Comprehensive Problem. I have attached the excel file.

Read ALL instructions before getting started! ABC Corporation is a new company that buys and sells office supplies. Business began on January 1, 2014. Given on the first two tabs are ABC's 12/31/14 Unadjusted Trial Balance and a list of needed adjustments. 1. Make all 16 adjustments on the "Adjusting Journal Entries" tab. Remember to include a description under each journal entry. 2. Post the adjustments to the general ledger on the "12-31-14 T-Accounts" tab. You may have to add T-Accounts for new accounts. Link your T-Account entries to your Journal Entries. PLEASE NOTE THAT THE "BB" (BEGINNING BALANCES) FOR THE T-ACCOUNTS REPRESENT THE UNADJUSTED BALANCES AS OF 12/31/14. 3. Once the 12/31/14 T-Accounts are complete, prepare the Adjusted Trial Balance. There may be some accounts with zero dollars, and you may have to insert lines for new accounts (some blank T-Accounts have already been provided for you). Link the Adjusted Trial Balance to your T-Accounts. 4. Use the Adjusted Trial Balance numbers to complete the Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows. For purposes of the Income Statement, prepare using the multiple step format and assume that Rent Revenue, any Unrealized Holding Gains/Losses, Interest Expense, Interest Revenue, and any other Gains/Losses are NOT part of the major central ongoing operations of the company. Link your financial statements to your Adjusted Trial Balance. Use the Income Statement and Balance Sheet to finish the partially completed Statement of Cash Flows. Since this is ABC's first year of operations, several line items on the Statement of Cash Flows have already been supplied to you . If necessary, review financial statement preparation in Chapters 4 and 5 of your textbook for a quick refresher. Plan on using your knowledge gained in completing Chapter 23 to help with the preparation of the Statement of Cash Flows. Additionally, since this is ABC Corporation's first year of operations, the adjusted trial balance for all current assets and liabilities represents the change during the year for Statement of Cash Flows analysis purposes. 5. When the Financial Statements are complete, make the closing entries on the "Closing Entries" tab being mindful of the four closing entries you've learned. 6. When closing entries have been made, post the entries to the general ledger on the "Post-Close T-Accounts" tab. Make sure your adjusting journal entries are also posted on your Post-Close T-Accounts. They will not automatically flow from tab-to-tab. Suggestion: As an alternative, after you've finished posting your adjusting journal entries to the accounts in the "12-31-14 T Accounts" tab, make a duplicate of this worksheet to use for posting your closing entries and then just relabel the tab as "Post-Close T-Accounts." Just be sure to delete the original "Post-Close T-Accounts" tab already in the workbook before you do this since you can't have two worksheets with the same name. 7. The final step is the Post-Closing Trial Balance, which will use the ending balances from the 1/1/15 T-Accounts. 8. Double-check your work. Here are a few things to check for: -Adjusted Trial Balance: Make sure debit column and credit column total to the same figure at the bottom. -Net income from the income statement will flow through to the Statement of Retained Earnings. -Ending Retained Earnings from the Statement of Retained Earnings will flow through to the Balance Sheet. -Ending Cash balance from the Balance Sheet should match your ending Cash balance on the Statement of Cash Flows. -The Post-Closing Trial Balance should not have any revenue, expense, gain, loss, or other temporary accounts. -Check figure 1: Income from operations = $236,536. -Check figure 2: Total Current Assets = $1,250,380. -Check figure 3: Total Liabilities & Stockholders' Equity = $1,758,834. -Check figure 4: Cash flow provided by operating activities = $134,285. -Check figure 5: Adjusted Trial Balance debit and credit columns total $2,590,686. -Check figure 6: Cash flow provided by financing activities $1,292,929. -Remember: Neatness matters in Financial Statements. Print or Print Preview before submitting to make sure your statements are neat. Otherwise, management may send back to you for revision! -Include your work at the bottom of each tab as needed. -Ask questions prior to the dayight before the due date. The due date is clearly indicated on the course schedule. -Utilize formulas and worksheet linkings in your financial statements to improve accuracy and save time in completing the assignment. -Please take advantage of Excel by using formulas to calculate groups of numbers (i.e. "Total Liabilities and Stockholders' Equity"). comments: This project is intended to make sure that you understand the accounting cycle as well as several key financial accounting transactions that you have during your Intermediate Accounting series. It is very important to take the necessary time on this project to master these concepts. The concepts mastered in this comprehensive problem will serve you well in Advanced Accounting and the rest of your accounting curriculum. ABC Corporation Unadjusted Trial Balance December 31, 2014 Cash $ Short term investments Fair value adjustment (Trading) Accounts receivable Allowance for doubtful accounts Inventory Purchases Prepaid insurance LT (Debt) investments (HTM) Land Building Accumulated depreciation: building Equipment Accumulated depreciation: equipment Patent Accounts payable Notes payable Income taxes payable Unearned rent revenue Bonds Payable Premium on Bonds Payable Common stock PIC In Excess of Par-Common Stock Retained earnings Treasury stock Dividends Sales Revenue Advertising expense Wages expense Office expense Depreciation expense Utilities expense Insurance expense Income taxes expense Debit 694,083 167,000 200,200 Credit $ - 332,700 24,600 168,934 75,000 150,000 4,000 60,000 20,000 37,500 75,240 235,000 63,800 36,000 800,000 154,432 86,000 13,000 49,000 41,000 802,845 8,400 67,600 21,700 24,000 31,000 73,800 63,800 ### ### 1 On March 1, ABC purchased a one-year liability insurance policy for $98,400. Upon purchase, the following journal entry was made: Dr Prepaid insurance 98,400 Cr Cash 98,400 The expired portion of insurance must be recorded as of 12/31/14. Notice that the expired portion from March through November has been recorded already. Make sure that the Prepaid Insurance balance after the adjusting entry is correct. 2 Depreciation expense must be recorded for the month of December. The building was purchased with cash on February 1, 2014 for $150,000 with a remaining useful life of 30 years and a salvage value of $6,000. The method of depreciation for the building is straight-line. The equipment was purchased with cash on February 1, 2014 for $60,000 with a remaining useful life of 5 years and a salvage value of $3,000. The method of depreciation for the equipment is double-declining balance. Depreciation has been recorded for the building and equipment for months February through November. 3 On December 1, XYZ Co. agreed to rent space in ABC's building for $12,000 per month, and XYZ paid ABC on December 1 in advance for the first three months' rent. The entry made on December 1 was as follows: Dr Cash 36,000 Cr Unearned rent revenue 36,000 The unearned revenue account must be adjusted to reflect the amount earned as of 12/31/14. 4 Per timecards, from the last payroll date through December 31, 2014, ABC's employees have worked a total of 250 hours. Including payroll taxes, ABC's wage expense averages about $51 per hour. The next payroll date is January 5, 2015. The liability for wages payable must be recorded as of 12/31/14. 5 On November 30, 2014, ABC borrowed $235,000 from American National Bank by issuing an interest-bearing note payable. This loan is to be repaid in three months (on February 28, 2015), along with interest computed at an annual rate of 6%. The entry made on November 30 to record the borrowing was: (for Statement of Cash Flow purposes, consider a financing item) Dr Cash 235,000 Cr Notes payable 235,000 On February 28, 2015 ABC must pay the bank the amount borrowed plus interest. Assume the beginning balance for Notes Payable is correct. Interest through 12/31/14 must be accrued on the $235,000 note. 6 ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete physical inventory at year-end. A physical count was taken on December 31, 2014, and the inventory on-hand at that time totaled $90,000. Record the 2014 Cost of Goods Sold and the 12/31/14 Inventory adjustment. (This includes closing Purchases.) 7 It would be unusual for a company to have an asset impairment in Year 1, but for the sake of this example, ABC realized that their intangible asset might be impaired on December 31, 2014. Record the impairment if any. The expected future net cash flows for this intangible asset totals $30,000, and the fair value of the asset is $27,500. 8 On 7/1/14, ABC purchased 7,000 shares of its own stock from existing stockholders as treasury stock. The cost of the treasury stock was $7 per share, or $49,000 in total. The effects of this transaction are already shown in the unadjusted trial balance. On 12/31/14, ABC reissued these 7,000 shares of treasury stock at $10 per share. Record the journal entry required for the reissuance of the treasury stock. 9 On 12/31/14, ABC issued 5,000 shares of $3 par value common stock at the closing market price of $7 per share. Prepare ABC's journal entry to reflect the issuance of the stock on 12/31/14. 10 On 7/1/14, ABC sold 15% bonds having a maturity value of $800,000 for $954,432, resulting in an effective yield of 10%. The bonds are dated 7/1/14, and mature 7/1/19. Interest is payable semiannually on July 1 and January 1. ABC uses the effective interest method of amortization for bond premium or discount. Record the adjusting entry for the accrual of interest and the related amortization on 12/31/14. Hint: Develop an abbreviated amortization schedule to accurately determine the interest expense. 11 The following information is available for ABC Corporation at 12/31/14 regarding its investments in stocks of other companies. Securities 2,200 shares of Toyota Corporation Common Stock 1,100 shares of G.M. Corporation Common Stock Cost Fair Value ### ### $ 67,000 $84,000 ### ### Prepare the adjusting entry (if any) for 2014, assuming the securities are classified as trading. 12 On 1/1/14, ABC Corporation purchased, as a held-to-maturity investment, $190,000 of the 8%, 5-year bonds of Intuit Corporation for $168,934, which provides an 11% return. Prepare ABC's 12/31/14 journal entry to reflect the receipt of annual interest and discount amortization. Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used. 13 ABC Corporation prepares an aging schedule on 12/31/14 that estimates total uncollectible accounts at $25,000. Assuming that the allowance method is used, prepare the entry to record bad debt expense. 14 On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make annual payments of $10,503 at the beginning of each year, starting January 1, 2014. The delivery vehicle has an estimated useful life of 6 years and a $7,000 unguaranteed residual value. The delivery vehicle reverts back to the lessor at the end of the lease term. ABC Corporation uses the straight-line method of depreciation for the delivery vehicle. ABC Corporation's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown. No entries have yet been made concerning this lease arrangement. After determining the type of lease arrangement (capital or operating), prepare the necessary multiple-part journal entry for 2014 for ABC Corporation. (Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for this lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity.) 15 ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pension plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan in 2014. Pension asset/liability (January 1) $0 Actual return on plan assets $40,000 Expected return on plan assets $20,000 Contributions (funding) in 2014 $35,000 Fair value of plan assets (Decemb $75,000 Settlement rate 10% Projected benefit obligation (Janu $0 Service cost $60,000 Benefits paid in 2014 $0 *For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Liability as long-term in nature. 16 On December 31, 2014, ABC Corporation issued 1,000 shares of restricted stock to its Chief Financial Officer. ABC stock had a fair value (closing market price) of $7 per share on December 31, 2014. Additional information is as follows: a. The service period related to the restricted stock is 2 years. b. Vesting occurs if the CFO stays with the company for a two-year period. c. The par value of the common stock is $3 per share. Make the appropriate accounting entry as of the grant date, 12/31/14. Do this step after preparing the Income Statement except for the Income taxes line: (You need to calculate Income Before Income Taxes in order to calcualte total Income Tax Expense) 17 Corporate taxes are due in four estimated quarterly payments on April 15, June 15, September 15, and December 15. However, for the purposes of this ABC illustration, we will assume that estimates are not paid, and that the tax is paid in full on the return's March 15, 2015 due date. ABC's income tax rate is 40%. The entire year's income tax expense was estimated at the beginning of 2014 to be $69,600, so January through November income tax expense recognized amounts to $63,800 (11/12 months). Since we are assuming estimates are not made during the year, the balance in Income taxes payable represents tax accrued for January through November. Assume no deferred tax assets or deferred tax liabilities. Based on the income before income taxes figure from the income statement, record December's income tax expense so that the entire year's total tax expense is correct. 12/31/14 JE # Adjusting Journal Entries Account Titles 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Debits Credits Beginning balances (bb) on these T-accounts are the 12/31/14 unadjusted balances. Hint: If there is no beginning balance (bb), it is a new account. bb Cash 694,083 bb 694,083 bb Accounts receivable 200,200 bb 200,200 Short term investments 167,000 Inventory - bb - Fair value adjustment (Trading) - bb 332,700 Allowance for doubtful accounts - bb bb Purchases 332,700 Prepaid insurance 24,600 bb 24,600 LT (Debt) investments (HTM) 168,934 75,000 Bonds Payable bb Land 75,000 800,000 bb Premium on Bonds Payable 154,432 bb 800,000 167,000 bb - - Accumulated depreciation: building 4,000 bb Building 150,000 150,000 bb 4,000 Notes payable 154,432 Accumulated depreciation: equipment 20,000 bb Equipment 60,000 60,000 Income taxes payable 63,800 bb 235,000 bb 168,934 bb 20,000 Unearned rent revenue 36,000 bb Patent 37,500 Accounts payable 75,240 bb 37,500 Common stock 86,000 bb 75,240 Retained earnings - bb bb Dividends 41,000 bb Utilities expense 31,000 PIC In Excess of Par-Common Stock 13,000 bb 235,000 63,800 Sales Revenue 802,845 bb bb Advertising expense 8,400 bb Income taxes expense 63,800 802,845 bb Insurance expense 73,800 73,800 8,400 36,000 bb Wages expense 67,600 67,600 86,000 bb Office expense 21,700 21,700 63,800 NOTE: When closing entries have been made, post the entries to the general ledger on the "Post-Close T-Accounts" tab. Make sure your adjusting journal entries are also posted on your Post-Close T-Accounts. They will not automatically flow from tab-to-tab. Suggestion: As an alternative, after you've finished posting your adjusting journal entries to the accounts in the "12-31-14 T Accounts" tab, make a duplicate of this worksheet to use for posting your closing entries and then just relabel the tab as "Post-Close T-Accounts." Just be sure to delete the original "Post-Close T-Accounts" tab already in the workbook before you do this since you can't have two worksheets with the same name. 41,000 - bb Depreciation expense 24,000 24,000 31,000 13,000 bb Treasury stock 49,000 49,000 ABC Corporation Adjusted Trial Balance December 31, 2014 Debit Credit ABC Corporation Income Statement For the Year Ended December 31, 2014 ABC Corporation Statement of Retained Earnings For the Year Ended December 31, 2014 ABC Corporation Balance Sheet For the Year Ended December 31, 2014 ABC Corporation Statement of Cash Flows For the Year Ended December 31, 2014 Cash flows from operating activities Net income Add: Depreciation expense Add: Bad debt expense Add: Pension Underfunding Deduct: Amortization of bond premium (Issued bonds) Deduct: Unrealized holding G/L Deduct: Amortization of HTM discount (Bond investment) Cash flow provided by operating activities - Cash flows from investing activities Cash flow used by investing activities - Cash flows from financing activities Issuance of bonds Leased delivery vehicle payment-principal only Proceeds from bank note Cash flow provided by financing activities Net change in cash Beginning cash balance 1/1/14 Ending cash balance 12/31/14 - *Note: As indicated in the instructions, the Statement of Cash Flows has been partially populated preparation of this financial statement. Remember, since the beginning cash balance is zero, the e should also represent the total net change in cash. 12/31/14 JE # Closing Entries Account Titles 1 2 3 4 Debits Credits Beginning balances (bb) on these T-accounts are the 12/31/14 unadjusted balances. Hint: If there is no beginning balance (bb), it is a new account. bb Cash 694,083 bb 694,083 bb Accounts receivable 200,200 bb 200,200 Short term investments 167,000 Inventory - bb - Fair value adjustment (Trading) - bb 332,700 Allowance for doubtful accounts - bb bb Purchases 332,700 Prepaid insurance 24,600 bb 24,600 LT (Debt) investments (HTM) 168,934 75,000 Bonds Payable bb Land 75,000 800,000 bb Premium on Bonds Payable 154,432 bb 800,000 167,000 bb - - Accumulated depreciation: building 4,000 bb Building 150,000 150,000 bb 4,000 Notes payable 154,432 Accumulated depreciation: equipment 20,000 bb Equipment 60,000 60,000 Income taxes payable 63,800 bb 235,000 bb 168,934 bb 20,000 Unearned rent revenue 36,000 bb Patent 37,500 Accounts payable 75,240 bb 37,500 Common stock 86,000 bb 75,240 Retained earnings - bb bb Dividends 41,000 bb Utilities expense 31,000 PIC In Excess of Par-Common Stock 13,000 bb 235,000 63,800 Sales Revenue 802,845 bb bb Advertising expense 8,400 bb Income taxes expense 63,800 802,845 bb Insurance expense 73,800 73,800 8,400 36,000 bb Wages expense 67,600 67,600 86,000 bb Office expense 21,700 21,700 63,800 NOTE: When closing entries have been made, post the entries to the general ledger on the "Post-Close T-Accounts" tab. Make sure your adjusting journal entries are also posted on your Post-Close T-Accounts. They will not automatically flow from tab-to-tab. Suggestion: As an alternative, after you've finished posting your adjusting journal entries to the accounts in the "12-31-14 T Accounts" tab, make a duplicate of this worksheet to use for posting your closing entries and then just relabel the tab as "Post-Close T-Accounts." Just be sure to delete the original "Post-Close T-Accounts" tab already in the workbook before you do this since you can't have two worksheets with the same name. 41,000 - bb Depreciation expense 24,000 24,000 31,000 13,000 bb Treasury stock 49,000 49,000 ABC Corporation Post-Closing Trial Balance December 31, 2014 Debit Credit TOTAL POINTS EARNED 0 0 0 0 0 TOTAL SCORE (MAX 400 POINTS) Instructor Comments: 0