Directions:

Bearcat, LLP is auditing Dumbledore Manufacturing, Inc. (DMI), a privately-held company, for the year ended December 31, 2019. You are the staff auditor responsible for preparing the financial statements. With the unadjusted trial balance provided, you are responsible for the following:

1. Recording any adjusting journal entries based on audit findings on both the trial balance and the AJE report. Dont forget to add a description.
2. Accumulating any passed adjusting journal entries based on audit findings and determining whether income effect of entries is below materiality.

General Audit Planning Information:

Materiality = $40,000

PAJE Scope = $2,000

Audit Findings:

A.When performing the search for unrecorded liabilities test, it was discovered that an invoice relating to 2019 services was incorrectly excluded from the accounts payable aging. Total additional expense to record dues/subscription/seminars expense #74650 was $1,850 which extrapolated to $25,674. DMI does not want to record an adjusting entry to correct as this is an extrapolated number versus an actual known error.

B.When auditing the bank reconciliation for the Cash Operating account at Chase, a $450 error was discovered. The client will not correct until the January 2020 bank reconciliation process.

2019 Information needed for Cash Flow Statement:

• There were no sales of investment securities. The only two items effecting the investment line will be purchases of $875,410 and change in unrealized gain. (Unrealized change will equal OCI change and should be a non-cash item)
• Information needed for fixed assets is on the fixed asset rollforward tab
• There were no additional borrowings on notes payable
• There were no additional borrowings on long-term debt

FINAL AJE FINAL 12/31/2018 251,746.00 3,500.00 100.00 618,507.00 (80,000.00) 9,330,682.00 595,838.00 2 Grouping 3 Cash 4 Cash 5 Cash 6 Accounts receivable 7 Accounts receivable 8 Inventory 9 Inventory 10 Prepaid expenses 11 Prepaid expenses 12 Prepaid expenses 13 Investments 14 Investments 15 Land 16 Office equipment 17 Buildings and improvements 18 Autos and trucks 19 Machinery and equipment 20 Office equipment 21 Office equipment 22 Office equipment 23 Accumulated depreciation 24 Accumulated depreciation 25 Accumulated depreciation 26 Accumulated depreciation 27 Accumulated depreciation 28 Accumulated depreciation 29 Cash surrender value of life insurance 30 Goodwill 31 Goodwill 32 Accounts payable 33 Line of credit 34 Current portion of notes payable 35 Notes payable 36 Current portion of long-term debt 37 Long-term debt 38 Accrued expenses 39 Accrued expenses 40 Accrued wages 41 Accrued wages Acct # Acct Description 10050 Cash - Operating Chase 1684 10070 Cash in Bank - PNC 10080 Petty Cash 11100 A/R - TRADE 11150 ALLOW DOUBTFUL ACCOUNTS 12010 INVENTORY 12500 W.I.P. - PARTS & LABOR 13120 PPD. LIABILITY INSURANCE 13160 PPD. WORKERS' COMP. 13350 PPD. OTHER 14500 INVESTMENTS - VANGUARD 14600 INVESTMENTS - VALUATION ACCOUNT 15100 LAND 15170 COMPUTER/CATALOG EQUIPMENT 15180 Buildings & Improvements 15190 Autos & Trucks 15200 Machinery & Equipment 15250 Office Equipment 15300 Phone System 15330 Computer System 16180 A/D- Buildings & Improvements 16190 A/D - Autos & Trucks 16200 A/D - Machinery & Equipment 16250 A/D - Office Equipment 16300 A/D - Phone System 16330 A/D - Computer System 17150 CASH SURRENDER VALUE-LF 17600 GOODWILL 17650 ACCUM W/DOWN - GOODWILL 20380 Accounts Payable 21110 Line of Credit - Chase 21250 N/P-INSURANCE/AUTO LOANS - CURRENT 21260 N/P-INSURANCE/AUTO LOANS 21290 LONG-TERM DEBT - HUNTINGTON - CURRENT 21300 LONG-TERM DEBT - HUNTINGTON 24150 SALES TAX-OHIO 27400 ACCRUED INTEREST EXP 27550 ACCRUED SALARIES 27560 ACCRUED BONUS - MGMT UNADJ 12/31/2019 947,251.00 2,000.00 100.00 789,185.00 (80,000.00) 7,533,433.00 664,950.00 90,000.00 7,580.00 41,600.00 3,975,410.00 90,000.00 100,000.00 42,710.00 1,385,000.00 651,458.00 3,285,460.00 78,850.00 35,854.00 204,785.00 (654,060.00) (370,646.00) (2,323,294.00) (100,962.00) (25,911.00) (143,002.00) 2,500,588.00 100,000.00 12/31/2019 947,251.00 2,000.00 100.00 789,185.00 (80,000.00) 7,533,433.00 664,950.00 90,000.00 7,580.00 41,600.00 3,975,410.00 90,000.00 100,000.00 42,710.00 1,385,000.00 651,458.00 3,285,460.00 78,850.00 35,854.00 204,785.00 (654,060.00) (370,646.00) (2,323,294.00) (100,962.00) (25,911.00) (143,002.00) 2,500,588.00 100,000.00 18,680.00 31,800.00 3,100,000.00 80,000.00 100,000.00 30,850.00 1,350,000.00 835,602.00 3,684,105.00 78,850.00 35,854.00 145,650.00 (536,460.00) (505,152.00) (2,818,238.00) (74,951.00) (22,114.00) (123,926.00) 2,400,588.00 100,000.00 (214,940.00) (848,621.00) (17,500.00) (172,286.00) (150,000.00) (524,000.00) (8,339.00) (12,575.00) (214,940.00) (848,621.00) (17,500.00) (172,286.00) (150,000.00) (524,000.00) (8,339.00) (12,575.00) (435,505.00) (1,125,475.00) (15,000.00) (189,786.00) (100,000.00) (635,000.00) (7,896.00 (14,585.00) (247,759.00) (374,000.00) (345,000.00) (345,000.00) 42 Accrued wages 43 Accrued wages 44 Accrued expenses 45 Accrued expenses 46 Accrued expenses 47 Accrued expenses 48 Common stock 49 Additional paid-in capital 50 Accumulated other comprehensive (income) loss 51 Retained earnings 52 Retained earnings 53 Sales 54 Sales 55 Sales 56 Sales 57 Sales 58 Sales 59 Cost of Goods Sold 60 Operating Expenses 61 Operating Expenses 62 Operating Expenses 63 Operating Expenses 64 Operating Expenses 65 Operating Expenses 66 Operating Expenses 67 Operating Expenses 68 Operating Expenses 69 Operating Expenses 70 Operating Expenses 71 Operating Expenses 72 Operating Expenses 73 Operating Expenses 74 Operating Expenses 75 Operating Expenses 76 Operating Expenses 77 Operating Expenses 78 Operating Expenses 79 Operating Expenses 80 Operating Expenses 81 Operating Expenses 82 Operating Expenses 27580 ACCRUED BONUS - EXEC 27600 ACCRUED COMMISSIONS 27610 ACCRUED LEGAL FEES 27620 ACCRUED CPA FEES 27950 ACCRUED OTHER - AMEX CC 29200 STATE INCOME TAXES 30010 COMMON STOCK 30020 ADDTL PAID IN CAPITAL 30100 ACCUMULATED OTHER COMPREHENSIVE INCOME 30200 DISTRIBUTIONS-SHAREHOLDERS 33110 RETAINED EARNINGS 40110 SALES 40130 OTHER OPERATING REVENUE 40310 LABOR INCOME 40520 FREIGHT INCOME 40650 LANVIN INCOME 40900 SALES DISCOUNTS 50110 COST OF SALES 60000 SALARIES & WAGES-SALARY 60010 SALARIES & WAGES-HOURLY 60100 PAYROLL TAXES 60200 EMPLOYEE BENEFITS 61350 ADVERTISING 62200 DEPRECIATION EXPENSE 62210 AMORTIZATION EXPENSE 62320 TRUCK EXPENSES/REPAIRS 62350 INSURANCE 62400 BUILDING RENT 62540 REPAIRS & MAINT-PARTS 62590 REAL ESTATE TAX 62600 SHOP/WAREHOUSE LABOR 62620 UNIFORMS 62660 UTILITIES 64650 DUES/SUBSCRPTN/SEMINARS 65450 MEALS 65460 ENTERTAINMENT 67590 CELLULAR PHONES/PAGING 69250 COMMISSION EXP. 69750 OTHER OPERATING EXP. 70500 WORKERS' COMPENSATION 71400 PROMOTION (281,000.00) (34,812.00) (15,000.00) (20,000.00) (9,897.00) (30,000.00) (1,000.00) (320,400.00) (90,000.00) 750,000.00 (14,795,441.00) (27,560,510.00) (195,863.00) (8,598.00) (178,814.00) (61,865.00) 35,875.00 22,485,174.00 567,290.00 285,367.00 121,028.00 249,027.00 57,065.00 594,152.00 (281,000.00) (34,812.00) (15,000.00) (20,000.00) (9,897.00) (30,000.00) (1,000.00) (320,400.00) (90,000.00) 750,000.00 (14,795,441.00) (27,560,510.00) (195,863.00) (8,598.00) (178,814.00) (61,865.00) 35,875.00 22,485,174.00 567,290.00 285,367.00 121,028.00 249,027.00 57,065.00 594,152.00 (184,000.00) (27,410.00) (15,000.00) (20,000.00) (11,254.00) (32,000.00) (1,000.00) (320,400.00) (80,000.00) 650,000.00 (14,157,456.00) (25,961,652.00) (194,258.00) (9,254.00) (150,359.00) (70,255.00) 40,800.00 21,530,131.00 474,921.00 285,486.00 135, 149.00 250,258.00 52,486.00 486,705.00 64,568.00 95,306.00 210,000.00 12,515.00 29,561.00 210,741.00 4,650.00 90,816.00 1,745.00 41,842.00 4,029.00 883.00 85,759.00 10,347.00 10,107.00 192,926.00 64,568.00 95,306.00 210,000.00 12,515.00 29,561.00 210,741.00 4,650.00 90,816.00 1,745.00 41,842.00 4,029.00 883.00 85,759.00 10,347.00 10,107.00 192,926.00 55,584.00 93,258.00 210,000.00 19,586.00 28,000.00 267,371.00 4,700.00 90,135.00 1,800.00 38,471.00 5,000.00 958.00 145,825.00 12,584.00 10,800.00 196,582.00 83 Operating Expenses 84 Operating Expenses 85 Operating Expenses 86 Operating Expenses 87 Interest Expense 88 Other Income 89 Gain on Sale of Assets 90 Operating Expenses 91 Operating Expenses 92 Operating Expenses 93 94 71700 COMMISSION EXP 73500 AUTO REPAIRS & EXPENSES 74100 POSTAGE & OVERNIGHT MAIL 74650 DUES/SUBSCRPTN/SEMINARS 90200 INTEREST EXP. 90250 CHANGE IN CASH SURRENDER VALUE OF LIFE INS 90300 (GAIN) LOSS ON SALE OF ASSETS 92500 BONUS PROVISION - MGMT. 92510 BONUS PROVISION - EXEC. 97150 STATE & LOCAL INC. TAX 120,358.00 62,075.00 367.00 101,721.00 26,940.00 (100,000.00) (4,987.00) 345,000.00 281,000.00 24,875.00 120,358.00 62,075.00 367.00 101,721.00 26,940.00 (100,000.00) (4,987.00) 345,000.00 281,000.00 24,875.00 125,487.00 62,584.00 358.00 87,745.00 31,841.00 (90,000.00) (140,297.00) 374,000.00 184,000.00 25,485.00