Step $2$: Record the $11$ adjusting journal entries based on the information below. Record all AJE's on the Excel spreadsheet using the tab labeled "AJEs and Closing Entries." Post to the Trial Balance $($second tab at the bottom of the spreadsheet$)$ in the two columns labeled AJE's $($Columns E & G$).$ SC uses a perpetual inventory system, which means that when they record the sale of a product $($at the selling price$),$ they also update COGS and Inventory $($at cost$).$ Recommendation: use cell referencing when posting to the Trial Balance to eliminate potential typos and follow$-$through errors.

Step $3$: Once all AJE's have been recorded & posted to the Trial Balance, check your work with the "CHECK FIGURES FOR Accounting Cycle Project." If your spreadsheet agrees with the Check Figures, you can move to Step $4.$

Step $4$: Record the $5$ Closing entries on the tab labeled "AJE's & Closing." Post to the Trial Balance in columns K & M$.$

Step $5$: Complete the Income Statement, Comprehensive Income Statement, Statement of Retained Earnings, and Balance Sheet in good form.

Additional information to use in recording the necessary Adjusting Journal Entries $($AJE$\text{'}$s$)$:

$1.$ As of December $31,$ wages of $$39,800$ should be accrued; associated payroll taxes on these wages are $$2,900.($Record in two separate adjusting entries. The payroll taxes are an expense to the company for unemployment benefits and are recorded as payroll taxes payable to the state & federal taxing authority.$)$

$2.$ The Unearned Consulting Revenue account has a balance before adjustment of $$326,220$ as of December $31,20$x$2.$ Of this balance, $65\%$ of the work was completed by year$-$end.

$3.$ You discover that a sale of a product was made on the account and SC recorded the sale in December for $$86,400.$ However, the product has not yet been shipped, therefore it is not considered to be $$delivered to the customer.$$ The cost of the product was $55\%$ of its selling price. SC uses the perpetual inventory method. $($Simply reverse the original journal entry!$)$

$4.$ At year$-$end, the CFO asks you to review the Accounts Receivables to determine if any customer accounts should be written off as uncollectible. Based on your review, you determine that the Account Receivable from Shift, Co$.$ has been past due for over $18$ months, and Shift recently declared bankruptcy. The CFO instructs you to write off the account balance of $$18,450.$ Directly following this action, you can now record bad debt expense, estimated to be $5\%$ of ending Accounts Receivable. $($Round to the nearest whole dollar.$)$

$5.$ SC prepays for its property & casualty insurance. As of December $31,20$x$2,80\%$ of the prepayments have now been consumed. $($Round to the nearest whole dollar.$)$

$6.$ SC records depreciation and amortization expenses annually. They do not use an accumulated amortization account. $($i$.$e$.,$ Amortization Expense is recorded with a debit to Amort. Exp and a credit to the Patent.$)$ Annual depreciation rates are $5\%$ for Buildings$/$Equipment$/$Furniture$,$ with no salvage. $($Round to the nearest whole dollar.$)$ Annual Amortization rates are $10\%$ of the original cost, straight$-$line method, no salvage. SC owns two patents: Patent #FJ$101$ has an original cost of $$154,000,$ and Patent #CQ$510$ was acquired for $$169,000.$ The last time depreciation & amortization were recorded was December $31,20$x$1.$

$7.$ The long$-$term liabilities were outstanding for all of $20$x$1$ and accrue interest at $6\%$ APR. SC records accrued interest quarterly $($interest was last updated on September $30.)$ The company is required to pay the interest annually each January $1.$

$8.$ SC often allows customers to finance the purchase of their products through long$-$term lending agreements and therefore reports Long$-$term Notes Receivable on their Balance Sheet. These notes are interest$-$bearing and earn SC interest revenue at $8\%$ APR and were outstanding for all $20$x$2.$ Interest is payable to SC each January $1.$

$9.$ On December $15,$ SC declared a dividend of $$220,000,$ to be paid on January $20,20$x$3.$ The dividend declaration had not yet been recorded. Please record the debit to Dividends.

$10.$ On December $31,$ the Long$-$Term Investments $($Available$-$for$-$sale securities or "AFS"$)$ had a fair value of $$172,900.$ The AFS Investment was initially purchased on June $1,20$x$2,$ for $$160,500.$ SC uses a "Fair Value Adjustment" account $($an adjunct$/$contra account to the Investments$)$ to mark$-$to$-$market the investment portfolio at year$-$end. $($e$.$g$.,$ If the fair value of the Investment has increased at year$-$end, debit the Fair Value Adjustment account to increase the Carrying Value of the asset to equal its fair value on the balance sheet on December $31.$ This is an "unrealized" $($holding$)$ gain, which would require a credit to record it$.)$

$11.$ SC$\text{'}$s Income tax rate for $20$x$2$ was determined to be $25\%.($Hint: The income statement must be prepared to determine income tax expense$)$