You have been hired by Dillard to prepare adjusting entries and financial statements for 2019. Previously Rinky Dink Accounting had been performing such tasks.

The following information was gathered through examination of the books of Dillard company and thorugh discussions with its employees. You are to prepare the comprehensice income statement, statement of stockholders equity, statement of cash flows, balance sheet all in proper form. Ignore tax effects.

Part I: Due: Due submitted on canvas by 11:59 PM on Monday, October 19, 2020 (change from date on syllabus). Part I: Adjusting journal entries, Adjusted trial balance for 2019 and corrected 2018 balance sheet. Part II: Due submitted on canvas by 11:59 PM on Friday, October 23, 2020 (same as syllabus) Part II: Complete set of financial statements for 2019 (I will post the solution to Part I after the turn-in time for Part I, the solution should form the basis of your part II solution). NOTE: Important! Make a copy of your solution. The solution to the problem will be posted on canvas after you turn in the project. Everything must be TYPED. Purpose of this assignment: 1. Review the adjustment/correction process including sophisticated topics from accounting 350/351/352. 2. Prepare all of the financial statements in proper form. These are foundational to this course and your career as accountants. Setting: You have been hired by Dillard to prepare adjusting entries and financial statements for 2019. Previously Rinky Dink Accounting had been performing such tasks. The following information was gathered through examination of the books of Dillard Company and through discussions with its employees. You are to prepare the comprehensive income statement, statement of stockholders' equity, statement of cash flows, balance sheet; all in proper form Refer to your intermediate accounting textbook for form questions. Ignore tax effects. The trial balance at 12/31/19 before you work your magic and the balance sheet at 12/31/18 are included in a separate excel file. ria 16 BI U A. : E33 7 1. The investments account at 12/31/19 contains stocks that were all purchased during 2018, In discussions with the CFO, you determine that they were made to invest excess cash. They are properly classified as trading securities. Here is information that you gather regarding that portfolio (Amounts in 000's): Company DAG GLS HRG Initial Investment Cost Market Value at 12/31/19 $400 $410 50 60 80 76 Market Value at 12/31/18 $405 55 73 You also discuss with the CFO the Investment in Pencil Corporation. You discover that this Investment was first made 3 years ago on 1/1/17 and that the investment cost was $2,000,000. The investment in 40% of the voting stock of Pencil was made in order to be able to have representation on its board since Pencil is a key supplier of the inventory that Dillard sells. Dillard wants to have a say in the quality control and other decisions that Pencil makes. You dig around and realize that Pencil's book value of equity on 1/1/17 was $3,300,000. You realize that there are some unbooked patents that Pencil owns that have 10 year remaining lives as of 1/1/17. You also determine that Dillard has been recording dividend revenue when it receives payment. During 2017, Dillard received $70,000 in dividends, in 2018 $75,000 and in 2019, S65,000. Pencil has reported income during 2017 of $900,000, 2018 of $500,000 and 2019 of $400,000 2. You discover that Dillard bought and installed equipment for $500,000 on 1/1/15. The equipment's use will result in environmental damage that will need to be cleaned up when the equipment is retired. The estimated life of the equipment is 10 years on 1/1/15. The environmental clean-up cost is estimated to be $80,000. The $80,000 will all be paid at the end of the asset's useful life. You notice that the equipment cost was expensed when purchased. A discount rate of 5% is reasonable for the clean-up cost. Straight-line depreciation method is reasonable with no salvage cost for the depreciation 3. On 1/1/16, Dillard sold 1,000, 51,000 face 5% bonds, interest paid semi-annually on 7/1 and 12/31 with a maturity term of 20 years. The selling price was $703,108. The effective interest method is appropriate. 4. Dillard recorded its contribution into its pension plan as Pension Expense this year and has made no other entries related to the pension this year. In examining last year's financials you note the following in the footnotes. All numbers in 000's. Projected Pension Benefit Obligation (54,400) 2 Home insert Draw Layout Review View mbria 16 I U . HIT 4,000 400 Plan Assets Unamortized Prior service cost In discussions with the actuary you determine the following: 2019 service cost is $400, The discount rate used to compute the PBO is 4% At 12/31/18, 10 years remained related to the prior service cost. The company assumes an expected return on its pension assets of 6%. Funding is always on 12/31 of each year. The plan asset value at the end of 2019 after the funding was $5,000 Assume that the pension expense was properly recorded in 2018. Assume that no benefits were paid to retirees in 2019. 5. The company uses the percentage of accounts receivable method and historically does not collect 4% of its ending accounts receivable. 6. You discover that wage expense was not accrued at 12/31/17, 12/31/18 or 12/31/19. The unrecorded liabilities at each date were $8,000, $4,500 and $9,000 respectively. 7. Additional information: Dillard purchased equipment for $350,000 cash this year. This transaction was properly recorded. 8. On August 1, 2019, Dillard sold 500 bundles super shaver complete. Each bundle sold for $750 a bundle consisting of I) super shaver with a retail cost of $100 and a 24 month subscription to super shaver supplies. The supplies if sold separately would sell for $30 per month. Dillard recorded sales revenue of $375,000 in 2019 related to these bundles. All costs related to the super shaver and the shipments of supplies were expensed properly. The patent was sold at the end of 2019. 10. You discover that 2018 ending inventory was overstated by S100,000 and 2019 ending inventory was understated by S50,000 9. Trial Balance Part 1 Home Insert Draw Formulas Data Review View Verdana ABC 10 B I U ebe A 123 fx 1000000 D E F 245,277 400,000 20,000 380,000 530,000 15,000 500,000 2,000,000 807,000 800,000 650,000 (250,000) 1,200,000 100,000 5,777,277 A B C 1 2 Cash 3 Accounts Receivable 4 Allowance for Doubtful Accounts 5 Investments 6 Prepaid Rent 7 Inventory 8 9 10 11 Investment in Pencil Corporation 12 13 Land 14 Building 15 Equipment 16 Accumulated Depreciation 17 18 Patent 19 Total Assets 20 21 Accounts Payable 22 Bonds Payable 23 Net Pension Obligation 24 Notes Payable 25 Common stock 26 Retained earnings 27 Treasury Stock 28 Other Comprehensive Income-pensions 29 30 31 32 33 34 35 36 37 38 39 40 41 200,000 703,108 400,000 1,000,000 100,000 3,814,169 (40,000) (400,000) 5,777,277 10512)... 123119 prel trial balance 123118 bs > art > art t... > DR CR Cash 157,277 Investments 530,000 Accounts Receivable 350,000 Allowance for Doubtful Accts 10,000 Prepaid Rent 15,000 Inventory 600,000 Land 807,000 Building 800,000 Equipment 570,000 Accumulated Depreciation 330,000 Patent 40,000 Investment in Pencil Corporation 2,000,000 Accounts Payable 321,000 Notes Payable 500,000 Net Pension Obligation 400,000 Bonds Payable 703, 108 Common stock 370,000 Other Comprehensive Income-Pensions 400,000 Retained Earnings 3,814,169 Treasury stock 80,000 Cash Dividends 100,000 Stock Dividends 20,000 Sales 2,400,000 Sales Returns & Allowances 150,000 Dividend Revenue 65,000 Cost of Goods Sold 1,400,000 Salaries Expense 354,000 Interest Expense 50,000 Pension Expense 350,000 Depreciation Expense 140,000 Gain on Sale of Patents 75,000 Warranty Expense 10,000 Loss on sale of equipment 20,000 Rent Expense 15,000 Patent Amortization 10,000 8,978,277 8.978,277 Part I: Due: Due submitted on canvas by 11:59 PM on Monday, October 19, 2020 (change from date on syllabus). Part I: Adjusting journal entries, Adjusted trial balance for 2019 and corrected 2018 balance sheet. Part II: Due submitted on canvas by 11:59 PM on Friday, October 23, 2020 (same as syllabus) Part II: Complete set of financial statements for 2019 (I will post the solution to Part I after the turn-in time for Part I, the solution should form the basis of your part II solution). NOTE: Important! Make a copy of your solution. The solution to the problem will be posted on canvas after you turn in the project. Everything must be TYPED. Purpose of this assignment: 1. Review the adjustment/correction process including sophisticated topics from accounting 350/351/352. 2. Prepare all of the financial statements in proper form. These are foundational to this course and your career as accountants. Setting: You have been hired by Dillard to prepare adjusting entries and financial statements for 2019. Previously Rinky Dink Accounting had been performing such tasks. The following information was gathered through examination of the books of Dillard Company and through discussions with its employees. You are to prepare the comprehensive income statement, statement of stockholders' equity, statement of cash flows, balance sheet; all in proper form Refer to your intermediate accounting textbook for form questions. Ignore tax effects. The trial balance at 12/31/19 before you work your magic and the balance sheet at 12/31/18 are included in a separate excel file. ria 16 BI U A. : E33 7 1. The investments account at 12/31/19 contains stocks that were all purchased during 2018, In discussions with the CFO, you determine that they were made to invest excess cash. They are properly classified as trading securities. Here is information that you gather regarding that portfolio (Amounts in 000's): Company DAG GLS HRG Initial Investment Cost Market Value at 12/31/19 $400 $410 50 60 80 76 Market Value at 12/31/18 $405 55 73 You also discuss with the CFO the Investment in Pencil Corporation. You discover that this Investment was first made 3 years ago on 1/1/17 and that the investment cost was $2,000,000. The investment in 40% of the voting stock of Pencil was made in order to be able to have representation on its board since Pencil is a key supplier of the inventory that Dillard sells. Dillard wants to have a say in the quality control and other decisions that Pencil makes. You dig around and realize that Pencil's book value of equity on 1/1/17 was $3,300,000. You realize that there are some unbooked patents that Pencil owns that have 10 year remaining lives as of 1/1/17. You also determine that Dillard has been recording dividend revenue when it receives payment. During 2017, Dillard received $70,000 in dividends, in 2018 $75,000 and in 2019, S65,000. Pencil has reported income during 2017 of $900,000, 2018 of $500,000 and 2019 of $400,000 2. You discover that Dillard bought and installed equipment for $500,000 on 1/1/15. The equipment's use will result in environmental damage that will need to be cleaned up when the equipment is retired. The estimated life of the equipment is 10 years on 1/1/15. The environmental clean-up cost is estimated to be $80,000. The $80,000 will all be paid at the end of the asset's useful life. You notice that the equipment cost was expensed when purchased. A discount rate of 5% is reasonable for the clean-up cost. Straight-line depreciation method is reasonable with no salvage cost for the depreciation 3. On 1/1/16, Dillard sold 1,000, 51,000 face 5% bonds, interest paid semi-annually on 7/1 and 12/31 with a maturity term of 20 years. The selling price was $703,108. The effective interest method is appropriate. 4. Dillard recorded its contribution into its pension plan as Pension Expense this year and has made no other entries related to the pension this year. In examining last year's financials you note the following in the footnotes. All numbers in 000's. Projected Pension Benefit Obligation (54,400) 2 Home insert Draw Layout Review View mbria 16 I U . HIT 4,000 400 Plan Assets Unamortized Prior service cost In discussions with the actuary you determine the following: 2019 service cost is $400, The discount rate used to compute the PBO is 4% At 12/31/18, 10 years remained related to the prior service cost. The company assumes an expected return on its pension assets of 6%. Funding is always on 12/31 of each year. The plan asset value at the end of 2019 after the funding was $5,000 Assume that the pension expense was properly recorded in 2018. Assume that no benefits were paid to retirees in 2019. 5. The company uses the percentage of accounts receivable method and historically does not collect 4% of its ending accounts receivable. 6. You discover that wage expense was not accrued at 12/31/17, 12/31/18 or 12/31/19. The unrecorded liabilities at each date were $8,000, $4,500 and $9,000 respectively. 7. Additional information: Dillard purchased equipment for $350,000 cash this year. This transaction was properly recorded. 8. On August 1, 2019, Dillard sold 500 bundles super shaver complete. Each bundle sold for $750 a bundle consisting of I) super shaver with a retail cost of $100 and a 24 month subscription to super shaver supplies. The supplies if sold separately would sell for $30 per month. Dillard recorded sales revenue of $375,000 in 2019 related to these bundles. All costs related to the super shaver and the shipments of supplies were expensed properly. The patent was sold at the end of 2019. 10. You discover that 2018 ending inventory was overstated by S100,000 and 2019 ending inventory was understated by S50,000 9. Trial Balance Part 1 Home Insert Draw Formulas Data Review View Verdana ABC 10 B I U ebe A 123 fx 1000000 D E F 245,277 400,000 20,000 380,000 530,000 15,000 500,000 2,000,000 807,000 800,000 650,000 (250,000) 1,200,000 100,000 5,777,277 A B C 1 2 Cash 3 Accounts Receivable 4 Allowance for Doubtful Accounts 5 Investments 6 Prepaid Rent 7 Inventory 8 9 10 11 Investment in Pencil Corporation 12 13 Land 14 Building 15 Equipment 16 Accumulated Depreciation 17 18 Patent 19 Total Assets 20 21 Accounts Payable 22 Bonds Payable 23 Net Pension Obligation 24 Notes Payable 25 Common stock 26 Retained earnings 27 Treasury Stock 28 Other Comprehensive Income-pensions 29 30 31 32 33 34 35 36 37 38 39 40 41 200,000 703,108 400,000 1,000,000 100,000 3,814,169 (40,000) (400,000) 5,777,277 10512)... 123119 prel trial balance 123118 bs > art > art t... > DR CR Cash 157,277 Investments 530,000 Accounts Receivable 350,000 Allowance for Doubtful Accts 10,000 Prepaid Rent 15,000 Inventory 600,000 Land 807,000 Building 800,000 Equipment 570,000 Accumulated Depreciation 330,000 Patent 40,000 Investment in Pencil Corporation 2,000,000 Accounts Payable 321,000 Notes Payable 500,000 Net Pension Obligation 400,000 Bonds Payable 703, 108 Common stock 370,000 Other Comprehensive Income-Pensions 400,000 Retained Earnings 3,814,169 Treasury stock 80,000 Cash Dividends 100,000 Stock Dividends 20,000 Sales 2,400,000 Sales Returns & Allowances 150,000 Dividend Revenue 65,000 Cost of Goods Sold 1,400,000 Salaries Expense 354,000 Interest Expense 50,000 Pension Expense 350,000 Depreciation Expense 140,000 Gain on Sale of Patents 75,000 Warranty Expense 10,000 Loss on sale of equipment 20,000 Rent Expense 15,000 Patent Amortization 10,000 8,978,277 8.978,277