Read ALL instructions before getting started!

ABC Corporation is a new company that buys and sells office supplies. Business began on January 1, 2012.

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

1. Make all 14 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 "12-31-12 T-Accounts" tab. You may have to add T-Accounts for new accounts.

Link your T-Account entries to your Journal Entries.

3. Once the 12/31/12 T-Accounts are complete, prepare the Adjusted Trial Balance. There may be some accounts with zero dollars, and youmay have to insert lines for new accounts. 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.

6. When closing entries have been made, post the entries to the general ledger on the "After-Close T-Accounts" tab. Make sure your adjusting journal entries are also on your After-Close T-Accounts. They will not automatically flow from tab-to-tab.

7. The final step is the Post-Closing Trial Balance, which will use the ending balances from the 1/1/13 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, or loss accounts.

-Check figure 1: Gross profit = $372,450.

-Check figure 2: Income before income taxes = $221,647.

-Check figure 3: Total Assets = $919,651.

-Check figure 4: Cash flow provided by operating activities = $31,340.

-Check figure 5: Adjusted Trial Balance debit and credit columns total $1,514,325.

-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 have studied 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 this comprehensive problem will serve you well in Advanced Accounting and the rest of your accounting curriculum.

ABC Corporation
Unadjusted Trial Balance
December 31, 2012
	Debit	Credit
Cash	$ 284,251
Short term investments	65,000
Fair value adjustment (Trading)	-
Accounts receivable	256,500
Allowance for doubtful accounts		-
Inventory	92,800
Purchases	251,000
Prepaid insurance	9,000
LT (Debt) investments (HTM)	74,086
Land	52,000
Building	36,000
Accumulated depreciation: building		$ 850
Equipment	12,000
Accumulated depreciation: equipment		4,000
Patent	30,000
Accounts payable		52,690
Notes payable		15,000
Income taxes payable		66,000
Unearned rent revenue		15,000
Bonds Payable		500,000
Discount on Bonds Payable	36,803
Common stock		80,000
PIC In Excess of Par-Common Stock		25,000
Retained earnings		-
Treasury stock	25,000
Dividends	14,000
Sales Revenue		651,250
Advertising expense	3,900
Wages expense	56,800
Office expense	6,900
Depreciation expense	4,850
Utilities expense	19,400
Insurance expense	13,500
Income taxes expense	66,000
	$1,409,790	$ 1,409,790

1. On March 1, ABC purchased a one-year liability insurance policy for $36,000. Upon purchase, the following journal entry was made:

Dr Prepaid insurance			36,000
	Cr Cash			36,000

The expired portion of insurance must be recorded as of 12/31/12. 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. 

2. Depreciation expense must be recorded for the month of December. The building was purchased on February 1, 2012 for $36,000 with a remaining useful life of 30 years and a salvage value of $5,400. The method of depreciation for the building is straight-line. The equipment was purchased on February 1, 2012 for $12,000 with a remaining useful life of 5 years and a salvage value of $500. 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.

3. On December 1, XYZ Co. agreed to rent space in ABC's building for $5,000 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 Cash			15,000
	Cr Unearned rent revenue			15,000

The unearned revenue account must be adjusted to reflect the amount earned as of 12/31/12.

4. Per timecards, from the last payroll date through December 31, 2012, ABC's employees have worked a total of 250 hours. Including payroll taxes, ABC's wage expense averages about $25 per hour. The next payroll date is January 5, 2013. The liability for wages payable must be recorded as of 12/31/12. 

5. On November 30, 2012, ABC borrowed $15,000 from American National Bank by issuing an interest-bearing note payable. This loan is to be repaid in three months (on February 28, 2013), along with interest computed at an annual rate of 6%. The entry made on November 30 to record the borrowing was:

Dr Cash			15,000
	Cr Notes payable			15,000

On February 28, 2013 ABC must pay the bank the amount borrowed plus interest. Assume the beginning balance for Notes Payable is correct. Interest through 12/31/12 must be accrued on the$15,000 note.

6. ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete physical inventory at year-end. A physical count was taken on December 31, 2012, and the inventory on-hand at that time totaled $65,000. Record the 2012 Cost of Goods Sold and the 12/31/12 Inventory adjustment. (This includes closing Purchases.) 

7.  It would be unusual for a company to have an asset impairment in Year 1, but for the sake of this example, ABC realized that their intangible asset might be impaired on December 31, 2012. Record the impairment if any. The expected future net cash flows for this intangible asset totals $22,500, and the fair value of the asset is $25,000.

8. On 7/1/12, ABC purchased 5,000 shares of its own stock from existing stockholders as treasury stock. The cost of the treasury 30000 stock was $5 per share, or $25,000 in total. The effects of this transaction are already shown in the unadjusted trial balance. On 12/31/12, ABC reissued these 5,000 shares of treasury stock at $6 per share. Record the journal entry required for the reissuance of the treasury stock. 

9. On 12/31/12, ABC issued 4,500 shares of $1 par value common stock at the closing market price of $6 per share. Prepare ABC's journal entry to reflect the issuance of the stock on 12/31/12.

10. On 7/1/12, ABC sold 10% bonds having a maturity value of $500,000 for $463,197, resulting in an effective yield of 12%. The bonds are 25000, 27,792 2,792 465,989 dated 7/1/12, and mature 7/1/17. 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 12/31/12. Hint: Develop an abbreviated amortization schedule to accurately determine the interest expense.

11	The following information is available for ABC Corporation at 12/31/12 regarding its investments in stocks of other companies.
		Securities					Cost	Fair Value
		2,000 shares of Ford Corporation Common Stock					$ 40,000	$ 45,000
		1,000 shares of G.M. Corporation Preferred Stock					$ 25,000	$ 22,500
							$ 65,000	$ 67,500
	Prepare the adjusting entry (if any) for 2012, assuming the securities are classified as trading.

12	On 1/1/12, ABC Corporation purchased, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of Intuit Corporation for $74,086,														7200	8149.46	949.46	75035
	which provides an 11% return. Prepare ABC's 12/31/12 journal entry to reflect the receipt of annual interest and discount amortization.														C	7200
	Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used.														D	949
																	8149

13. ABC Corporation prepares an aging schedule on 12/31/12 that estimates total uncollectible accounts at $18,500. Assuming that the allowance method is used, prepare the entry to record bad debt expense. Do this step after preparing the Income Statement except for the Income taxes line: 

14. Corporate 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, 2013 due date. ABC's income tax rate is 35%. The entire year's income tax expense was estimated at the beginning of 2012 to be $72,000, so January through November income tax expense recognized amounts to $66,000 (11/12 months). Since we are assuming estimates are not made during the year, the balance in Income taxes payable represents tax 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 tax expense is correct.