The following financial statements and additional information are available for Hi-Lo Corporation at the end of 2020. Hi-Lo CORPORATION Income Statement For the Year Ended December 31, 2020 $ 1,224,600 (802.200) 422,400 Sales Revenue Cost of goods sold Gross profit Expenses Depreciation Expenses -equipments Depreciation Expenses - building Wages and slaries expense Bad debt expenses Total Expenses Income before taxes Tax expense (30%) Net Income (58,000) (12,000) (59,000) (66.110) (195, 110) 227,290 (68,187) $_159.103 Hi-Lo CORPORATION Statement of Retained Earnings For the Year Ended December 31, 2020 $ Retained Earnings, January 1 Add: Net Income Subtract: Dividends Retained Earnings, December 31 159,103 (35,000) $ 124.103 HI-LO CORPORATION Statement of Financial Position As of December 31, 2020 Current Asset Current Liabilities Cash $ 3,714,000 Accounts Payable 60,500 Accounts Receivable 661,100 Taxes payable 68.187 Less Allowance for Doubtful Accounts (68.119 Dividends payable 35,000 Accounts receivable Net 504990 Wages and salaries payable 50,000 Inventories 542.800 Total Current Assets 4,851,790 Total Current Liabilities 222,687 Noncurrent Asset Noncurrent Liabilities Equipment 320,000 Less Accumulated depreciation Equipment 58.000 Total Liabilities 222.687 Equipments, Net 202,000 Stockholders' Equity Building 245.000 Common Stock (51 par value) 100,000 Less Accumulated depreciation 112.000 Additional paid-in capital Common 4,800,000 Building, Net 233,000 Retained Earnings 124.100 Total noncurrent assets 495,000 Total Stockholders Equity 5,124,103 Total Assets $ 5,346,790 Total Liabilities and Stockholders Equty $ 5,346,790 Additional information a. During the year-end audit, it was discovered that a September 1, 2020, transaction for the lump-sum purchase of a hydraulic lift and a trailer was not recorded. The fair market values of the hydraulic lift and the trailer were $350,000 and $97.000, respectively. Each asset has an expected useful life of 8 years with no salvage value. The purchase of assets was financed by issuing a $420,000 five-year promissory note directly to the seller. Interest of 10 percent is payable annually on August 31 of every year. Hi-Lo uses straight-line method to depreciate all of its assets. However; Hi-Lo decides to use the double-declining balance method for the hydraulic lift and the trailer rather than straight-line method. b. During the year-end audit, Hi-Lo was suggested to change way bad debts were estimated. Hi-Lo currently uses the percentage of accounts receivable method (10% of 661,100), but will have to revise its estimated bad debt expense using the aging of accounts receivable method. The information pertaining to the accounts receivable is given below: Amount (S) 126,500 DV Farmer J Joysen Due date January 17, 2021 July 30, 2020 June 12, 2020 89,200 NJ Bell 53,600 JC Net 232,800 October 19, 2020 Noell Store 63,000 December 14, 2020 96,000 September 28, 2020 Johnston Supplies Total 661,100 % Bad Debt Age Category (Number of Days Unpaid) 1-30 5 31-90 20 91-120 35 Over 120 SO c. Hi-Lo unintentionally omitted the record of the issuance of preferred stock and repurchase of treasury stock transaction. On March 1, 2020, the company issued 10,000 shares of 5%, $15 par value preferred stock at a price of $60 per share. In addition, Hi-Lo repurchased its common stock 25,000 shares on June 12 at a price of 40 per share and subsequently sold 15,000 shares of the treasury stocks to the market at a price of $50 per share on November 15, 2020. The total dividend declared was 35,000 (already adjusted on the financial statement). d. Below is the information on the beginning inventory, purchases and sales for the company for the year. Currently, Hi-Lo uses the perpetual FIFO method to value its inventory and cost of goods sold. However, Hi-Lo decided to change the costing method to weighted average. Adjust the inventory and cost of goods sold to reflect the change. Date Description 1-Jan Beginning inventory 2-Mar Sale 10-May Purchase 17-Jul Sale 28-Sep Purchase 10-Oct Sale 29-Nov Purchase # of Units 6,000 2,600 11,000 9,600 5,000 4,000 4,000 Unit Cost or Selling Price $47 63 51 78 54 78 58 Instruction: 1. Record journal/ adjusting entries to record all omitted transactions. 2. Prepare revised financial statements. NOTE: PLEASE SHOW WORKING IN DETAILS FOR ALL CHANGES MADE TO THE FINANCIAL STATEMENTS