Powell Co. is a retailing business operating in the southeastern US. Powells fiscal year-end is December 31, and it prepares financial statements just once a year, at year-end. The company has already recorded mostof its transaction and adjusting entries for the year ended December 31, 2018. The resulting trial balance follows:

Account	Debit	Credit
Cash	$ 379,975
Accounts Receivable	608,230
Allowance for Doubtful Accounts		$ 3,297
Inventory	317,810
Prepaid Insurance	234,972
Land	168,030
Buildings	836,928
Accumulated Depreciation Buildings		209,232
Construction in Progress	411,000
Equipment	392,752
Accumulated Depreciation Equipment		122,735
Notes Receivable	31,825
Discount on Notes Receivable		4,028
Accounts Payable		414,815
Notes Payable		829,350
Common Stock ($5 par)		217,500
Retained Earnings		905,625
Dividends	97,600
Sales Revenue		4,821,780
Advertising Expense	85,319
Cost of Goods Sold	2,974,065
Insurance Expense	42,931
Interest Expense	31,420
Rent Expense	20,160
Salaries and Wages Expense	691,705
Utilities Expense	203,640
	$7,528,362	$7,528,362

Powell has notyet recorded certain transactions and adjustments, and these omitted items are the focus of this assignment. Information pertaining to the omittedtransactions and adjustments follows:

Omitted Transactions

T1. Powell purchased equipment on December 31, 2018. The company gave a down payment of $9,500 and signed a 4-year promissory note for the balance due. The note requires Powell to make annual payments of $10,485 with the first payment due on December 31, 2019. The prevailing market rate of interest for comparable notes is 9%.

T2. On December 31, 2018, Powell engaged in an exchange of buildings with ABC Co. The following information pertains to the building each company owned immediately before the exchange:

	Powell Co.	ABC Co.
Building cost	$231,048	$326,240
Accumulated depreciation	64,180	152,340
Fair value	144,000	130,680

In addition, Powell received $13,320 cash from ABC. Assume the exchange of buildings hascommercial substance.

T3. On the same date (December 31, 2018), Powell engaged in another exchange of buildings, this one with XYZ Co. The following information pertains to the building each company owned immediately before the exchange:

	Powell Co.	XYZ Co.
Building cost	$128,988	$156,272
Accumulated depreciation	35,830	89,621
Fair value	135,000	119,475

In addition, Powell received $15,525 cash from XYZ. Assume the exchange of buildings lackscommercial substance.

Omitted Adjustments

A1. Powell purchased its buildings in 2009 and its equipment in 2015. Powell uses the straight-line depreciation method. For the buildings, the company uses an estimated life of 36 years and no salvage value. For the equipment, it uses an estimated life of 8 years and no salvage value. Note For the 2018 depreciation calculations, ignore the new fixed assets Powell acquired on December 31, 2018 (new equipment; and new buildings received in the two exchanges). Do consider the old buildings Powell gave in the two exchanges as the company used these assets for the full year. (Assume Powell computed the 2018 depreciation on them for T2 and T3, but has not yet recorded the amounts.)

A2. On May 1, 2018, Powell signed a 5-year lease to rent additional warehouse space. On that date, Powell prepaid the first 18 months of rent totaling $20,160. The prepayment covers the period May 2018 through October 2019. Powells bookkeeper recorded the prepayment into the Rent Expense account. Give the adjusting entry needed when a company uses an expense approach to record a payment in advance.

A3. The Notes Payable balance of $829,350 results from two loans the company has taken. On November 1, 2017, Powell took a 4-year, 5%, $654,350 loan. The interest on this loan is payable annually, on each October 31. Also, On June 1, 2018, Powell took a 1-year, 8%, $175,000 construction loan (see A7 below). The interest on this loan is payable on the maturity date, May 31, 2019. Note Powell already recorded the interest paidon these loans in 2018. For this adjustment, consider any accrued interest on the loans at the December 31, 2018 reporting date.

A4. On April 1, 2018, Powell hired a contractor to construct a new warehouse. The construction work commenced on June 1, 2018, and it is expected to continue through May 31, 2019. Powell made progress payments to the contractor in 2018 as follows:

Date	Amount
June 1	$ 123,000
July 1	174,000
September 1	81,000
November 1	33,000
	$411,000

As stated in A3 above, Powell took a 1-year, 8%, $175,000 construction loan to help fund the work on this project. The company also has a 4-year, 5%, $654,350 loan that is not related to the construction project. Give the adjusting entryneeded at December 31, 2018 to record the capitalization of interest for this project.

A5. Powell estimates that 8.95% of the 2018 year-end Accounts Receivable balance will notbe collected.

A6. On January 1, 2018, Powell received a promissory note from a customer as consideration in an inventory sale transaction. Powell recorded the sale, but it has not yet recorded the interest earned on the note during 2018. The note is noninterest-bearing, and it calls for the customer to pay the $31,825 face value on the December 31, 2019 maturity date. The relevant market rate of interest on the issue date was 7%.

A7. On July 1, 2018, Powell purchased a 3-year insurance policy for $234,972 and paid the full cost of the policy in advance. The policy provides coverage through June 30, 2021.

A8. The inventory figure in the trial balance above reflects use of a perpetual system and the FIFO cost flow method. At year-end 2018, Powell decides to adopt the LIFO method, specifically the dollar-value LIFO cost method. The following information relates to the companys first-time adoption of the new method:

Date	Inventory at Year-End Prices	Relevant Price Index
December 31, 2017	$272,465	100
December 31, 2018	$317,810	111

Give the FIFO-to-LIFO conversion entry needed at year-end 2018. Assume the change in method does notaffect any years prior to 2018.

A9. Once the company determines the Inventory balance under the new method (LIFO), it must consider the need for an inventory write-down. Powell applies the write-down procedure to the inventory as a whole. Information concerning the companys December 31, 2018 inventory follows:

Net realizable value	$339,650
Normal profit margin	67,385
Replacement cost	269,810

A10. The companys income tax rate for the year is 30%.

Instructions

Complete the following three tasks relating to Powell Co.s accounting process at year-end 2018:

(a) Prepare the journal entries to record the omitted transactions (T1 through T3).

(b) Prepare the journal entries to record the omitted adjustments (A1 through A10).

(c) Prepare the resulting adjustedtrial balance as of December 31, 2018. List the accounts in an appropriate trial balance order.