Complete General entries for following question:

Gordon Corporation is a company that specializes in the design of custom hardware and software solutions for manufacturing companies. The company is located in Dayton, Ohio and it owns the building and land which houses operations. Gordon Corporation’s staff are able to record daily transactions, collect receivables, pay vendors and complete the weekly payroll. Gordon uses the services of an outside accountant to prepare end of year adjusting entries, corrections, and any other necessary entries necessary to prepare accurate financial statements. You will be providing this service for 2021.

Gordon uses straight-line depreciation and depreciates assets to the nearest whole month in use during the year. The company uses the LIFO inventory method with lower of cost or net realizable value applied to individual items. Adjustments are only recorded at the end of the fiscal year unless otherwise noted. Reversing entries are used for deferrals which were originally recorded in income statement accounts and all accruals.

Gordon has 50,000 shares of $6.50 par value common stock authorized. The corporation uses the cost method of accounting for treasury stock. Gordon prepares all financial statements in accordance with GAAP. Gordon’s incremental borrowing rate is 6%. The company’s common stock was selling for $37 per share throughout the entire last quarter of 2021.

You will find the 12/31/21 preliminary trial balance for Gordon Corporation on the last page of this assignment. You can assume the amounts on the trial balance are correct so far unless you are given information to the contrary. The list of transactions below need your attention as the company’s outside accountant. Unless you are told otherwise, assume the information in these transactions have not been recorded. You will also find the post-closing trial balance for 2020 on the last page. Gordon’s effective tax rate in 2020 was 15%.

For simplicity, all operating expenses for the current year are shown in one account entitled “Operating Expenses.” But, when you complete your entries, use specific account titles for any operating expenses you need to record (such as Salaries Expense or Insurance Expense). However, if the accounts you add are Operating Expenses, you may combine them into the amount reported as Operating Expenses on the income statement.

1. The balance in the petty cash fund is $238. Receipts for items paid out of petty cash include the following: $145 for office supplies, $87 for FedEx shipping costs, $23 for a staff pizza party (approved by the owner). At this point all of the office supplies have been used and the petty cash fund needs to be replenished.
2. Bad debts are estimated at 2% of gross receivables. All questionable receivables have already been written off.
3. The note payable already on the books is a 12-year, 6% interest-bearing note that is next due to be paid on 11/1/22. Part of the principle is payable annually on November 1 in equal $5,000 installments in addition to the year’s interest. The last payment of interest and principle was paid on 11/1/21 and it was booked on that date.
4. On Oct 3, 2021, Gordon acquired 1,000 shares of Newtech Company common stock at $12 per share. Gordon paid cash for this stock that represents 25% of Newtech’s outstanding common stock. The stock was recorded in the Equity Securities account when it was purchased. Newtech’s total net income for year ended 12/31/21 was $32,000 which was earned evenly throughout the year. The fair value of Newtech’s common stock was $17 per share at the end of the year. Nothing has been recorded related to Newtech except for the initial purchase.
5. The remaining balance in Equity Securities represent stocks owned in a variety of companies. Other than the Newtech stock investment, the ownership percentage is very small for all other equity securities. The company views these securities as a long-term investment but could sell the securities if a need for cash arises. The current market value of the securities (other than Newtech) is $8,600.
6. In December 2021, Gordon and Mega-Manufacturing signed a 3 year contract for Gordon to update Mega’s computer networks starting in 2022. The contract calls for annual payments of $20,000 due on January 1 of each year, with the first payment due on 1/1/22. The implicit rate of interest used by Gordon in pricing this contract was 8%.
7. Equipment purchased for $6,000 on 1/1/19 was taken out of service at the beginning of August 2021 due to recurring maintenance problems. The company’s attempts to find a buyer have been unsuccessful. Depreciation recorded on the equipment prior to 2021 was $2,400. No depreciation has been taken in 2021. If a buyer is not found, and that now appears likely, there will be no proceeds from disposing of the equipment.
8. Late in 2021, Gordon discovered a “bug” in a software product that was installed for several of Gordon’s clients. Although the bug was not Gordon’s fault, the CEO of the company feels strongly that Gordon’s software engineers should assist client with a programming solution since the company recommended the software. Gordon will begin contacting clients early in 2022 and should have fixes in place for all those affected by the end of the first quarter of 2022. The estimated cost is $7,000.
9. On November 3, the Gordon executed a deal to trade 2,000 share of the company’s common stock for land to be used as a future building site to expand into the Columbus area. The company chose to issue new shares rather than using any of its treasury stock.
10. The patent already on the books was purchased by Gordon on January 5, 2021 from a competitor. The patent has a remaining legal life of 10 years. Gordon assumes the patent will benefit the company for at least 15 years.
11. At the end of 2021, Gordon has stock options outstanding for the purchase of 2,000 shares of common stock at an option price of $30 per share. The options cannot be exercised until after 1/1/23.
12. Gordon ordered inventory totaling $13,000 on Dec. 2, 2021 that was placed on backorder because the supplier did not have the items in stock. The company received notice that the items were shipped FOB Shipping point on Dec. 30. The inventory arrived Jan. 5, 2022. The terms offered by the vendor are 2/10, n/30.
13. Included in the inventory account are 50 computer monitors that were purchased for $75 each. These monitors were purchased for a specific client who ended up backing out on a contract with Gordon. The monitors would have been sold for $150 each if the contract had continued. The monitors have been sitting in inventory most of the year and are now an out-of-date model. The monitors can be sold to an online overstock company for $30 each. Gordon will have to pay $80 of shipping to have the monitors delivered to the online retailer’s warehouse. If Gordon were to buy the monitors now from the manufacturer, they would cost $45 each.
14. On December 15, Gordon declared a 10% stock dividend on common stock. The stock dividend will be distributed on January 10, 2022 before 2021 financial statements will be issued.
15. No entries for depreciation of plant assets have been recorded for 2021. The following information is available to help you record depreciation. The useful life column represents the asset life that was estimated at the time of acquisition.

Asset	Original Cost	Residual Value	Useful Life	Comments
Building	$180,000	0	20 yrs.	3 yrs of depreciation has been recorded prior to 2021
Assets in the Equipment account:	Original Cost	Residual Value	Useful Life	Comments
Computer Equipment	$20,000	2,000	5 yrs.	3 yrs of depreciation has been recorded prior to 2021
Computer Equipment not in service	$6,000	0	5 yrs.	This is the computer that was taken out of service described in #7 above
Network Servers	10,000	800	4 yrs.	Placed in service on 3/26/21
Network Accessories	12,000	0	6 yrs.	3 yrs of depreciation has been recorded prior to 2021. At the beginning of 2021, the company determined that the accessories will probably need to be replaced after 2 more years.
Network Hub	13,000	600	3 yrs.	Placed in service on 11/28/20. The asset was recorded in the Equipment account when purchased; however, due to an oversight, no depreciation has been recorded on this asset in 2020 or 2021.
Total Equipment	$61,000