Instructions:

Big Box Retailer (BBR) is preparing the final adjustments to its financial statements to comply with GAAP in revenue recognition and federal income taxes. The following matters require adjusting entries. Post the adjustment in the appropriate column to the financial statments. Amounts are in millions, except for customers described in #4.

Put each adjustment in a separate column. The worksheet contains formulas. However, formulas can become corrupted. You may wish to check your final work by re-computing the balances.

1) BBR analyzed its sales history and determined that its estimates for sales returns were too low. It requires an increase in estimated return inventory of $225 and a liability related to returns of $300.

2) Due to inflation, fewer customers are losing their gift cards. As a result the estimate for the gift card liability is $50 higher.

3) BBR's accrued warranty expense account shows a debit balance. To correct the account and show the appropriate liability an increase in accrued warranty expense of $120 is required.

4) BBR ran a special sale in December 2023 which gave customers who purchased $1,000 of merchandise, in one day, a $150 coupon to use in 2024. The cash receipt and relief of inventory for the sold merchandise has been recorded. However, the coupon has not been. A total of 500,000 customers took advantage of the offer.

The coupon is a second performance obligation. As a result, sales are overstated by $65 million.

5) After taking into account the unadjusted earnings and the adjustments above, the tax accountants provide the following information.

Tax Expense = $2,143

Taxes already paid and expensed during the year = $1,800

Additional Tax Liability Currently Due = $200

Additional Deferred Tax Liability = $143

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