventory is sold the other company sends our company the cash. The inventory should be on the books of the company that owns the inventory. C. The Insurance Expense of $12000 is for a one year insurance policy purchased on May 1. 2019. D. Depreciation on the Building is on the straight line basis. During account analysis it was discovered that the bookkeeper foret to record 550.000 depreciation in 2016. E. Depreciation on the Equipment is on the straight line basis and was correctly recorded by the bookkeeper .F. The Common Stock has a SIO par value and there are no treasury shares. 400,000 shares are authorized. A $40.000 dividend was declared and paid during the year. G. Sales are primarily made on a trade account basis, with no prompt payment discount (such as 2/10. n/30) offered. Ordinarily, inventory items are delivered on an r.o.b. shipping point basis. H. Green Dog sold all the assets related to its running shoe segment on January 2, 2019 The company no longer has any involvement in this type of business. The Loss on Sale was $500,000 1. The note payable has 5% interest. Only the interest is payable monthly and the principal of $500,000 is due July 31, 2025. J. The Company started selling Gift Cards at the beginning of 2019. The gift cards are stored valued cards that have no expiration dates or service charge fees. The gift cards may be redeemed for any product in any Green Dog retail outlet A total of $820.000 gift cards were sold and at year end 590,000 were outstanding (not redeemed yet). K. The income tax rate for all fiscal year ends since 12-31-10 has been 25%. Green Dog Products Inc. Balance Sheet 12-31-19 Cash Accounts Receivable Allowance for Doubtful Accounts Inventory Land Buildings Accumulated Depreciation - Buildings Equipment Accumulated Depreciation - Equipment $ 240,000 315.000 (22.000) 437.000 600.000 1,800,000 (430,000) 900.000 (270.000) Total Assets $ 3.570.000 S Accounts Payable Income Taxes Payable 5% Notes Payable Common Stock - Par Paid in Capital in Excess of Par - Common Retained Earnings 460,000 42.000 500.000 800.000 250.000 1.518.000 Total Liabilities and Stockholders' Equity $ 3,570.000 BUS 320 Financial Reporting Project Green Dog Products Inc. Income Statement For year ended December 31, 2019 $8.000.000 5.140.000 2.860,000 Sales Less: Cost of Goods Sold Gross Profit Less Other Expenses: Loss on Sale of Shoe Segment Bad Debt Expense Depreciation Expense - Building Depreciation Expense - Equipment Interest Expense Insurance Expense Salary Expense Operating Expenses Income Before Income Tax Income Tax Expense Net Income $ 500.000 $ 114,000 100.000 67.500 20.000 120,000 510,000 728,500 2.160,000 700.000 175.000 S_525.000 Statement of Retained Earnings Retained Earnings, January 1, 2019 Net Income $1.033.000 525.000 1.558.000 40.000 $1.518.000 Less Cash Dividends: Retained Earnings, December 31, 2019 FRP 1 Income Tax Expense Adjustment Worksheet Income tax expense should be corrected once all other corrections have been made. a. Take Income Before Income Tax from Income Statement (done below). b. Add and subtract the changes due to the impacts on revenues and expenses from the other adjusting entries. (You may not need all rows.) c. This gives a corrected Income Before Income Tax. d. Correct Income Before Income Tax X 25 tax rate Correct Income Tax Expense. e. Recorded Expense - Correct Expenses Amount of Adjustment S 700.000 Income Before Income Tax From Income Statement in Project Information Impact of Adjustments that Impact Income: Corrected Income Before Income Tax X Tax Rate Correct Income Tax Expense Less Recorded Income Tax Expense Amount of Income Tax Adjustment ($175.000) Income Tax Expense and Income Tax Payable are the accounts in the Adjustment