Your task is record selected transactions for Sherby Corporation for 2021 and prepare year-end financial statements. Attached is a preliminary trial balance for Sherby. You can assume all transactions already recorded by Sherby have been recorded accurately. For the 13 items listed below, assume no journal entries have been made for 2021 unless you are told otherwise.

You may assume all the balances on the preliminary trial balance are correct as a starting point. As you record transactions, you will need to use accounts that are not listed on the preliminary trial balance. Assume all transactions and all amounts are material. If you dont know the exact date of a transaction, it is fine to record the transaction on the last day of the month in which it occurred.

Sherby uses the effective interest method to amortize any discounts or premiums on investments and bonds payable. The company uses straight-line depreciation for plant assets assuming no residual value. The company policy is to take a full years depreciation in the year of acquisition for any plant asset and no depreciation in the year of sale/disposal.

When recording transactions related to investments, use the balance sheet accounts below to keep the categories of investments separate. You do not need to separate out the income statement accounts (such as interest revenue, dividend revenue, gains or losses) by investment category. For example, while you DO need an Interest Revenue account, but you DONT need separate Interest Revenue accounts for Investment in Bonds at Fair Value and Investment in Bonds at Amortized Cost.

• Investment in Equity Affiliate
• Investment in Equity Securities
• Fair Value Adjustment Equity Securities *Hint: also consider if the investment is
• Investment in Bonds (at Amortized Cost) current or long-term
• Investment in Bonds (at Fair Value)
• Fair Value Adjustments Bonds
• Premium on Bond Investments

Discount on Bond Investments.

You will need to submit your project in one Excel file. That file should contain the following

1. All the journal entries on one sheet (tab) organized by item, not chronologically. Have all the entries for #1 together, then #2, etc. Do not organize by date. Show all supporting calculations with the appropriate entry, including any amortization tables. The easier I can follow your work, the more points you will get! Round all entries to the nearest whole dollar. Name this sheet (on the tab) Journal.
2. A updated trial balance resulting from your entries on a separate sheet (or tab). Name this sheet Trial Bal.
3. A 2021 year-end multiple-step Income Statement (without earnings per share data), Statement of Retained Earnings and classified Balance Sheet in good form. Round all amounts to the nearest whole dollar. You can put all your financial statements on 1 sheet or you may put them on 3 separate sheets. Name the sheets appropriately, such as Fin Statemt or Inc Statemt.

Your file may have additional sheets that you use for calculations. But have everything you want considered in your grade on the sheets identified above.Your file may have additional sheets that you use for calculations. But have everything you want considered in your grade on the sheets identified above.

Transactions to be recorded:

1. On July 1, 2021 Sherby borrowed $150,000 from a bank at a 12% annual interest rate for 4 years. Sherby is required to make 48 equal monthly payments (due on the first day of each month starting with August 1, 2021) to repay the principal and interest on this installment loan. Nothing has been recorded for the loan in 2021. Make all entries necessary through Dec. 31, 2021.
2. On January 1, Sherby issued $400,000 in 10 year, 8% bonds. The bonds were priced to yield 6%. Interest payments are made on June 30 and December 31.
3. In June, Sherby took advantage of the opportunity to exchange 2 of its delivery trucks for 2 newer model trucks. The delivery trucks were originally purchased at a cost of $150,000 and their current book value is $84,000. The fair value of the trucks is $87,000. Sherby had to pay $90,000 cash as part of the deal. The transaction will not change Sherbys economic position or cash flows from using the trucks.
4. In June after acquiring the new trucks but before they went into service, Sherby added a custom wrap to advertise the business by putting the company name, logo and phone number on each truck. The cost of the wrap was $630 per truck. About a month after the trucks were put in service, Sherby added a lift system to each truck to make them easier to load. The cost was $900 per truck.
5. Record depreciation for 2021 on the new trucks acquired in the exchange assuming a 7-year life. (You do not need to record depreciation for any other assets.)
6. In October, Sherby took some equipment out of service that was replaced with more efficient machines. The original cost of the equipment was $60,000. The equipment was purchased in 2016 and was being depreciated over an 8-year life. Sherby is looking for a buyer for the equipment. The company estimates the equipment will sell within a few months at the asking price of $12,000.
7. Sherby purchased bonds on July 1, 2021 with a face value of $200,000 as an investment. These bonds were 7 year, 5% bonds issued by Evan Corp. The bonds pay interest semi-annually on June 30 and Dec. 31 and were priced to yield 9% interest. Sherby received the first interest payment on Dec. 31, 2021. The company plans to hold on to these bonds and use the interest payments over the next 7 years to help fund company benefits for employees. (You do not need to record any of the employee benefit costs; they have already been accounted for. Just do the entries related to the bonds.) The Evan bonds were selling at 94 on Dec. 31, 2021.
8. On January 1, 2021 Sherby purchased $300,000 of 11%, 10-year bonds issued by Kinney Company. The bonds with a $300,000 face value were priced to yield 10% interest. The bonds pay interest semi-annually on June 30 and Dec. 31. While the bonds were originally purchased for their high interest rate, Sherby now believes Kinneys bond rating will increase in the first couple of months of 2022 due to the companys expansion. This should drop the effective interest rate for Kinneys bonds and Sherby plans to sell them when the prices rise at a profit. As of December 31, 2021, the bonds are selling at 107.
9. As of December 31, 2020, Sherby owned equity investments that originally cost $6,550 with a fair value of $9,475. The fair value of those securities on December 31, 2021 is $8,200. None of those securities were sold during 2021. However, Sherby anticipates these investments will be sold in 2022.
10. Sherby purchased 2,000 shares of Gregg Corporations common stock for $30 per share on April 1, 2021. Gregg has a total of 8,000 shares of common stock outstanding. On December 1, Sherby received $700 in dividends from Gregg. On December 31, Greggs stock was selling for $39 per share. Greggs 2021 net income was $200,000. Sherby does not intend to sell the stock in 2022.
11. Sherby purchased 100 shares of Martin Corporations common stock for $85 per share September 30, 2021. Martin has a total of 500 shares of common stock outstanding. Most of that stock is held by Ken Martin, the founder and CEO of the company. On December 15, Sherby received $1,000 in dividends from Martin. On December 31, Martins stock was selling for $81 per share but Sherby has no intentions of selling the stock anytime in foreseeable future. Martins 2021 net income was $780,000.
12. On January 1, 2021, Sherby entered into a 4-year lease for a forklift. The forklift has an economic life of 6 years and a fair value of $70,000. The annual lease payment (first payment due 1/1/2021) is $17,000. Sherby can buy the forklift at the end of the 4 years for $9,000 even though the estimated residual value at that time is estimated to be $15,000. The implicit rate on the lease, which happened to be listed in the lease contract, is 8%.
13. On January 1, 2021, Sherby also entered in to a 4-year lease of a small warehouse. The lease requires payments of $36,000 per year. The first payment is to be made on 1/1/2021. The rest of the annual payments will be made on 12/31 beginning with 12/31/2021. The warehouse probably has a useful life of 20 years or more, so Sherby could try to renegotiate a new lease at the end of the lease term if the space is still adequate, but they are under no obligation to do so and the lessor has made no promises regarding a new lease. While there is nothing unique about this warehouse, Sherby was happy to lease the space because the purchase of a similar warehouse would probably cost at least $800,000. Sherby paid a $2,000 commission to the agent who found the warehouse and negotiated the initial lease with a 7% implicit rate.