Morgan Manufacturing Corp. Adjusting Entries For the Year Ended December 31, 2019 The following additional information is available at the corporation's year-end. GST of 5% only applies when indicated. a. A sale on account has not been recorded in the amount of: Applicable sales tax is: $5,000 8% b. Warranty expense for the year as a percentage of sales should be: 2% c. Unpaid gross salaries at year-end amount to: $10,000 Deductions from unpaid salaries are as follows: Employee Portion Employee income taxes 12% FICA Social Security taxes* 4% FICA Medicare taxes 2% Company health insurance 4% * these are not the actual required percentages Company Portion 0% 4% 2% 4% d. The estimated year-end audit fees are: $90,000 e. Rent revenue consists of 13 equal monthly payments, including one paid in advance for January 2020. f. A trade account payable was converted to a note payable during the year. Nafntry has been made to record this. The note payable is due at the end of 2020. M N C Adj. 11 Adjusted TB Debit Cred Trial Balance At December 31, 2019 2 Account Unadjusted TB Adjustments 3 Debit Credit Adj. #1 Debit Credit 4 Cash in bank 74,000 5 Accounts receivable 760,000 6 Parts inventory 210,000 7 Corp. income tax receivable 8 Land 10,000,000 9 Building 7,900,000 10 Accumulated dep'n - bldg. 1,580,000 11 Trade accounts payable 140,000 12 Interest payable 13 Estimated current liabilities 14 15 Estimated warranty liability 136,000 16 Salaries payable 17 Employee inc. taxes pay. 18 FICA Soc. Sec. pay. 19 20 FICA Medicare payable 21 22 Co, health insurance payable 23 24 Corp. income tax payable 25 Sales tax payable 1,000 26 Note payable 27 Unearned rent revenue 28 Mortgage payable 1,632,000 29 Common stock, $1 per sh. 9,000,000 30 Retained earnings 2,963,800 31 Rent revenue 520,000 32 Sales, net 13,600,000 33 Cost of goods sold 8,704,000 34 Bad debts expense 3,000 35 Co. health ins. expense 18,400 36 Delivery expense 300,000 Required Adjusting Entries Gen. Unl Trial Bal. Fri, Stmts Conurinht 4 2019 2018 $12,756,800 9,017,344 3,739,456 5 Sales, net 6 Less: Cost of goods sold 7 Gross profit 8 Operating expenses 9 Selling 10 Salaries and benefits 11 Delivery 12 Office supplies 13 Warranty 14 Total selling 15 General and administrative 16 Bad debts 17 Depreciation 18 Lawsuit damages 19 Professional fees 20 Total general and adminstrative 21 Total operating expenses 22 Income from operations 23 Other income 532,510 282,000 99,000 247,520 1,161,030 2,790 940 143,000 146,730 1,307,760 2,431,696 24 Rent revenue 25 Income before interest and income taxes 26 Interest expense 27 Income before income taxes 28 Income taxes 29 Net income 499,200 2,930,896 177,243 2,753,653 275,365 $2,478,288 30 31 32 33 34 35 Morgan Manufacturing Corp. Statement of Changes in Equity For the Year Ended December 31, 2019 2019 Common Retained stock earnings Total equity $9,000,000 $2,963,800 $11,963,800 2018 36 37 Balance at Jan. 1 38 Net income 39 Balance at Dec. 31 Total equity $9,485,512 2,478,288 $11,963,800 $9,000,000 40 41 42 Morgan Manufacturing Corp. Balance Sheet Morgan Manufacturing Corp. Balance Sheet At December 31, 2019 Assets Current 2019 Cash Accounts receivable, net Corporate income taxes receivable Inventories 2018 $41,970 640,000 168,012 849,982 Non-current Land Building, net 23,166, 245 6,321,000 29,487,245 $30,337,227 $108,150 84,600 126,900 Liabilities Current Trade accounts payable Estimated current liabilities Estimated warranty liabilities Note payable Interest payable Salaries and benefits payable Sales tax payable Unearned rent Current portion of mortgage payable Corporate income taxes payable 0 297 10,340 1,540 41,600 180,000 553,427 Non-current Mortgage payable Less: Current portion 18,000,000 (180,000) 17,820,000 18,373,427 Total liabilities Stockholders' Equity Common stock Q Stockholders'Equity Common stock Retained earnings 9,000,000 2,963,800 11,963,800 $30,337,227 Total liabilities and S/H equity Required Adjusting Entries DY Gen.nl Trial Bal. Fol. Stmts. The unadjusted trial balance of Morgan Manufacturing Corp. at December 31, 2019 is shown on the "Trial Bal" page (see tab below). Refer also to the additional year- end information for the company shown on the "Adjusting Entries" page (see tab below) Required: 1 Prepare year-end adjusting entries. General ledger account numbers are not necessary. Show your calculations below each adjusting entry. 2 Post the adjusting entries to the trial balance and prepare an adjusted trial balance. 3 Using the amounts from the adjusted trial balance, complete the financial statements for the year ended December 31, 2019