Hi-Lo CORPORATION Income Statement For the Year Ended December 31, 2020

Sales Revenue $ 1,224,600 Cost of goods sold $(802,200) Gross profit $422,400 Expenses Depreciation Expenses -equipments $(58,000) Depreciation Expenses -building $(12,000) Wages and slaries expense $(59,000) Bad debt expenses $(66,110) Total Expenses $(195,110) Income before taxes $227,290 Tax expense (30%) $(68,187) Net Income $ 159,103

Hi-Lo CORPORATION Statement of Retained Earnings For the Year Ended December 31, 2020

Retained Earnings, January 1 $ - Add: Net Income $159,103 Subtract: Dividends $(35,000) Retained Earnings, December 31 $ 124,103

Hi-Lo CORPORATION Statement of Financial Position As of December 31, 2020

Current Asset		Current Liabilities
Cash	$ 3,714,000	Accounts Payable	$ 60,500
Accounts Receivable	661,100	Taxes payable	68,187
Less: Allowance for Doubtful Accounts	(66,110)	Dividends payable	35,000
Accounts receivable, Net	594,990	Wages and salaries payable	59,000
Inventories	542,800
Total Current Assets	4,851,790	Total Current Liabilities	222,687
Noncurrent Asset		Noncurrent Liabilities
Equipment	320,000
Less: Accumulated depreciation, Equipment	(58,000)	Total Liabilities	222,687
Equipments, Net	262,000	Stockholders Equity
Building	245,000	Common Stock ($1 par value)	100,000
Less: Accumulated depreciation	(12,000)	Additional paid-in capital, Common	4,900,000
Building, Net	233,000	Retained Earnings	124,103
Total noncurrent assets	495,000	Total Stockholders Equity	5,124,103
Total Assets	$ 5,346,790	Total Liabilities and Stockholders Equity	$ 5,346,790

Additional information a. During the year-end audit, it was discovered that a September 1, 2020, transaction for the lump-sum purchase of a hydraulic lift and a trailer was not recorded. The fair market values of the hydraulic lift and the trailer were $350,000 and $97,000, respectively. Each asset has an expected useful life of 8 years with no salvage value. The purchase of assets was financed by issuing a $420,000 five-year promissory note directly to the seller. Interest of 10 percent is payable annually on August 31 of every year. Hi-Lo uses straight-line method to depreciate all of its assets. However; Hi-Lo decides to use the double-declining balance method for the hydraulic lift and the trailer rather than straight-line method. b. During the year-end audit, Hi-Lo was suggested to change way bad debts were estimated. Hi-Lo currently uses the percentage of accounts receivable method (10% of 661,100), but will have to revise its estimated bad debt expense using the aging of accounts receivable method. The information pertaining to the accounts receivable is given below:

	Amount ($)	Due date
DV Farmer	126,500	January 17, 2021
JJ Joysen	89,200	July 30, 2020
NJ Bell	53,600	June 12, 2020
JC Net	232,800	October 19, 2020
Noell Store	63,000	December 14, 2020
Johnston Supplies	96,000	September 28, 2020
Total	661,100

Age Category (Number of Days Unpaid)

Age Category (Number of Days Unpaid)	% Bad Debt
1-30	5
31-90	20
91-120	35
Over 120	50

c. Hi-Lo unintentionally omitted the record of the issuance of preferred stock and repurchase of treasury stock transaction. On March 1, 2020, the company issued 10,000 shares of 5%, $15 par value preferred stock at a price of $60 per share. In addition, Hi-Lo repurchased its common stock 25,000 shares on June 12 at a price of 40 per share and subsequently sold 15,000 shares of the treasury stocks to the market at a price of $50 per share on November 15, 2020. The total dividend declared was 35,000 (already adjusted on the financial statement). d. Below is the information on the beginning inventory, purchases and sales for the company for the year. Currently, Hi-Lo uses the perpetual FIFO method to value its inventory and cost of goods sold. However, Hi-Lo decided to change the costing method to weighted average. Adjust the inventory and cost of goods sold to reflect the change.

Date Description # of Units Unit Cost or Selling Price 1-Jan Beginning inventory 6,000 $47 2-Mar Sale 2,600 $63 10-May Purchase 11,000 $51 17-Jul Sale 9,600 $78 28-Sep Purchase 5,000 $54 10-Oct Sale 4,000 $78 29-Nov Purchase 4,000 $58

QUESTION: 1. Record journal/ adjusting entries to record all omitted transactions. 2. Prepare revised financial statements.