The year end unadjusted trial balance of Harmon Ave Brewing Corporation is reproduced on an

excel spreadsheet. The information below is relevant to the preparation of adjusting entries

needed to both properly match revenues and expenses for the period and reflect the proper

balances in the real and nominal accounts.

Instructions

You are the new accountant (and brew-master) for Harmon Ave Brewing Corporation. The 2010

year has just come to an end and you need to prepare the financial statements for 2010. Before

preparing the financial statements, you need to adjust the books. You are to prepare adjusting

entries based on the following data and based on the information in the companys year end

unadjusted trial balance. The trial balance numbers are preprinted on the spreadsheet.

Please record your adjustments in journal entry form including a brief explanation on the

separate journal entry sheet provided. Then enter the adjustments on the worksheet (in the

adjustment columns) and complete the additional columns with respect to the income statement

and balance sheet. Carefully key your adjustments and label all items. Please round all

computations to the nearest dollar.

(a) The adjustment to write-off bad debts has already been made on the books. After an aging

of accounts receivable, it was estimated that three percent (3.0%) of the uncollected

accounts receivable will become uncollectible. You need to adjust the allowance for doubtful

accounts and bad debt expense.

(b) Depreciation on equipment is computed using the straight-line method, with a five year life

and $0 salvage value. Please make the adjustment to record depreciation for 2010. All the

equipment was acquired on January 1 of 2009.

(c) In December 2010, a customer prepaid fees to Harmon Ave Brewing Corporation for

contract brewing services to be performed in December and January of 2011. The prepayment was in the amount of $1,800. The payment was recorded as fee revenue when it

was received. As of December 31, 2010, $950 dollars worth of these services have been

performed. This needs to be adjusted.

(d) The note payable was issued on October 1, 2010 bearing interest at 4% per year, due

March. 1, 2011. No payments of principal or interest have been made on this note. You

need to record interest payable as of December 31, 2010.

e) Inventories were counted on December 31, 2010. The inventory indicated $550 of brewing

supplies currently in stock. The inventory of merchandise indicated $3,200 of merchandise

inventory on hand. You need to adjust both the supplies and the merchandise inventory

accounts.

(f) Provisions of the brewery lease specify that lease payments (rent) must be made on or

before the last day of each month covering the rent for the following month. The monthly

payment for January 2011 was made on Dec. 31, 2010 and was charged to rent expense.

Brewery rent is $2,500 per month.

(g) Brewery workers are paid an in-kind bonus each week based on achieving production goals.

You have calculated that each brewery worker is entitled to one keg of beer as their

productivity bonus for the final week of December 2010. Each keg has a value of $40 and

there are 15 workers eligible for the bonus. You need to accrue a liability (bonus payable)

for the value of the bonus owed as of December 31, 2010.

Proceed as follows:

1) Enter your year-end adjustments to the journal entry worksheet

2) Post your adjustments from your journal entry worksheet to the worksheet

3) Complete the worksheet

4) Prepare the balance sheet as of 12/31/2010.

5) Prepare the income statement for the year ended 12/31/10

Account Title	DR	CR
Cash	6,000
Accounts receivable	20,000
Allowance for doubtful accts		500
Mdse inventory	16,000
Brewing supplies	1,000
Equipment	40,000
Accum depr - equip		4,000
Accounts payable		5,500
Notes payable		12,000
Common stock		5,000
Retained earnings		7,000
Sales		1,203,000
Fees for services		62,000
Cost of goods sold	844,000
Office salaries	80,000
Brewer's salaries	250,000
Rent expense	26,000
Legal and accounting exp	11,000
Bad debt expense	1,000
Supplies expense	4,000
Subtotal
Net income
Totals	1,299,000	1,299,000