To practice making necessary correcting and adjusting entries and using them to create an adjusted trial balance. (See Topic Guides AC 6, 11, 12, 14. Information: The table on the next page reports Terry's account balances on December 31st for the current and prior years. The following entries have not yet been made for the current year: During the year the board declared and paid a $300,00o dividend. During the year the sales department wrote off $360,000 of accounts receivable (already included in the current account balances). They have now decided that 8% of their ending A/R balance is uncollectible. Terry uses the Percentage of A/R method for recognizing bad debt expense. On September 1st, a year's premiums on a new insurance policy was prepaid for $120,0oo. The original payment was recorded as a debit to insurance expense. No other entries have been made for this contract since that time. Terry's reported income tax expense (see below) includes an estimate for this year's taxes. Only the three adjustments mentioned above have not yet been included in this tax estimate. Because of this, you will need to record any tax effects from the transactions throughout this case (starting with the tax effects, if any, of these three entries). Since another tax payment will not be made until April, these adjustments should be accounted for in Income Tax Expense and Income Tax Payable. Terry's tax rate is 30%. Assignment: Calculations 1. Make the appropriate journal entries, if any, to account for the adjustments mentioned above (including any necessary changes to income tax expense). 2. Create Terry's Year 2 adjusted trial balance. Hint: Trial balances need to be in a specific order and they are only for the current year! Critical Thinking 3. Do you think it's a problem that Terry is still making these changes, even when all of their other numbers are set? What do these last minute corrections suggest about the company's accounting department