Lee Manufacturing Corporation was incorporated on January 3, 2015. The corporations financial statements for its first years operations were not examined by a CPA. You have been engaged to examine the financial statements for the year ended December 31, 2016, and your examination is substantially completed. Lees trial balance at December 31, 2016, appears as follows:

Lee Manufacturing Corporation

UNADJUSTED TRIAL BALANCE

December 31, 2016

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	61,000.00
2	Accounts Receivable	92,500.00
3	Allowance for Doubtful Accounts		500.00
4	Inventories	38,500.00
5	Machinery	75,000.00
6	Equipment	29,000.00
7	Accumulated Depreciation		10,000.00
8	Patent	85,000.00
9	Leasehold Improvements	26,000.00
10	Prepaid Expenses	10,500.00
11	Organization Costs	29,000.00
12	Goodwill	24,000.00
13	Licensing Agreement No. 1	50,000.00
14	Licensing Agreement No. 2	49,000.00
15	Accounts Payable		147,500.00
16	Unearned Revenue		12,500.00
17	Common Stock		300,000.00
18	Retained Earnings, January 1, 2016	27,000.00
19	Sales		768,500.00
20	Cost of Goods Sold	466,000.00
21	Selling and General Expenses	173,000.00
22	Interest Expense	3,500.00
23	Totals	1,239,000.00	1,239,000.00

The following information relates to accounts that may yet require adjustment:

1.	Patents for Lees manufacturing process were acquired January 2, 2016, at a cost of $68,000. An additional $17,000 was spent in December 2016 to improve machinery covered by the patents and charged to the Patent account. Depreciation on fixed assets has been properly recorded for 2016 in accordance with Lees practice which provides a full years depreciation for property on hand June 30 and no depreciation otherwise. Lee uses the straight-line method for all depreciation and amortization and amortizes its patents over their legal life.
2.	On January 3, 2015, Lee purchased Licensing Agreement No. 1, which was believed to have an indefinite useful life. The balance in the Licensing Agreement No. 1 account includes its purchase price of $48,000 and costs of $2,000 related to the acquisition. On January 1, 2016, Lee purchased Licensing Agreement No. 2, which has a life expectancy of 10 years. The balance in the Licensing Agreement No. 2 account includes its $48,000 purchase price and $2,000 in acquisition costs, but it has been reduced by a credit of $1,000 for the advance collection of 2017 revenue from the agreement. In late December 2015, an explosion caused a permanent 60% reduction in the expected revenue-producing value of Licensing Agreement No. 1, and in January 2017 a flood caused additional damage that rendered the agreement worthless.
3.	The balance in the Goodwill account includes (a) $8,000 paid December 30, 2015, for newspaper advertising for the next 4 years following the payment, and (b) legal costs of $16,000 incurred for Lees incorporation on January 3, 2015.
4.	The Leasehold Improvements account includes (a) the $15,000 cost of improvements with a total estimated useful life of 12 years, which Lee, as tenant, made to leased premises in January 2015; (b) movable assembly line equipment costing $8,500 that was installed in the leased premises in December 2016; and (c) real estate taxes of $2,500 paid by Lee in 2016, which under the terms of the lease should have been paid by the landlord. Lee paid its rent in full during 2016. A 10-year nonrenewable lease was signed January 3, 2015, for the leased building that Lee used in manufacturing operations.
5.	The balance in the Organization Costs account includes costs incurred during the organizational period.

Required:

Prepare a worksheet (spreadsheet) to adjust accounts that require adjustment and prepare financial statements. Formal adjusting journal entries and financial statements are not required. No intangible assets are impaired at the end of 2016. Ignore income taxes.

Complete the worksheet. Additional Instructions

LEE MANUFACTURING CORPORATION

Financial Statement Worksheet

Year Ended December 31, 2016

1		Trial Balance	Trial Balance	Adjustments	Adjustments	Income Statement	Income Statement	Balance Sheet	Balance Sheet
2	General Ledger Accounts	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
3	Cash	61,000.00
4	Accounts Receivable	92,500.00
5	Allowance for Doubtful Accounts		500.00
6	Inventories	38,500.00
7	Machinery	75,000.00
8	Equipment	29,000.00
9	Accumulated Depreciation		10,000.00
10	Patent	85,000.00
11	Leasehold Improvements	26,000.00
12	Accumulated Depreciation: Leasehold Improvements
13	Prepaid Expenses	10,500.00
14	Organization Costs	29,000.00
15	Goodwill	24,000.00
16	Licensing Agreement No. 1	50,000.00
17	Licensing Agreement No. 2	49,000.00
18	Accounts Payable		147,500.00
19	Unearned Revenue		12,500.00
20	Common Stock		300,000.00
21	Retained Earnings, January 1, 2016	27,000.00
22	Sales		768,500.00
23	Cost of Goods Sold	466,000.00
24	Selling and General Expenses	173,000.00
25	Interest Expense	3,500.00
26	Net Income for 2016
27	Totals	$1,239,000.00	$1,239,000.00