InstructionsRead ALL instructions before getting started!ABC Corporation is a new company that buys and sells office supplies. Business began on January 1, 2014.

Given on the first two tabs are ABC's 12/31/14 Unadjusted Trial Balance and a list of needed adjustments.

1. Make all 16 adjustments on the "Adjusting Journal Entries" tab. Remember to include a description under each journal entry.

2. Post the adjustments to the general ledger on the "12-31-14 T-Accounts" tab. You may have to add T-Accounts for new accounts. Link your T-Account entries to your Journal Entries. PLEASE NOTE THAT THE "BB" (BEGINNING BALANCES) FOR THE T-ACCOUNTS REPRESENT THE UNADJUSTED BALANCES AS OF 12/31/14.

3. Once the 12/31/14 T-Accounts are complete, prepare the Adjusted Trial Balance. There may be some accounts with zero dollars, and you may have to insert lines for new accounts (some blank T-Accounts have already been provided for you). Link the Adjusted Trial Balance to your T-Accounts.

4. Use the Adjusted Trial Balance numbers to complete the Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows. For purposes of the Income Statement, prepare using the multiple step format and assume that Rent Revenue, any Unrealized Holding Gains/Losses, Interest Expense, Interest Revenue, and any other Gains/Losses are NOT part of the major central ongoing operations of the company. Link your financial statements to your Adjusted Trial Balance. Use the Income Statement and Balance Sheet to finish the partially completed Statement of Cash Flows. Since this is ABC's first year of operations, several line items on the Statement of Cash Flows have already been supplied to you. If necessary, review financial statement preparation in Chapters 4 and 5 of your textbook for a quick refresher. Plan on using your knowledge gained in completing Chapter 23 to help with the preparation of the Statement of Cash Flows. Additionally, since this is ABC Corporation's first year of operations, the adjusted trial balance for all current assets and liabilities represents the change during the year for Statement of Cash Flows analysis purposes.

5. When the Financial Statements are complete, make the closing entries on the "Closing Entries" tab being mindful of the four closing entries you've learned.

6. When closing entries have been made, post the entries to the general ledger on the "Post-Close T-Accounts" tab. Make sure your adjusting journal entries are also posted on your Post-Close T-Accounts. They will not automatically flow from tab-to-tab. Suggestion: As an alternative, after you've finished posting your adjusting journal entries to the accounts in the "12-31-14 T Accounts" tab, make a duplicate of this worksheet to use for posting your closing entries and then just relabel the tab as "Post-Close T-Accounts." Just be sure to delete the original "Post-Close T-Accounts" tab already in the workbook before you do this since you can't have two worksheets with the same name.

7. The final step is the Post-Closing Trial Balance, which will use the ending balances from the 1/1/15 T-Accounts. 8. Double-check your work. Here are a few things to check for: -Adjusted Trial Balance: Make sure debit column and credit column total to the same figure at the bottom.-Net income from the income statement will flow through to the Statement of Retained Earnings.-Ending Retained Earnings from the Statement of Retained Earnings will flow through to the Balance Sheet.-Ending Cash balance from the Balance Sheet should match your ending Cash balance on the Statement of Cash Flows.-The Post-Closing Trial Balance should not have any revenue, expense, gain, loss, or other temporary accounts.-Check figure 1: Income from operations = $270,341.-Check figure 2: Total Current Assets = $1,726,156.-Check figure 3: Total Liabilities & Stockholders' Equity = $2,182,393.-Check figure 4: Cash flow used by operating activities = $(9,260).-Check figure 5: Adjusted Trial Balance debit and credit columns total $3,033,472.-Check figure 6: Cash flow provided by financing activities $1,706,367.-Remember: Neatness matters in Financial Statements. Print or Print Preview before submitting to make sure your statements are neat. Otherwise, management may send back to you for revision!-Include your work at the bottom of each tab as needed.-Ask questions prior to the day/night before the due date. The due date is clearly indicated on the course schedule.-Utilize formulas and worksheet linkings in your financial statements to improve accuracy and save time in completing the assignment.-Please take advantage of Excel by using formulas to calculate groups of numbers (i.e. "Total Liabilities and Stockholders' Equity").

Final comments: This project is intended to make sure that you understand the accounting cycle as well as several key financial accounting transactions that you havestudied during your Intermediate Accounting series. It is very important to take the necessary time on this project to master these concepts. The concepts mastered in thiscomprehensive problem will serve you well in Advanced Accounting and the rest of your accounting curriculum.

Unadjusted Trial BalanceABC CorporationUnadjusted Trial BalanceDecember 31, 2014

DebitCreditCash$980,333Short term investments187,000Fair value adjustment (Trading)0.0Accounts receivable318,200Allowance for doubtful accounts0.0Inventory0.0Purchases402,700Prepaid insurance22,500LT (Debt) investments (HTM)151,151Land68,000Building135,000Accumulated depreciation: building3,550Equipment49,500Accumulated depreciation: equipment16,500Patent37,500Accounts payable66,290Notes payable275,000Income taxes payable69,300Unearned rent revenue45,000Bonds Payable1,100,000Premium on Bonds Payable212,344Common stock100,000PIC In Excess of Par-Common Stock15,000Retained earnings0.0Treasury stock56,000Dividends50,000Sales Revenue840,450Advertising expense6,400Wages expense69,100Office expense25,700Depreciation expense20,050Utilities expense27,500Insurance expense67,500Income taxes expense69,300$2,743,434$2,743,434

Adjustments Needed1On March 1, ABC purchased a one-year liability insurance policy for $90,000.Upon purchase, the following journal entry was made:Dr Prepaid insurance90,000Cr Cash90,000The expired portion of insurance must be recorded as of 12/31/14.Notice that the expired portion from March through November has been recorded already.Make sure that the Prepaid Insurance balance after the adjusting entry is correct.

2Depreciation expense must be recorded for the month of December.The building was purchased with cash on February 1, 2014 for $135,000 with a remaining useful life of 30 years and a salvage value of $7,200. The method of depreciation for the building is straight-line. The equipment was purchased with cash on February 1, 2014 for $49,500 with a remaining useful life of 5 years and a salvage value of $1,250. The method of depreciation for the equipment is double-declining balance.Depreciation has been recorded for the building and equipment for months February through November.3On December 1, XYZ Co. agreed to rent space in ABC's building for $15,000 per month,and XYZ paid ABC on December 1 in advance for the first three months' rent.The entry made on December 1 was as follows:Dr Cash45,000Cr Unearned rent revenue45,000The unearned revenue account must be adjusted to reflect the amount earned as of 12/31/14.4Per timecards, from the last payroll date through December 31, 2014, ABC's employees have worked a total of 250 hours.Including payroll taxes, ABC's wage expense averages about $55 per hour. The next payroll date is January 5, 2015.The liability for wages payable must be recorded as of 12/31/14.5On November 30, 2014, ABC borrowed $275,000 from American National Bank by issuing an interest-bearing note payable.This loan is to be repaid in three months (on February 28, 2015), along with interest computed at an annual rate of 6%. The entry made on November 30 to record the borrowing was: (for Statement of Cash Flow purposes, consider a financing item)Dr Cash275,000Cr Notes payable275,000On February 28, 2015 ABC must pay the bank the amount borrowed plus interest. Assume the beginning balance for Notes Payable is correct.Interest through 12/31/14 must be accrued on the $275,000 note.6ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a completephysical inventory at year-end. A physical count was taken on December 31, 2014, and the inventory on-hand atthat time totaled $140,000.Record the 2012 Cost of Goods Sold and the 12/31/14 Inventory adjustment. (This includes closing Purchases.)

7It would be unusual for a company to have an asset impairment in Year 1, but for the sake of this example, ABC realizedthat their intangible asset might be impaired on December 31, 2014. Record the impairment if any.The expected future net cash flows for this intangible asset totals $30,000, and the fair value of the asset is $25,000.8On 7/1/14, ABC purchased 7,000 shares of its own stock from existing stockholders as treasury stock. The cost of the treasury stock was $8 per share, or $56,000 in total. The effects of this transaction are already shown in the unadjusted trial balance. On 12/31/14,ABC reissued these 7,000 shares of treasury stock at $10 per share. Record the journal entry required for the reissuance of the treasury stock.

9On 12/31/14, ABC issued 5,500 shares of $2 par value common stock at the closing market price of $9 per share. Prepare ABC's journal entry to reflect the issuance of the stock on 12/31/14.

10On 7/1/14, ABC sold 15% bonds having a maturity value of $1,100,000 for $1,312,344, resulting in an effective yield of 10%. The bonds aredated 7/1/14, and mature 7/1/19. Interest is payable semiannually on July 1 and January 1. ABC uses the effective interest method of amortization for bond premium or discount. Record the adjusting entry for the accrual of interest and the related amortization on 12/31/14.Hint: Develop an abbreviated amortization schedule to accurately determine the interest expense.

11The following information is available for ABC Corporation at 12/31/14 regarding its investments in stocks of other companies.

SecuritiesCostFair Value2,200 shares of Toyota Corporation Common Stock$110,000$121,0001,100 shares of G.M. Corporation Common Stock$77,000$88,000$187,000$209,000Prepare the adjusting entry (if any) for 2014, assuming the securities are classified as trading.

12On 1/1/14, ABC Corporation purchased, as a held-to-maturity investment, $170,000 of the 8%, 5-year bonds of Intuit Corporation for $151,151,which provides an 11% return. Prepare ABC's 12/31/14 journal entry to reflect the receipt of annual interest and discount amortization. Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used.

13ABC Corporation prepares an aging schedule on 12/31/14 that estimates total uncollectible accounts at $25,000. Assuming that the allowance method is used,prepare the entry to record bad debt expense.

14On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make annual payments of $9,477 at the beginning of each year, starting January 1, 2014. The delivery vehicle has an estimated useful life of 6 years and a $7,000unguaranteed residual value. The delivery vehicle reverts back to the lessor at the end of the lease term. ABC Corporation uses the straight-line methodof depreciation for the delivery vehicle. ABC Corporation's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown. No entries have yetbeen made concerning this lease arrangement. After determining the type of lease arrangement (capital or operating), prepare the necessary multiple-part journal entry for 2014 for ABC Corporation. (Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries forthis lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity.)

15ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pension plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan in 2014.

Pension asset/liability (January 1)$0Actual return on plan assets$30,000Expected return on plan assets$15,000Contributions (funding) in 2014$35,000Fair value of plan assets (December 31)$65,000Settlement rate10%Projected benefit obligation (January 1)$0Service cost$50,000Benefits paid in 2014$0*For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Liability as long-term in nature.

16On December 31, 2014, ABC Corporation issued 1,000 shares of restricted stock to its Chief Financial Officer. ABC stock had a fair value (closing market price) of$9 per share on December 31, 2014. Additional information is as follows:a. The service period related to the restricted stock is 2 years.b. Vesting occurs if the CFO stays with the company for a two-year period.c. The par value of the common stock is $2 per share.Make the appropriate accounting entry as of the grant date, 12/31/14.

Do this step after preparing the Income Statement except for the Income taxes line: (You need to calculate Income Before Income Taxes in order to calcualte total Income Tax Expense)17Corporate taxes are due in four estimated quarterly payments on April 15, June 15, September 15, and December 15. However, for the purposes of this ABC illustration, we will assume that estimates are not paid, and that the tax is paid in full on the return's March 15, 2015 due date.ABC's income tax rate is 35%. The entire year's income tax expense was estimated at the beginning of 2014 to be $75,600,so January through November income tax expense recognized amounts to $69,300 (11/12 months).Since we are assuming estimates are not made during the year, the balance in Income taxes payable representstax accrued for January through November. Assume no deferred tax assets or deferred tax liabilities.Based on the income before income taxes figure from the income statement, record December's income tax expense so that the entire year's total tax expense is correct.

Adjusting Journal Entries12/31/14Adjusting Journal Entries

JE #Account TitlesDebitsCredits1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

12-31-14 T-Accounts (GL)Beginning balances (bb) on these T-accounts are the 12/31/14 unadjusted balances.Hint: If there is no beginning balance (bb), it is a new account.

CashAccounts receivableInventoryPurchasesPrepaid insuranceLandbb980,333bb318,200bb0.0bb402,700bb22,500bb68,000

980,333318,2000.0402,70022,50068,000

Short term investmentsFair value adjustment (Trading)Allowance for doubtful accountsLT (Debt) investments (HTM)Bonds PayablePremium on Bonds Payablebb187,000bb0.00.0bbbb151,1511,100,000bb212,344bb

1,100,000187,0000.00.0151,151212,344

BuildingAccumulated depreciation: buildingEquipmentAccumulated depreciation: equipmentPatentAccounts payablebb135,0003,550bbbb49,50016,500bbbb37,50066,290bb

135,0003,55049,50016,50037,50066,290

Notes payableIncome taxes payableUnearned rent revenueCommon stockRetained earningsDividendsPIC In Excess of Par-Common Stock275,000bb69,300bb45,000bb100,000bb0.0bbbb50,00015,000bb

275,000

69,30045,000100,0000.050,00015,000Sales RevenueAdvertising expenseWages expenseOffice expenseDepreciation expenseUtilities expenseTreasury stock840,450bbbb6,400bb69,100bb25,700bb20,050bb27,500bb56,000

840,4506,40069,10025,70020,05027,50056,000

Insurance expenseIncome taxes expensebb67,500bb69,300

67,50069,300

NOTE: When closing entries have been made, post the entries to the general ledger on the "Post-Close T-Accounts" tab. Make sure your adjusting journal entries are also posted on your Post-Close T-Accounts. They will not automatically flow from tab-to-tab. Suggestion: As an alternative, after you've finished posting your adjusting journal entries to the accounts in the "12-31-14 T Accounts" tab, make a duplicate of this worksheet to use for posting your closing entries and then just relabel the tab as "Post-Close T-Accounts." Just be sure to delete the original "Post-Close T-Accounts" tab already in the workbook before you do this since you can't have two worksheets with the same name.

Adjusted Trial BalanceABC CorporationAdjusted Trial BalanceDecember 31, 2014

DebitCredit

0.00.0

Income StatementABC CorporationIncome StatementFor the Year Ended December 31, 2014

Statement of Retained EarningsABC CorporationStatement of Retained EarningsFor the Year Ended December 31, 2014

Balance SheetABC CorporationBalance SheetFor the Year Ended December 31, 2014

Statement of Cash FlowsABC CorporationStatement of Cash FlowsFor the Year Ended December 31, 2014Cash flows from operating activities Net income

Add: Bad debt expense Deduct: Amortization of bond premium (Issued bonds)

Deduct: Amortization of HTM discount (Bond investment)

Cash flow used by operating activities0.0

Cash flows from investing activities

Purchase of Patent

Cash flow used by investing activities0.0

Cash flows from financing activities

Leased delivery vehicle payment-principal only Proceeds from bank note

Issuance of common stock for cash PIC-Treasury stock Cash flow provided by financing activities0.0

Net change in cash0.0Beginning cash balance 1/1/140.0Ending cash balance 12/31/140.0

*Note: As indicated in the instructions, the Statement of Cash Flows has been partially populated to assist you in thepreparation of this financial statement. Remember, since the beginning cash balance is zero, the ending cash balanceshould also represent the total net change in cash.

Closing Entries12/31/14Closing Entries

JE #Account TitlesDebitsCredits1

2

3

4

Post-Close T-AccountsBeginning balances (bb) on these T-accounts are the 12/31/14 unadjusted balances.Hint: If there is no beginning balance (bb), it is a new account.

CashAccounts receivableInventoryPurchasesPrepaid insuranceLandbb980,333bb318,200bb0.0bb402,700bb22,500bb68,000

980,333318,2000.0402,70022,50068,000

Short term investmentsFair value adjustment (Trading)Allowance for doubtful accountsLT (Debt) investments (HTM)Bonds PayablePremium on Bonds Payablebb187,000bb0.00.0bbbb151,1511,100,000bb212,344bb

1,100,000187,0000.00.0151,151212,344

BuildingAccumulated depreciation: buildingEquipmentAccumulated depreciation: equipmentPatentAccounts payablebb135,0003,550bbbb49,50016,500bbbb37,50066,290bb

135,0003,55049,50016,50037,50066,290

Notes payableIncome taxes payableUnearned rent revenueCommon stockRetained earningsDividendsPIC In Excess of Par-Common Stock275,000bb69,300bb45,000bb100,000bb0.0bbbb50,00015,000bb

275,000

69,30045,000100,0000.050,00015,000Sales RevenueAdvertising expenseWages expenseOffice expenseDepreciation expenseUtilities expenseTreasury stock840,450bbbb6,400bb69,100bb25,700bb20,050bb27,500bb56,000

840,4506,40069,10025,70020,05027,50056,000

Insurance expenseIncome taxes expensebb67,500bb69,300

67,50069,300

NOTE: When closing entries have been made, post the entries to the general ledger on the "Post-Close T-Accounts" tab. Make sure your adjusting journal entries are also posted on your Post-Close T-Accounts. They will not automatically flow from tab-to-tab. Suggestion: As an alternative, after you've finished posting your adjusting journal entries to the accounts in the "12-31-14 T Accounts" tab, make a duplicate of this worksheet to use for posting your closing entries and then just relabel the tab as "Post-Close T-Accounts." Just be sure to delete the original "Post-Close T-Accounts" tab already in the workbook before you do this since you can't have two worksheets with the same name.

Post-Closing Trial BalanceABC CorporationPost-Closing Trial BalanceDecember 31, 2014

DebitCredit

grading checklist and rubricGrading Checklist for AC323 Comprehensive ProblemTOTAL POINTSEARNEDAdjusting EntriesPoints PossiblePoints Earned1428340485868788809810811812813801481581681781280

Adjusted Trial BalancePoints PossiblePoints Earned0Correct totals (based on formula)8Totals balance8160

Income StatementPoints PossiblePoints Earned0Correct Format4Correct Income Before Income Taxes (based on formula)8Correct Gross Profit (based on formula)8Correct Income Tax Expense (based on formula)8Components Sum to Net Income8360

Balance SheetPoints PossiblePoints EarnedCorrect Form4Assets=Liabilities+Stockholders Equity8Correct Totals for Assets, Liab, & Equity4Components Sum Correctly8240

Statement of Retained EarningsPoints PossiblePoints EarnedCorrect Form4Correct Ending Retained Earnings8120TOTAL SCORE (MAX 400 POINTS)0Statement of Cash FlowsPoints PossiblePoints EarnedCorrect Form4Instructor Comments:Correct Cash flows from Operating Activities8Correct Cash Flows from Investing Activities8Correct Cash Flows from Financing Activities8Correct Net Change in Cash8360

Closing EntriesPoints PossiblePoints Earned18283848320

After-Closing Trial BalancePoints PossiblePoints EarnedCorrect totals (based on formula)8Totals balance8160