Closing Trial Balance 12/31/2015	Unadjusted Trial Balance 12/31/2016
	DR	CR	DR	CR
Cash	$28,355		$87,365
Accounts Receivable	$81,350		$93,000
allowance doubtful accounts		$5,000		$4,000
Prepaid Insurance	$2,900		$2,310
Investment (AFS)	$94,000		$20,000
Inventory	$153,100		$174,000
Land Buldings & Eqpt	$1,134,000		$1,268,000
Accum Deprec		$581,000		$619,000
Notes Payable		$84,000		$33,100
Accounts Payable		$157,670		$79,440
Bonds Payable		$-		$209,000
Salaries Payable		$29,000		$23,600
Income Tax payable				$5,000
Common Stock		$300,000		$300,000
Retained Earnings		$337,035		$312,535
Revenue				$1,865,000
Cost of goods sold			$1,198,300
Maintenance expense			$16,500
Utilities expense			$22,550
Salary expense			$505,900
Interest expense - note payable			$1,800
Depreciation expense			$52,100
Miscellaneous expense			$6,600
bad debt expense			$4,100
gain on sale of securities				$5,400
gain on sale of equipment				$1,450
Income tax expense			$5,000
Totals	$1,493,705	$1,493,705	$3,457,525	$3,457,525
Additional Information -- Prior to any adjustments or corrections
Beg RE 1/1/16	$337,035
add net income	$59,000			$2,325
less cash dividends paid	$24,500
Ending RE 12/31/16	$371,535
Land, Buldings & Equipment consist of:
		purchase date	salvage value	Deprec expense
Land	$270,000	1/1/2014		$13,500
Buildings (30 yr SL)	$844,000	1/1/2014	$40,000	$26,800
Equipmnet (10 yr SL)	$154,000	8/31/2016	$36,000	$11,800
	$1,268,000			$52,100
The business was purchased on January 1, 2014
Common stock par value is $1 per share
An investment in 10% of Red Co. costing $74,000 was sold for $79,400 on February 15, 2016
The remaining investment of $20,000 relates to a 25% investment in Blue Co purchased in 2015.
Equipment costing $20,000 with a book value of $5,900 was sold for $7,350 on August 31, 2016
New equipment was purchased for cash of $154,000 on July 1, 2016
There are 220 bonds payable each at $1,000, issued at $209,000 on June 1, 2016 with a 5% interest rate payable annually
Each bond is convertible into one share of common stock.
Notes payable included in the trial balance of $30,000 were refinanced for a lower interest rate of 5% on October 1, 2016
The interest rate on the original note payable was 6%.
Miscellaneous expense - consists of:
Meals and entertainment	$2,800
Officer's life insurance	$2,300
Engagement ring	$1,500
Total	$6,600

Prepare all necessary correcting and journal entries for 2016 related to the following issues. Do not compute taxes for 2016 yet.

Assume that the books have not yet been closed for 2016. Assume a 30% Tax Rate for the year 2015. Do not compute the Taxes for 2016 yet.

Prepare the adjusted trial balance after correcting/adjusting entries.

1. since the bookkeeper didnt make any entries for stock options or IPO, enter the entries you determined are required for 2016. ( the entry for 2015 is to record 1000 options * 20% * 50% of the time vesting options but none of the performance vesting options. All remaining options are recorded in 2016 due to the IPO.)

2. You review the articles of the incorporation and asset purchase agreement and determine the bookkeeper incorrectly recorded a 12- year $50,000 non-compete agreement as part of the land basis when the business was purchased on January 1,2014. There are 10 years remaining on the contract at 1/1/2016.

3. you review the fixed asset details. The Equipment purchased on 8/31/2016 should have been depreciated using the SL method but you determine that a 5- year useful life with a salvage value of $5000 is more appropriate. Review the depreciation calculations.

4. You determine that the company should have accrued a warranty reserve equal to 0.5% of revenue by the current year and a bad debt expense reserve equal to 2.5% of the total account receivable balance,

5. You research the information related to the purchase of the investment, which the bookkeeper recorded at cost. Blue Co. was purchased on 6/30/2015.According to your valuatin experts, the fair value of Blue Co. was $25000 at the end of 2015. and $32,000 at the end of 2016. No dividends were paid from Blue Co. in 2015 or 2016. Blue Co. recorded net income of $18000 in 2015 and $32000 in 2016.

6. The bookkeeoer recorded the issuance of the bonf on June 1, 2016. but has the bond issuance and discover that the interest rate is 5% and the yield rate is 6%. You also determine that the bond was issued at $ 209,000 but the face value of the bond was $220000.

	5%	6%
	Cash	Int	disct
6/1/2016				209000
6/1/2017	11000	12540	1540	210540
6/1/2017	11000	12632.4	1632.4	212172.4
6/1/2018	11000	12730.344	1730.344	213902.744
6/1/2019	11000	12834.16464	1834.16464	215736.9086
6/1/2020	11000	12944.21452	1944.214518	217681.1232
6/1/2021	11000	13060.86739	2060.86739	219741.9905

7. Review the detail for miscellaneous expense and account for any discrepancies.

8. You review the loan document and discover that a $30,000 Note payable was refinanced on October 1st to a 10- year loan wit an annual interest rate of 5%. Any interest payabe on the previous loan was rolled into the principal balance of the new loan. The bookkeeper calculated interet based on the refinanced loan balance * the original interest rate. The note is balloon loan.

9. Income Tax Expense is not correct because mo income tax provision was prepared. Reverse out the original income tax entry. Dont compute the 2016 taxes.