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They have provided you with the unadjusted trial balance for Computers Inc. as of 12/31/16. The previous accountant recorded all original entries involving cash, etc.

They have provided you with the unadjusted trial balance for Computers Inc. as of 12/31/16. The previous accountant recorded all original entries involving cash, etc. during the year. Your task will be to create and record all necessary adjusting, correcting, and reclassification entries so that 2016 financial statements in accordance with US GAAP can be issued. The below information was discovered by reviewing contracts, agreements, correspondence and discussions with management.

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). Add any new accounts as needed to the trial balance.

Computers Inc. was authorized to issue 1,000,000 shares of $2 par Common Stock but has only issued 150,000 shares of common stock as of 12/31/2016. All 150,000 shares were issued on 1/1/2014 at $8 per share. No new shares were issued during 2016.

k. The store equipment was purchased January 1, 2014. Computers R Us uses the straight line method to depreciate store equipment. No store equipment has been added since the initial purchase. It was estimated that the store equipment had a useful life of 5 years with a salvage value of $15,000. Now in 2016, Computers R US estimates the useful life to be 10 years with a salvage value of 12,500.

l. The office equipment was not purchased until January 1, 2015. Computers R Us 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 5 years with a salvage value of $5,000.

m. On April 1, 2016, Computers R Us rented a portion of their store to Bytes and Bits. The contract was for 10 (enter the last digit of your student number) months and Computers R Us 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.

n. The storage building was self-constructed this year by Computers R Us. The Company had their initial expenditure of $250,000 on January 1. They paid an additional $350,000 on March 1stand then the final payment of $150,000 on December 1st. 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 $10,000. The company depreciates this asset using partial years.

o. Computers R Us 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 1.10. Prior year inventory records show the following calculation for 2015:

275,000 X 1.0 = 275,000

125,000 X 1.08 = 135,000

p. As of 12/31/2016 the Available for Sale Securities have a fair value of $100,000. Due to the market conditions, the company does not plan on selling the assets in 2016, but their intent is to sell at some point in time. (Ignore income taxes when recording this information.)

q. Computers R Us has two loans outstanding. Interest is paid annually on January 1st. The facts on each loan is as follows:

Onstar Bank outstanding since January 1, 2016 with a 5.0% interest rate. This loan was taken out to finance the construction of the Storage Building. The loan and the related interest will be paid off on January 1, 2017.

Coldstar Bank outstanding all of 2016 with a 4.0 %. This is a six year loan with interest due annually on January 1st. Principle is due on January 1, 2020. Since interest will not be paid to the bank until 1/1/2016, Computers R Us did not accrue any interest.

r. On September 1, 2016, Computers R Us recorded a patent in the amount of $75,000. The company paid outside legal fees of $20,000 to have the patent registered. The other $55,000 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 5 years with no residual value. No one knows what to do with this information so no amortization has been recorded for 2016. Amortization is straight line and the company depreciates using partial years for intangible assets.

s. 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 10% amounted to $30,000

t. Computers R Us has a straight tax rate of 28%. Income tax expense is Net Income before taxes times 28%.

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