Reference no: EM13379616

Problem #1-  You must use an "Excel" spreadsheet for your answer.

Axion Corporation

Balance Sheet

December 31, 201X

Assets

        Cash       $32,500

        Accounts receivable           174,175

        Land          140,000

Building       400,000

Equipment         100,000

         Less: Accumulated depreciation         (80,000)

Prepaid expenses           14,000

        Patent          20,000

        Inventory             50,000

    Total Assets      $ 850,675

Liabilities and Owners' Equity

        Accounts payable           $   77,300

        Mortgage payable    150,000

        Taxes payable             40,000

        Unearned revenue       11,000

        Common stock    50,000

        Retained earnings     522,375

    Total Liabilities and

  Owners' Equity         $ 830,675

The books have been closed for the year. Any changes in revenues or expenses will be adjusted to Retained Earnings.

Additional Information:

1) Cash included a customer's check in the amount of $2,000 that was deposited on December 28^th, but was returned marked "NSF" on January 4^th, the following year. The customer has gone out of business and cannot be located.

2) It is estimated at 5% of the receivables will be uncollectible.

3) A review of the land, building and equipment account indicated the land cost $140,000. The building cost was $400,000, and the equipment cost $100,000. Depreciation on the building has been calculated on the straight-line method using a 40 year useful life and has been on the books for eight years. The equipment was purchased two years ago and is being depreciated on the straight-line method with a useful life of 10 years. The depreciation has not been recorded for this year.

4) The patent was purchased on January 2nd of the current year and has a legal life of 20 years. No amortization has been recorded for the current period.

5) $5,000 of the mortgage payable is due within the next 12 months.

6) $11,000 was recorded as unearned revenue when it was received in advance for a customer's order back in September. The goods were shipped on October 15^th of the current year.

7) Common stock represents 5,000 shares of $1 par common. It was all sold for $10 per share.

8) The company was notified on January 15^th (after the year end) that it is being sued for $10,000,000.

Note: In order to determine how some of these items are accounted for, you will have to refer to other chapters in your book. For example, "Bad Debts" are discussed in Chapter 7; Patents are discussed in Chapter 10 & 11, etc. You can find the location of the information by referring to the index in the back of your book.

Required: a) Prepare a worksheet (Use the format from Exerc.3-28). Post the numbers from the original balance sheet in the first two columns (as if it were a trial balance).

b) Prepare any adjusting entries you feel are necessary in a separate tab sheet,  in a proper adjusting journal entry format, including explanations.

c) Post the adjusting journal entries to the worksheet, in the "Adjustments"columns.

d) Complete the worksheet by putting the adjusted balances in the "Balance Sheet" columns.

Also- since there will be "multiple" adjusting entries to retained earnings, you will need to sub-total the debits/credits as one amount in order to enter them on the worksheet.

e) Prepare a "corrected" Balance Sheet, in proper format . Use the following categories on the Bal. Sheet:

- Current Assets

- Property, Plant & Equipment (separate the three assets, and reflect the accumulated depreciation for the building and the equipment)

- Other Assets

- Current Liabilities

- Long-Term Debt

- Stockholder's Equity