Exhibit B: Information for year-end adjusting entries

Ozark closes to customers from Christmas until January 2. Employees do work counting inventory, doing maintenance, and cleaning. The following information pertains to potential year-end adjusting entries. If needed, the applicable federal income tax rate for prior and the current year is 30%.

1. Depreciation is taken. Assets sold are depreciated through the month of sales. (Note: Depreciation on the Trucks for the year should be $12,000 in addition to the $5,000 applicable to the truck sold in Dec.). The depreciation on the building has been based on a 30-year life. It is now estimated that the life used for the building should have been 40 total years. The change in estimate will be incorporated into the current year depreciation calculation.
2. Major expenditures to improve existing assets are debited to the appropriate asset account as was done in entry 29 on Dec. 24. Include depreciation on the capitalized repair for a half year. It is common to use a half year assumption for all asset purchases during the year, it is built in to tax law).
3. Property insurance is allocated over the 12 month period covered by the premium (see Dec. 10, entry 24)
4. A physical inventory was taken of piers and lifts. This was done to confirm the perpetual inventory amount. You uncovered the following information: (a) A lift was listed in the inventory records, but could not be found. It was determined that it had been sold during the current year and had not been included in the cost of goods sold. The cost of the lift was $3,200. (b) A lift was purchased by Ozark and was shipped by the manufacturer to Ozark FOB Shipping Point (ownership transfers to buyer at sellers loading dock)). It had an invoice of $5,300. (c) It was also determined that some lifts were obsolete and they were written down by $2,000. This loss will appear as a separate other expense on the income statement. (Number your adjustments, 4a, etc.)
5. An analysis of the deferred revenue on the books revealed that it was for rentals made for ski rentals for January March of the current year (2016). It had been accrued last Dec. 31, 201 Sales tax was collected in 2015 at the time of the ski rental.
6. An aging schedule is to be done to establish the allowance for bad debts: The allowance should be:

Age	Amount	Percentage
0-30 days	$40,000	1%
30-60 days	10,000	5%
Over 60 days	Balance	20%

7. A physical inventory was taken of the 510, supplies account, the December 31, 2016 balance was $1,700.
8. A physical inventory was taken of account 505, Inventory, sports equipment. The agreed upon value using LIFO was $28,000. Remember, this inventory is recorded under the periodic method. At this point, you should make entries to arrive at the cost of goods sold. Freight is to be added to purchases to get cost delivered to Ozark. Purchase discounts should be subtracted. Always build the cost of goods available to sell. Then deduct ending inventory to arrive at cost of goods sold.
9. The law suit involves a suit by a customer concerning damage to a boat caused by a boat lift. Your lawyer thinks that you will have to pay damages and the estimate is $7,000.
10. As of Dec. 31, 2016, accrued salaries are $3,000 and accrued labor wages are $10,000. Dont forget added employer paid tax for FICA and Medicare and as 10% income tax withholding. Rather than creating new accrual accounts, you may use the usual payroll and tax payable accounts. This will not create a problem since this entry will be reversed on January 1, 2017.
11. Dock lumber in the amount of $700 was purchased on account in December and was returned for a credit. The lumber company canceled the bill (which had not yet been paid)
12. Advertising in the amount of $1,000 was paid in January, but the ad was run in December of 2015.The income tax rate applicable to 2015 was 30%.
13. The estimated value of the tools remaining at 2016 year-end is $7,000. The appraisal method of depreciation is used (see information on page 4 for account # 537).
14. Interest is paid quarterly on the $120,000, 6% note payable (under the line of credit). The note is due on May 1, 2017. Interest was last paid on November 1.
15. It has been determined that $4,000 property taxes paid in 2016 were applicable to 2017, not 2016.
16. The sports equipment rental revenue collected in December (entry 36) is for the use of equipment during December through March and it should be pro-rated equally over the four months. The pro-ration is the same, no matter when the rental contract is executed.
17. The exchange rate on Dec. 31 is One Euro = $1.30 (refer back to Dec. 24, #17)
18. An adjustment is need for prepaid computer consulting services (Dec. 24, item 37)
19. Installment contracts payable principal payments on truck loan are $10,035 in 2017. These amounts do not require an entry, but the information will be needed for the formal balance sheet (Requirement 3).
20. The market value of the trading investments is $15,000. The adjustment to market should be a valuation account just below the investment account.

T The applicable income tax rate is 30%. The adjustment for income tax expense cannot be made until you have calculated income before tax on the worksheet. Thus, no entry is made at this point. Be sure that you do not include the provision for income taxes in the amounts summed to calculate income before taxes. (Otherwise you would calculate tax on income that is already net of tax.)