CM Corporation (CMC) was founded in 2011 by Eric Conner and Phil Martin. The company designs, installs, and services security systems for high-tech companies. The founders, who describe themselves as "entrepreneurial geeks," met in a computer lab when they were teenagers and found they had common interests in working on security systems for critical industries. In early January 2017, CMC hired you as an accounting intern to assist the CFO and the entire corporate accounting team.

Lately Conner and Martin have been working with radio frequency identification (RFID) technology. They have developed a detailed system designed to track inventory items using RFID tags embedded invisibly in products. This technology has numerous inventory applications in multiple industries. One of the most basic applications is tracking manufacturing components; if tagged components "go walking" (if employees attempt to take them), companies can easily track and find them. Conner and Martin have sold their system to several high-tech companies in the area. These companies have a number of government contracts that require extensive security systems to protect sensitive data from infiltration by terrorists and competitors. To date, CMCs cash flow from sales and services has adequately funded its operations.

CMC anticipates growth potential for its products. As a result, it is planning a new public offering of their common stock at the end of 2017. The accounting department is currently quite small and the CFO has requested additional staff to help keep pace with the companys fast-paced growth. Therefore, as an accounting intern you can immediately become a valuable member to their corporate accounting team.To familiarize you with the company's operations, the CFO has provided an unadjusted trial balance from the end of their last fiscal year (2016) on an Excel spreadsheet.

Adjusting Journal Entries (AJEs):

1. Wages earned by employees during December (16) and to be paid in January (17) are $35,875; associated payroll taxes on these wages are $2,910. (Record in two separate adjusting entries.The payroll taxes are an expense to the company for unemployment benefits and recorded as a payable to the state & federal taxing authority.)

2.The Unearned Consulting Revenue account has a balance of $261,220 as of December 31, 2016.Earlier in the year, on May 1, 2016 a client paid CMC $153,000 cash in advance for a 12-month consulting services contract.CMC will earn revenue evenly over this 12-month period. This was the only prepayment received from clients during the entire 2016 fiscal year and recorded with a credit to Unearned Revenue.Of the beginning balance in Unearned Revenue (i.e. at Jan 1 2016), 65% of the work has now been completed by year end.

3.You discover that a sale of a product was made on account and recorded in December for $148,500; the product has not yet been shipped (i.e. delivered to the customer). The cost of the product was 55% of its selling price.CMC uses the perpetual inventory method.

4.Bad debt expense is estimated to be 6% of ending Accounts Receivable.(Round to the nearest whole dollar.)

5.CMC prepays for some insurance and advertising.The Prepaid Expense account has a balance of $26,774 at year end but before adjustment. This balance includes $12,200 for a two-year casualty insurance policy purchased on March 1, 2016. Of the remaining prepaid balance, 60% of the advertising has now been used.(Round to the nearest whole dollar.)

6.CMC records depreciation and amortization expense annually as one compound adjusting journal entry.They do not use an accumulated amortization account.Annual depreciation rates are 7% for Buildings & Equipment/Furniture, no salvage.(Round to the nearest whole dollar.) Annual Amortization rates are 10% of original cost, straight-line method, no salvage.The patent was acquired on October 1, 2013. The last time depreciation & amortization were recorded was December 31, 2015.

7.The long-term liabilities were outstanding for all of 2016 and accrue interest at 8% APR.CMCrecords accrued interest quarterly (interest was last updated on Sept. 30.)The company is required to pay the interest annually each January 1^st.

8.CMC often allows customers to finance the purchase of their products through long-term lending agreements and therefore reports Long-term Notes Receivable on their Balance Sheet.These notes are interest bearing and earn CMC interest revenue.The beginning balance of Interest Receivable at January 1, 2016 was $3,500.During 2016, cash received from customers for interest on these notes amounted to $17,600.You determine that the income statement for the year-ended December 31, 2016 should show Interest Revenue in the amount of $18,700.The adjusting entry to accrue interest revenue at year end has not yet been recorded.

9.On December 15, CMCdeclareda dividend of $150,000, to be paid on January 20, 2017.It had not yet been recorded.

10.At December 31, the Long-Term Investments are classified as Available-for-sale debt securities (or AFS). To comply with GAAP, CMC must report long-term investments in financial instruments at fair value as of the balance sheet date.These debt securities have a current fair value of $162,600. The Investment is in a corporate bond that was issued at par for $180,000, earns 8% APR, and pays interest semi-annually each Jun 30 and Dec 31.The investment was purchased on July 1, 2016. You discover that the semi-annual interest revenue on this bond has not yet been received and therefore not recorded, and the company has yet to mark-to-market the investment portfolio at year end.CMCuses a Fair Value Adjustment account (an adjunct/contra account) to report any increase/decrease in the assets value. (Ignore income taxes as this is an unrealized gain/loss)

11.CMC has a 35% tax rate on their taxable income.

Continued

(b) After making the 11 adjusting entries in Part (a), record the appropriate closing entries on the spreadsheet provided using the tab labeled AJEs and Closing Entries. Post all closing entries to the Trial Balance in the columns labeled 12/31/16 Closing Entries. *Remember, after closing, all temporary accounts should show a zero balance.

(c)Complete the required financial statements (Statement of Comprehensive Income, and Statement of Stockholders Equity) in good form.The Statement of Stockholders Equity should reconcile with your balance sheet (which is automatically updated for youso check to make sure the ending balances are the same), income statement, & Statement of Comprehensive Income.(Use cell referencing to link the appropriate cells from the other financial statements.Keep in mind that not all cells on the Statement of Stockholders Equity will require any updates.For example, no new stock was issued during 2016; the balance in the contributed capital accounts will therefore not change.)

AJE # 1 2 3 4 5 6 7 8 9 10 Account Name DR CR 11 Closing Entries 1 2 3 4 5 Account Name DR CR General Ledger Account Name Cash and cash equivalents Accounts Receivable Allowance for doubtful accounts Interest Receivable Inventory Prepaid expenses Other Current Assets Investments Fair Value Adjustment Notes Receivable Building Equipment and furniture Land Accum Depr Goodwill Patents Accounts Payable Dividends payable Interest payable Unearned Consulting Revenue Wages payable Payroll taxes payable Income tax payable Long term liabilities Common Stock Paid-in capital common stock Treasury Stock Retained Earnings Dividends Accum Other Comprehensive Income Sales revenue Service revenue Interest Revenue Sales returns Sales discounts Product cost of goods sold Service cost of goods sold Advertising Bad debt expense Depreciation and amortization Professional Dues & subscriptions Gain/loss on disposal Income tax expense Insurance Interest expense Legal and accounting fees Miscellaneous Office expense Payroll taxes Property taxes Repair and maintenance Research and development Telephone Travel and entertainment Utilities Wages Salaries - Officers Income Summary Unrealized Gain/Loss-AFS Unadj. Balance 12/31/16 Debit Credit 572,563 910,680 29,462 0 1,270,160 26,774 16,063 180,000 0 0 220,000 876,418 268,483 348,791 591,965 990,851 217,000 1,169,343 12/31/16 AJEs Debit Credit 41,310 261,220 81,350 8,850 688,500 920,000 105,000 400,000 539,069 0 162,400 269,662 5,384,590 570,811 159,080 0 0 21,470 4,790 0 80,144 41,310 106,650 9,048 220,114 136,975 104,570 42,028 470,680 20,085 38,391 47,049 964,670 710,000 0 0 15,862,300 0 10,253,346 1,158,785 14,100 0 0 15,862,300 ### 0 0 Adjusted Balance 12/31/16 Debit Credit 572,563 910,680 29,462 0 1,270,160 26,774 16,063 180,000 0 0 220,000 876,418 268,483 348,791 591,965 990,851 217,000 1,169,343 0 41,310 261,220 81,350 8,850 0 688,500 920,000 105,000 400,000 539,069 0 0 0 10,253,346 1,158,785 14,100 162,400 269,662 5,384,590 570,811 159,080 0 0 21,470 4,790 0 80,144 41,310 106,650 9,048 220,114 136,975 104,570 42,028 470,680 20,085 38,391 47,049 964,670 710,000 0 0 0 0 15,862,300 15,862,300 12/31/16 Closing Entries Debit Credit ### 0 Post-Closing T/B 12/31/16 Debit Credit 572,563 910,680 29,462 0 1,270,160 26,774 16,063 180,000 0 0 220,000 876,418 268,483 348,791 591,965 990,851 217,000 1,169,343 0 41,310 261,220 81,350 8,850 0 688,500 920,000 105,000 400,000 539,069 0 0 0 10,253,346 1,158,785 14,100 162,400 269,662 5,384,590 570,811 159,080 0 0 21,470 4,790 0 80,144 41,310 106,650 9,048 220,114 136,975 104,570 42,028 470,680 20,085 38,391 47,049 964,670 710,000 0 0 0 0 0 15,862,300 15,862,300 CM Corporation Balance Sheet December 31, 2016 December 31, 2015 Assets Current assets Cash and cash equivalents Accounts receivable Allowance for doubtful accounts Inventory Interest Receivable Prepaid expenses Other current assets Total current assets Long-Term Investments Investments +/-Fair Value Adjustment Notes Receivable Property, plant and equipment Property, plant and equipment Accumulated depreciation PP&E (net) $572,563 910,680 (29,462) 1,270,160 0 26,774 16,063 $117,170 516,454 (24,975) 799,460 3,500 14,574 8,879 2,766,778 180,000 0 180,000 220,000 1,493,692 (591,965) 1,435,062 0 0 1,179,695 (591,965) 901,727 Intangible Assets Goodwill Patents 990,851 217,000 Total assets (net) 0 48,000 587,730 0 217,000 1,207,851 217,000 $5,276,356 $2,287,792 Liabilities and Stockholders' Equity Current liabilities Accounts payable Dividends payable Unearned revenue Interest payable Wages payable Payroll taxes payable Income taxes payable Total current liabilities $1,169,343 0 261,220 41,310 81,350 8,850 0 Long-term liabilities Stockholders' equity Contributed capital Common stock, $2 par value (4,000,000 shares authorized,460,000 issued; 440,000 are outstanding) Paid-in capital common stock Total contributed capital Retained earnings Accumulated other comprehensive income Less common stock in treasury, at cost Total stockholders' equity $315,395 48,000 108,220 6,500 78,200 9,033 279,850 1,562,073 845,198 688,500 278,525 920,000 105,000 1,025,000 920,000 105,000 1,025,000 2,400,783 0 (400,000) 539,069 0 (400,000) Total liabilities and stockholders' equity 3,025,783 1,164,069 $5,276,356 $2,287,792 CM Corporation Income Statement For the Years Ended December 31, 2016 Revenue Net product sales revenue Service revenue Total revenue Cost of goods sold Products Services Total cost of sales Gross profit Operating expenses Advertising Bad debt expense Depreciation and amortization Dues and subscriptions Insurance Legal and accounting fees Miscellaneous Office expense Payroll taxes Property taxes Repair and maintenance Research and development Telephone Travel and entertainment Utilities Wages - Employees Wages - Officers Total operating expenses $9,821,284 1,158,785 Income (loss) before income taxes Income tax (expense) benefit Net income (loss) $8,984,852 975,860 $10,980,069 5,384,590 570,811 $9,960,712 5,356,018 445,637 5,955,401 5,024,668 159,080 0 0 21,470 80,144 106,650 9,048 220,114 136,975 104,570 42,028 470,680 20,085 38,391 47,049 964,670 710,000 Income (loss) from operations Other income and (expense) Interest expense Gain (loss) on disposal of assets Interest Revenue Total other income (expense) December 31, 2015 5,801,655 4,159,057 123,869 28,640 125,500 19,730 90,144 87,650 12,010 214,138 131,170 93,400 37,543 278,000 21,085 60,402 37,876 954,688 650,000 3,130,954 2,965,845 1,893,714 1,193,212 (41,310) (4,790) 14,100 (27,800) (26,950) 9,230 (32,000) (45,520) 1,861,714 0 1,147,692 (401,692) $1,861,714 $746,000 CM Corporation Statement of Comprehensive Income Year Ended December 31, 2016 CM Corporation Statement of Stockholder's Equity as of December 31, 2016 Total Stockholder's Equity Beg. Balance, 1/1/16 Common Stock Issued Common Stock Repurchased Net Income ('16) Other Comprehensive Income ('16) Common Stock Dividend ('16) End. Balance, 12/31/16 Retained Earnings Accumulated Other Comprehensive Income Common Stock Additional Paid-In Capital Treasury Stock CASE 1 Check Figures (Revised) & Helpful Hints On the Trial Balance Worksheet: 1. 2. 3. 4. The debit and credit columns of your AJE's should total to: The Adjusted Trial Balance columns should total to: Net Income from Income Summary (the third closing entry) should be *This should match Net Income reported on CY Inc. Stmt. Total Stockholder's Equity on CY Balance Sheet should be: **This should match your end. Bal. on Statement of Stockholder's Equity $ 1,398,396 $16,667,850 $ 1,162,354* $ 2,159,023** Helpful Hints: a. To correctly record AJE #4 for Bad Debt Expense, you must first post the AJE #3 to your Trial Balance. b. You will have (5) closing entries. They include the following: i. Closing Entry #1: Close ALL revenues and Sales Returns/Discounts to Income Summary. The credit to Income Summary will therefore represent Net Sales/Service Revenues for the period. ii. Closing Entry #2: Close ALL expenses to Income Summary. Every individual expense & loss must be closed out with a credit, and the sum of all expenses/losses can then be debited to your Income Summary in this entry. iii. Closing Entry #3: Take the difference between the credit posted to Income Summary (Closing Entry #1) less the debit posted to Income Summary (Closing Entry #2) to close out the Income Summary account and permanently move NI to R.E. iv. Closing Entry #4: Close out the dividend directly to R.E. v. Closing Entry #5: Close the OCI-Unrealized Gain/Loss-AFS to Accumulated Other Comprehensive Income (your balance sheet account). This closes out your Comprehensive Income accounts & transfers their balance to your Balance Sheet under the account \"Accumulated Other Comprehensive Income\"...a permanent account. Just like NI is permanently closed into Retained Earnings, your OCI items from each current year also need to be closed out and permanently stored in your Accumulated OCI account under Stockholder's Equity on your Balance Sheet. vi. Post all closing entries to the Trial Balance in columns K & M of the worksheet. Make sure all temporary accounts show a zero balance after closing and that your Ending R.E. balance now matches the balance reported on the Balance Sheet & Statement of Stockholder's Equity. Only when posting the closing entries to RE does your End. RE balance get updated to match your actual financial statements. Also update your AOCI by posting Closing Entry #5 to the Trial Balance. Case 1 - Accounting Cycle: CM Corporation CM Corporation (CMC) was founded in 2011 by Eric Conner and Phil Martin. The company designs, installs, and services security systems for high-tech companies. The founders, who describe themselves as "entrepreneurial geeks," met in a computer lab when they were teenagers and found they had common interests in working on security systems for critical industries. In early January 2017, CMC hired you as an accounting intern to assist the CFO and the entire corporate accounting team. Lately Conner and Martin have been working with \"radio frequency identification\" (RFID) technology. They have developed a detailed system designed to track inventory items using RFID tags embedded invisibly in products. This technology has numerous inventory applications in multiple industries. One of the most basic applications is tracking manufacturing components; if tagged components "go walking" (if employees attempt to take them), companies can easily track and find them. Conner and Martin have sold their system to several hightech companies in the area. These companies have a number of government contracts that require extensive security systems to protect sensitive data from infiltration by terrorists and competitors. To date, CMC's cash flow from sales and services has adequately funded its operations. CMC anticipates growth potential for its products. As a result, it is planning a new public offering of their common stock at the end of 2017. The accounting department is currently quite small and the CFO has requested additional staff to help keep pace with the company's fast-paced growth. Therefore, as an accounting intern you can immediately become a valuable member to their corporate accounting team. To familiarize you with the company's operations, the CFO has provided an unadjusted trial balance from the end of their last fiscal year (2016) on an Excel spreadsheet. Instructions (a) Download the excel file \"CASE 1 - CMC\" which has the unadjusted trial balance with the existing accounts. This file also contains an accounting \"system\" comprised of a series of linked spreadsheets. The linkages enable the effects of all accounting entries (journal, adjusting, and closing) to flow through to spreadsheets to update the income statement, balance sheet, and retained earnings. You notice that for the fiscal year ended December 31, 2016, the bookkeeper has made all the routine general journal entries throughout the year, but none of the adjusting or closing entries have been recorded. The following information is provided for adjustments prior to closing the books. Connor and Martin ask you to enter the adjustments into the spreadsheet using the tab labeled \"AJE's & Closing Entries\". Also post these adjustments to the Trial Balance in the two columns to the right of the unadjusted trial balance. (CMC uses a perpetual inventory system.) You MUST use cell referencing when posting to the Trial Balance or your grade will be assessed a heavy penalty. Adjusting Journal Entries (AJE's): 1. Wages earned by employees during December ('16) and to be paid in January ('17) are $35,875; associated payroll taxes on these wages are $2,910. (Record in two separate adjusting entries. The payroll taxes are an expense to the company for unemployment benefits and recorded as a payable to the state & federal taxing authority.) 2. The Unearned Consulting Revenue account has a balance of $261,220 as of December 31, 2016. Earlier in the year, on May 1, 2016 a client paid CMC $153,000 cash in advance for a 12-month consulting services contract. CMC will earn revenue evenly over this 12-month period. This was the only prepayment received from clients during the entire 2016 fiscal year and recorded with a credit to Unearned Revenue. Of the beginning balance in Unearned Revenue (i.e. at Jan 1 2016), 65% of the work has now been completed by year end. 3. You discover that a sale of a product was made on account and recorded in December for $148,500; the product has not yet been shipped (i.e. delivered to the customer). The cost of the product was 55% of its selling price. CMC uses the perpetual inventory method. 4. Bad debt expense is estimated to be 6% of ending Accounts Receivable. (Round to the nearest whole dollar.) 5. CMC prepays for some insurance and advertising. The Prepaid Expense account has a balance of $26,774 at year end but before adjustment. This balance includes $12,200 for a two-year casualty insurance policy purchased on March 1, 2016. Of the remaining prepaid balance, 60% of the advertising has now been used. (Round to the nearest whole dollar.) 6. CMC records depreciation and amortization expense annually as one compound adjusting journal entry. They do not use an accumulated amortization account. Annual depreciation rates are 7% for Buildings & Equipment/Furniture, no salvage. (Round to the nearest whole dollar.) Annual Amortization rates are 10% of original cost, straight-line method, no salvage. The patent was acquired on October 1, 2013. The last time depreciation & amortization were recorded was December 31, 2015. 7. The long-term liabilities were outstanding for all of 2016 and accrue interest at 8% APR. CMC records accrued interest quarterly (interest was last updated on Sept. 30.) The company is required to pay the interest annually each January 1 st. 8. CMC often allows customers to finance the purchase of their products through long-term lending agreements and therefore reports Long-term Notes Receivable on their Balance Sheet. These notes are interest bearing and earn CMC interest revenue. The beginning balance of Interest Receivable at January 1, 2016 was $3,500. During 2016, cash received from customers for interest on these notes amounted to $17,600. You determine that the income statement for the year-ended December 31, 2016 should show Interest Revenue in the amount of $18,700. The adjusting entry to accrue interest revenue at year end has not yet been recorded. 9. On December 15, CMC declared a dividend of $150,000, to be paid on January 20, 2017. It had not yet been recorded. 10. At December 31, the Long-Term Investments are classified as Available-for-sale debt securities (or \"AFS\"). To comply with GAAP, CMC must report long-term investments in financial instruments at fair value as of the balance sheet date. These debt securities have a current fair value of $162,600. The Investment is in a corporate bond that was issued at par for $180,000, earns 8% APR, and pays interest semi-annually each Jun 30 and Dec 31. The investment was purchased on July 1, 2016. You discover that the semi-annual interest revenue on this bond has not yet been received and therefore not recorded, and the company has yet to mark-to-market the investment portfolio at year end. CMC uses a \"Fair Value Adjustment\" account (an adjunct/contra account) to report any increase/decrease in the asset's value. (Ignore income taxes as this is an unrealized gain/loss) 11. CMC has a 35% tax rate on their taxable income. Continued... (b) After making the 11 adjusting entries in Part (a), record the appropriate closing entries on the spreadsheet provided using the tab labeled \"AJEs and Closing Entries\". Post all closing entries to the Trial Balance in the columns labeled 12/31/16 Closing Entries. *Remember, after closing, all temporary accounts should show a zero balance. (c) Complete the required financial statements (Statement of Comprehensive Income, and Statement of Stockholder's Equity) in good form. The Statement of Stockholder's Equity should reconcile with your balance sheet (which is automatically updated for you...so check to make sure the ending balances are the same), income statement, & Statement of Comprehensive Income. (Use cell referencing to link the appropriate cells from the other financial statements. Keep in mind that not all cells on the Statement of Stockholder's Equity will require any updates. For example, no new stock was issued during 2016; the balance in the contributed capital accounts will therefore not change.) AJE # 1 2 Account Name DR Wages Wages Payable 35,875 Payroll Taxes Payroll Taxes Payable 2,910 Unearned Service revenue Service Revenue CR 35,875 2,910 153,000 153,000 3 4 5 Sales Revenue Accounts Receivable 148,500 Inventory Cost of Goods Gold 81,675 81,675 Bad Debts Expense 54,641 Allowance for Doubtful Accounts 54,641 Insurance Expense Prepaid Expense 5,083 6 Depreciation Expense Accumulated Depreciation Patent 7 Interest Expense Interest Payable 8 9 148,500 Dividend Dividend Payable 5,083 10 Fair Value Adjustment Unrealized Gain Income Tax payable 11 Income Tax Expense Income Tax Payble Closing Entries 1 2 3 4 5 Account Name Sales Revenue Service Revenue Net Income Net Income Sales Revenue Sales discount Net Income Product of cost of goods sold Service cost of goods sold Advertising Bad Debt Expense Depreciation and amortizalation Professional Dues & Subscriptions Income Tax Exxpense Insurance Interest Expense Legal and accountung DR CR General Ledger Account Name Cash and cash equivalents Accounts Receivable Allowance for doubtful accounts Interest Receivable Inventory Prepaid expenses Other Current Assets Investments Fair Value Adjustment Notes Receivable Building Equipment and furniture Land Accum Depr Goodwill Patents Accounts Payable Dividends payable Interest payable Unearned Consulting Revenue Wages payable Payroll taxes payable Income tax payable Long term liabilities Common Stock Paid-in capital common stock Treasury Stock Retained Earnings Dividends Accum Other Comprehensive Income Sales revenue Service revenue Interest Revenue Sales returns Sales discounts Product cost of goods sold Service cost of goods sold Advertising Bad debt expense Depreciation and amortization Professional Dues & subscriptions Gain/loss on disposal Income tax expense Insurance Interest expense Legal and accounting fees Miscellaneous Office expense Payroll taxes Property taxes Repair and maintenance Research and development Telephone Travel and entertainment Utilities Wages Salaries - Officers Income Summary Unrealized Gain/Loss-AFS Unadj. Balance 12/31/16 Debit Credit 572,563 910,680 29,462 0 1,270,160 26,774 16,063 180,000 0 0 220,000 876,418 268,483 348,791 591,965 990,851 217,000 1,169,343 12/31/16 AJEs Debit Credit 41,310 261,220 81,350 8,850 688,500 920,000 105,000 400,000 539,069 0 162,400 269,662 5,384,590 570,811 159,080 0 0 21,470 4,790 0 80,144 41,310 106,650 9,048 220,114 136,975 104,570 42,028 470,680 20,085 38,391 47,049 964,670 710,000 0 0 15,862,300 0 10,253,346 1,158,785 14,100 0 0 15,862,300 ### 0 0 Adjusted Balance 12/31/16 Debit Credit 572,563 910,680 29,462 0 1,270,160 26,774 16,063 180,000 0 0 220,000 876,418 268,483 348,791 591,965 990,851 217,000 1,169,343 0 41,310 261,220 81,350 8,850 0 688,500 920,000 105,000 400,000 539,069 0 0 0 10,253,346 1,158,785 14,100 162,400 269,662 5,384,590 570,811 159,080 0 0 21,470 4,790 0 80,144 41,310 106,650 9,048 220,114 136,975 104,570 42,028 470,680 20,085 38,391 47,049 964,670 710,000 0 0 0 0 15,862,300 15,862,300 12/31/16 Closing Entries Debit Credit ### 0 0 Post-Closing T/B 12/31/16 Debit Credit 572,563 910,680 29,462 0 1,270,160 26,774 16,063 180,000 0 0 220,000 876,418 268,483 348,791 591,965 990,851 217,000 1,169,343 0 41,310 261,220 81,350 8,850 0 688,500 920,000 105,000 400,000 539,069 0 0 0 10,253,346 1,158,785 14,100 162,400 269,662 5,384,590 570,811 159,080 0 0 21,470 4,790 0 80,144 41,310 106,650 9,048 220,114 136,975 104,570 42,028 470,680 20,085 38,391 47,049 964,670 710,000 0 0 0 0 15,862,300 15,862,300 CM Corporation Balance Sheet December 31, 2016 December 31, 2015 Assets Current assets Cash and cash equivalents Accounts receivable Allowance for doubtful accounts Inventory Interest Receivable Prepaid expenses Other current assets Total current assets Long-Term Investments Investments +/-Fair Value Adjustment Notes Receivable Property, plant and equipment Property, plant and equipment Accumulated depreciation PP&E (net) $572,563 910,680 (29,462) 1,270,160 0 26,774 16,063 $117,170 516,454 (24,975) 799,460 3,500 14,574 8,879 2,766,778 180,000 0 180,000 220,000 1,493,692 (591,965) 1,435,062 0 0 1,179,695 (591,965) 901,727 Intangible Assets Goodwill Patents 990,851 217,000 Total assets (net) 0 48,000 587,730 0 217,000 1,207,851 217,000 $5,276,356 $2,287,792 Liabilities and Stockholders' Equity Current liabilities Accounts payable Dividends payable Unearned revenue Interest payable Wages payable Payroll taxes payable Income taxes payable Total current liabilities $1,169,343 0 261,220 41,310 81,350 8,850 0 Long-term liabilities Stockholders' equity Contributed capital Common stock, $2 par value (4,000,000 shares authorized,460,000 issued; 440,000 are outstanding) Paid-in capital common stock Total contributed capital Retained earnings Accumulated other comprehensive income Less common stock in treasury, at cost Total stockholders' equity $315,395 48,000 108,220 6,500 78,200 9,033 279,850 1,562,073 845,198 688,500 278,525 920,000 105,000 1,025,000 920,000 105,000 1,025,000 2,400,783 0 (400,000) 539,069 0 (400,000) Total liabilities and stockholders' equity 3,025,783 1,164,069 $5,276,356 $2,287,792 CM Corporation Income Statement For the Years Ended December 31, 2016 Revenue Net product sales revenue Service revenue Total revenue Cost of goods sold Products Services Total cost of sales Gross profit Operating expenses Advertising Bad debt expense Depreciation and amortization Dues and subscriptions Insurance Legal and accounting fees Miscellaneous Office expense Payroll taxes Property taxes Repair and maintenance Research and development Telephone Travel and entertainment Utilities Wages - Employees Wages - Officers Total operating expenses $9,821,284 1,158,785 Income (loss) before income taxes Income tax (expense) benefit Net income (loss) $8,984,852 975,860 $10,980,069 5,384,590 570,811 $9,960,712 5,356,018 445,637 5,955,401 5,024,668 159,080 0 0 21,470 80,144 106,650 9,048 220,114 136,975 104,570 42,028 470,680 20,085 38,391 47,049 964,670 710,000 Income (loss) from operations Other income and (expense) Interest expense Gain (loss) on disposal of assets Interest Revenue Total other income (expense) December 31, 2015 5,801,655 4,159,057 123,869 28,640 125,500 19,730 90,144 87,650 12,010 214,138 131,170 93,400 37,543 278,000 21,085 60,402 37,876 954,688 650,000 3,130,954 2,965,845 1,893,714 1,193,212 (41,310) (4,790) 14,100 (27,800) (26,950) 9,230 (32,000) (45,520) 1,861,714 0 1,147,692 (401,692) $1,861,714 $746,000 CM Corporation Statement of Comprehensive Income Year Ended December 31, 2016 Net Income Other Comprehensive Income,net of Tax Unrealized Holding Gains,AFS Comprehensive Income CM Corporation Statement of Stockholder's Equity as of December 31, 2016 Total Stockholder's Equity Beg. Balance, 1/1/16 Common Stock Issued Common Stock Repurchased Net Income ('16) Other Comprehensive Income ('16) Common Stock Dividend ('16) End. Balance, 12/31/16 Retained Earnings Accumulated Other Comprehensive Income Common Stock Additional Paid-In Capital Treasury Stock CASE 1 Check Figures (Revised) & Helpful Hints On the Trial Balance Worksheet: 1. 2. 3. 4. The debit and credit columns of your AJE's should total to: The Adjusted Trial Balance columns should total to: Net Income from Income Summary (the third closing entry) should be *This should match Net Income reported on CY Inc. Stmt. Total Stockholder's Equity on CY Balance Sheet should be: **This should match your end. Bal. on Statement of Stockholder's Equity $ 1,398,396 $16,667,850 $ 1,162,354* $ 2,159,023** Helpful Hints: a. To correctly record AJE #4 for Bad Debt Expense, you must first post the AJE #3 to your Trial Balance. b. You will have (5) closing entries. They include the following: i. Closing Entry #1: Close ALL revenues and Sales Returns/Discounts to Income Summary. The credit to Income Summary will therefore represent Net Sales/Service Revenues for the period. ii. Closing Entry #2: Close ALL expenses to Income Summary. Every individual expense & loss must be closed out with a credit, and the sum of all expenses/losses can then be debited to your Income Summary in this entry. iii. Closing Entry #3: Take the difference between the credit posted to Income Summary (Closing Entry #1) less the debit posted to Income Summary (Closing Entry #2) to close out the Income Summary account and permanently move NI to R.E. iv. Closing Entry #4: Close out the dividend directly to R.E. v. Closing Entry #5: Close the OCI-Unrealized Gain/Loss-AFS to Accumulated Other Comprehensive Income (your balance sheet account). This closes out your Comprehensive Income accounts & transfers their balance to your Balance Sheet under the account \"Accumulated Other Comprehensive Income\"...a permanent account. Just like NI is permanently closed into Retained Earnings, your OCI items from each current year also need to be closed out and permanently stored in your Accumulated OCI account under Stockholder's Equity on your Balance Sheet. vi. Post all closing entries to the Trial Balance in columns K & M of the worksheet. Make sure all temporary accounts show a zero balance after closing and that your Ending R.E. balance now matches the balance reported on the Balance Sheet & Statement of Stockholder's Equity. Only when posting the closing entries to RE does your End. RE balance get updated to match your actual financial statements. Also update your AOCI by posting Closing Entry #5 to the Trial Balance