Reference no: EM1319690

The Chandler Corporation began business on January 2, 2007. It is now time for Chandler to prepare its financial statements for 2007. The bookkeeper at Chandler was able to complete the asset section of the balance sheet, but he needs your help to complete the liabilities and stockholder's equity sections. Set forth below are Chandler's liability and shareholder's equity accounts before any adjustments. During the course of your work you discover certain other items that had not been taken into account when preparing the general ledger accounts.

Required:

Prepare the journal entries to adjust the accounts. Some of the accounts already have an original entry; however the original entry may be misstated. You only need the entry to correct. Using "T" accounts may help you with this process. Once you have completed your entries prepare, in good form, the liability and stockholder's equity sections of Chandler's balance sheet. Use appropriate financial statement format, and include the appropriate parenthetical information where required.

You have discovered the following additional information during the course of your work at Chandler, and you have determined that some of the accounts above have not been properly stated.

1. The notes payable are from two sources. One is for merchandise Chandler bought for which it issued a note to Beaumont Corporation in the amount if $25,000. The note carries a 12% rate of interest and has a term of 120 days. The note was issued October 1, 2007. Chandler also borrowed $20,000 from First National Bank on November 16, 2007 by issuing its 90-day non interest bearing note. The note was discounted by the bank at 12% and the net proceeds were remitted to Chandler.

2. The bonds payable were issued on July 1, 2007. The face value of the bonds was $3,000,000, carried a 12% rate of interest and matures in 10 years. The interest on the bonds is paid semi-annually. In addition the bonds include detachable warrants giving the bondholder the right to purchase for $30, one share of the $5 par value common stock of Chandler for the next 10 years. The bonds were sold at par, and at the time of sale the warrants had a value of $200,000 (Ignore any amortization of bond premium, discount and interest payable).

3. The only transaction in Treasury stock was the recall of 5,000 shares at $10 per share. Chandler uses the cost method to account for Treasury stock.

4. Chandler declared a semi-annual dividend on December 15 on both the preferred and common stock. The common stock dividend was $1.25 per share. The dividend will be payable January 31, 2008.