On the designated worksheet, prepare in journal entry form all adjusting and correcting journal entries based on the following information (round all numbers to the nearest dollar). Letter entries to correspond to the below information and present them in alphabetical order. Add any new accounts as needed to the trial balance. Each entry must be entirely correct to receive allocated points. Before preparing entries, finish the story by filling in the blanks.

Toyz was authorized to issue 5,000,000 shares of $1 par Common Stock but has only issued 650,000 shares of common stock as of 12/31/2016. No new shares were issued during 2016.

1. On the Adjusting Journal Entries worksheet, prepare in journal entry form all adjusting and correcting journal entries based on the following information. All information was provided to you as of 12/31/2016. (Round all numbers to the nearest dollar). Label journal entries a through t.

Based on your review of the cash balances, you note that there was an overdraft of $10,000 in one of your bank accounts. However, there are many bank accounts at the specific bank where the account with the overdraft is deposited. The total cash at this bank equaled a debit balance of $180,000. The previous accountant moved the overdraft to Accounts Payable. You also note the Board of Directors has restricted $93,000 of cash for future expansion. This $93,000 is part of the cash balance. The future expansion will not occur for several more years.

Based on your inquiries, you note that $43,000 of accounts receivable had been written off during the year. The clerk had debited bad debt expense for $43,000 and credited Accounts Receivable for $43,000. When $12,000 of accounts previously written off had been collected, the accountant debited cash and credited sales. The company uses the allowance method based on the aging of accounts receivable. Based on this method, Toyz determines that uncollectible accounts are $80,000 at the end of 2016.

On April 1, 2016, Toyz renewed a 1X month insurance policy for $18,000. All cash was paid at the time the policy was signed and insurance expense was increased. All other transactions involving insurance were properly recorded.

On November 1, 2016, Toyz loaned a key supplier, $60,000. A promissory note was signed and issued. The note is due in full 9-months from December 1^st. The supplier agrees to pay interest on the note at an annual rate of 11%. 1). Principle and interest will be paid at the end of the 9-months. The note was recorded in Notes Receivable and is the only note outstanding.

Per a physical count of office supplies, $6,000 of supplies remained at the end of 2016. The balance on the worksheet in the office supplies account represents last years ending balance. During the year, $47,000 of office supplies were purchased and immediately expensed

On November 1, 2016 Toyz paid ABC Advertising $25,000 for a five month campaign of advertising services. Equal services are provided each month.

Because of a new product line, Toyz needed some temporary additional storage space so December 1, 2016 they rented a unit for an annual rate of $22,000 and they paid the entire amount up front.

The storage building was self-constructed this year by Toyz. The Company had their initial expenditure of $725,000 on January 1. They paid an additional $375,000 on May 1^st, $375,000 on August 1^st, and then the final payment of $200,000 on December 1^st when the building was completed and occupancy occurred. The company has decided to use S/L method for depreciation. The storage building is estimated to have a life of 40 years and a savage value of $91111. The company depreciates using partial years.

Toyz Double Entry has two loans outstanding as of 12/31/2016. Interest is paid annually on January 1st. The facts on each loan are as follows:

Onstar Bank Loan outstanding since January 1, 2016 with a 5.0% interest rate. This loan was taken out to finance the construction of the Storage Building. Interest for the year and 10% of the principle will be paid to the bank on January 1, 2017. Except for recording the initial cash received and loan, no additional entries have been made.

Coldstar Bank Loan also outstanding all of 2016 with 6.01 % interest rate Interest is due on January 1, 2017. Principle is due on January 1, 2022. Since interest will not be paid to the Bank until 2017, Toyz's office staff did not accrue any interest.

On _November___1, Toyz recorded a patent in the amount of $175,000. The company paid outside legal fees of $100,000 to have the patent registered. The other $75,000 represents internal costs in developing the patent. The patent is good for 20 years, but the company estimates that the patent will have a useful life of 8 years with no residual value. Amortization is straight line. The company depreciates using partial years for intangible assets. No amortization has been recorded for 2016.

As of 12/31/2016 the Available for Sale Securities have a fair value of $290,000. Due to the market conditions, the company does not plan on selling the assets in 2017, but their intent is to sell at some point in time. You can ignore the tax effect on unrealized gains and losses.

The office building was bought in January 1, 2014 and Toyz plans to use the building for 40 years and believes it will have a salvage value of $350,000 at the end of 40 years. Toyz depreciates the building on a straight line basis. Due to the location of the building and use potential, Toyz is concerned about impairment. At 12/31/2016 it is determined that the future cash flows for the building are $3,000,000. The fair value of the building is $3,390,000 at 12/31/2016.

After reviewing details of sales, you note that the sales taxes collected on the last week of Decembers sales were included in sales revenue. Sales recorded the last week of December that included the sales tax of 11 amounted to $285,000.

Toyz uses the Dollar Value LIFO inventory method. For internal purposes, the Merchandise Inventory Account is maintained at FIFO (current costs). At the end of the year, the LIFO reserve account is adjusted so inventory on the balance sheet reflects Dollar Value LIFO. You need to calculate the proper inventory balance and adjust the LIFO reserve. The price index for this year is 1.2X (enter last digit of student number). Prior year inventory records show the following calculation for 2016:

175,000 X 1.0 = 175,000

100,000 X 1.05 = 105,000

All office equipment was purchased January 1, 2015. Toyz uses the DDB method to depreciate office equipment. No office equipment has been added since the initial purchase. It is estimated that the office equipment has a useful life of 10 years with a salvage value of $12,000.

On November 1, 2016 Toyz rented a portion of one store to Marketing Majors Inc. The contract was for 18 months and Toyz required all of the cash up front. The rent is being earned equally each month. This is the only item in which rent is being earned by the company.

Toyz started to lease some new retail space in 2016 and added shelving and fixtures to this leased space. Based on your review of invoices, the previous accountant capitalized the cost of fixtures but did not capitalize the shipping and installation costs of $4,200 (enter the last two numbers of your student number). These costs were expensed and recorded as a miscellaneous selling expense. Toyz has decided to use double declining balance (DDB) depreciation for this item and to take a full year of depreciation in the year of acquisition. The leasehold improvements have a useful life of 15 years with a salvage value of $15,000.

Toyz uses the FIFO Inventory Method in valuing inventory. The inventory balance of $425,000 was based on a physical count at 12/31/2016. Based on your analysis, you have noted that $12,500 of marketing games that belonged to Marketing Majors Inc. was included in the account. You also note that $7,000 of goods shipped to Toyz f.o.b. destination were in transit on December 31, 2016 and not included in the physical count.

You note during the review of sales, that a rebate was issued for the 2016 Income Tax Game to encourage sales. 20,000 (enter the last digit of your student number) games were sold. Customers can mail in their receipt and receive a $2 rebate per game. It is estimated that 60% of customers will send in the rebate. The rebate expires on January 31, 2017. To date, 8,000 customers have sent in the rebate and $16,000 has been refunded. Without any direction, the accounting clerk debited Miscellaneous Selling Expense and credited Cash for the $16,000. The management of Toyz would prefer to have this type of expense in a separate account (Rebate Expense) so they can properly analyze for future ideas.

Toyz has a straight tax rate of 33%. Income tax expense is Net Income before taxes times 33%. (Hint: Prepare the Income Statement up to Net Income before Taxes and then record this adjusting journal entry.)

Cash	330,000	-
Accounts Receivable	575,000	-
Allowance for Doubtful Accounts	-	38,000
Interest Receivable	-	-
Merchandise Inventory	425,000	-
Prepaid Insurance	-	-
LIFO Reserve	-	32,000
Prepaid Advertising	-	-
Prepaid Rent	22,000	-
Office Supplies	15,000	-
Note Receivable	60,000
Available for Sale Securities	375,000	-
Office Building	3,750,000	-
Accumulated Depreciation - Office Building	-	85,000
Storage Building	1,675,000	-
Accumulated Depreciation - Storage Building	-	-
Land	750,000	-
Leasehold Improvements	225,000	-
Accumulated Depreciation - Leasehold Improvements	-	-
Office Equipment	325,000	-
Accumulated Depreciation - Office Equipment	-	56,000
Patent	175,000	-
Accounts Payable	-	345,000
Sales Tax Payable	-	-
Salaries Payable	-	142,000
Payroll Taxes Payable	-	25,000
Interest Payable	-	-
Income Tax Payable	-	-
Unearned Rent Revenue	-	-
Loan Payable - Onstar Bank	-	850,000
Loan Payable - Coldstar Bank	-	2,150,000
Common Stock	-	650,000
Additional Paid in Capital	-	2,390,000
Retained Earnings	-	940,270
Accumulated Other Comprehensive Income	-	25,000
Dividends	84,750	-
Sales	-	4,028,200
Sales Returns and Allowances	42,250	-
Sales Discounts	19,250	-
Cost of Goods Sold	1,879,500	-
Sales Salaries Expense	436,400	-
Office Salaries Expense	274,000	-
Advertising Expense	25,000	-
Depreciation Expense - Office Building	-
Depreciation Expense - Leasehold Improvements	-	-
Depreciation Expense - Office Equipment	-	-
Leasing Expense - Stores	132,000	-
Miscellaneous Selling Expense	23,000	-
Research & Development Expense	25,000
Rent Expense - Storage Facility	-	-
Insurance Expense	18,000	-
Office Supplies Expense	47,000	-
Miscellaneous Administrative Expense	9,170	-
Rent Revenue	-	90,000
Interest Revenue on Note Receivable	-	-
Dividend Revenue on AFS Securities	-	35,000
Interest Expense	-	-
Bad Debt Expense	43,000	-
Amortization Expense	-	-
Income Tax Expense	-	-
Payroll Taxes Expense	121,150	-
	11,881,470	11,881,470