Question

BUS 320 Financial Reporting Project Green Dog Products Inc. Requirements: Step 1: Adjusting and correcting journal entries as of 12-31-19 (the fiscal year end). Prepare the adjusting entries (including the income tax adjustment) on a separate sheet of paper. Submit the Income Tax Adjustment Worksheet with your entries. If the company would have already recorded a transaction during the year do not record it again. Adjusting entries never involve cash Step 2: 12 column spread sheet. (See Canvas for Excel spreadsheet.) Green Dog Products Inc. is a San Francisco-based retailer of organic dog food products. These products are sold in the company's own retail outlets and other retailers. The fiscal year end is December 31 and the accounts for the year ended 12-31-19 are unaudited. The company's routine adjusting procedures have been completed. The available information consists of the preliminary adjusted accounts and additional information about the company's accounting policies. Information about the company's accounting policies and resolved issmes: VA. Bad Debt Expense is estimated at 2% of credit sales. During 2019,80% of sales were on credit and the other 20% of sales were for cash. B. Inventory is accounted for using the last in, first out method. 20.000 cases of Green Dog's peanut butter dog cookies were not included in the physical inventory count because they were on consignment at various pet food retailers. The cases have a cost of $61.000. Total inventory at January 1, 2019 was $450,000. Consignment transactions involve another company having our inventory at their locations but our company retains ownership. The other company tries to sell the inventory for us and when the inventory is sold the other company sends our company the cash. The inventory should be on the books of the company that owns the inventory.

Answer 1

STEP-1
GREEN DOG PRODUCTS INC.,
Adjusting Journal Entries
For the Year Ended December 31,2019
Sr.No.	Account Title and Explanation	Debit	Credit
A	Bad Debt Expenses	$9,640
	Allowance for Doubtful Debts		$9,640
	( to adjust the allowance for doubtful debts @ 2% of credit sales)
B	Inventory	$61,000
	Cost of Goods Sold		$61,000
	(to record the inventory held by the consignee agents)
C	Prepaid Insurance	$40,000
	Insurance Expenses		$40,000
	(to record the insurance expenses for 8 months and transfer the balance
	amount of the premium to prepaid expenses)
D	Depreciation Expense - Building	$50,000
	Accumulated Depreciation - Building		$50,000
	(to record the depreciation expense for 2016 not previously recorded)
I	Interest Expenses	$5,000
	Interest Payable		$5,000
	(to record the interest on 5% Notes payable for 12 months)
J	Liability on Unredeemed Gift Cards	$90,000
	Sales		$90,000
	(to record the liability on gifts cards yet to be redeemed and reduce the
	equal amount from the sales revenue which is yet not generated)

Working Notes
Computation of Net Sales Revenue
Sales as per the Income Statement		$8,000,000
Less: Value of Unredeemed Gift Cards		($90,000)
Net Revised Sales		$7,910,000
Computation of Allowance for Doubtful Debts
Credit Sales @ 20% of Sales		$1,582,000
Doubtful Debts @ 2% on credit sales		$31,640
Allowance for Doubtful Debts as per Trial Balance		$22,000
Additional Allowance adjusted to Bad Debts		$9,640
Computation of Interest Expenses
Value of 5% Notes Payable		$500,000
Interest for 12 months @ 5%		$25,000
Interest Expenses as per Trial Balance		$20,000
Additional Interest Expenses		$5,000
Computation of Prepaid Insurance
Annual Insurance Premium for 12 months		$120,000
Period for which Insurance has expired upto Dec 31(months)		8
Insurance Expense for 2019		$80,000
Prepaid Insurance		$40,000

STEP-2
GREEN DOG PRODUCTS INC.,
Adjusting Journal Entries
For the Year Ended December 31,2019
	Trial Balance		Adjustments		Adjusted Trial Balance		Income Statement		Statement of Retained Earnings		Balance Sheet
	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$240,000				$240,000						$240,000
Accounts Receivable	$315,000				$315,000						$315,000
Allowance for Doubtful Debts		$22,000		$9,640		$31,640						$31,640
Inventory	$437,000		$61,000		$498,000						$498,000
Prepaid Insurance			$40,000		$40,000						$40,000
Land	$600,000				$600,000						$600,000
Buildings	$1,800,000				$1,800,000						$1,800,000
Accumulated Depreciation - Buildings		$430,000		$50,000		$480,000						$480,000
Equipment	$900,000				$900,000						$900,000
Accumulated Depreciation - Equipment		$270,000				$270,000						$270,000
Accounts Payable		$460,000				$460,000						$460,000
Interrest Payable				$5,000		$5,000						$5,000
Income Taxes Payable		$42,000	$13,410			$28,590						$28,590
Liability on Unredeemed Gift Cards				$90,000		$90,000						$90,000
5% Notes Payable		$500,000				$500,000						$500,000
Common Stock - Par		$800,000				$800,000						$800,000
Paid in Capital in Excess of Par - Common		$250,000				$250,000						$250,000
Retained Earnings - Jan 1,2019		$1,033,000				$1,033,000				$1,033,000
Sales		$8,000,000	$90,000			$7,910,000		$7,910,000
Cost of Goods Sold	$5,140,000			$61,000	$5,079,000		$5,079,000
Loss on Sale of Shoe Segment	$500,000				$500,000		$500,000
Bad Debt Expense	$114,000		$9,640		$123,640		$123,640
Depreciation Expense - Building	$100,000		$50,000		$150,000		$150,000
Depreciation Expense - Equipment	$67,500				$67,500		$67,500
Interest Expense	$20,000		$5,000		$25,000		$25,000
Insurance Expense	$120,000			$40,000	$80,000		$80,000
Salary Expense	$510,000				$510,000		$510,000
Operating Expenses	$728,500				$728,500		$728,500
Income Tax Expense	$175,000			$13,410	$161,590		$161,590
Dividends	$40,000				$40,000				$40,000
	$11,807,000	$11,807,000	$269,050	$269,050	$11,858,230	$11,858,230	$7,425,230	$7,910,000	$40,000	$1,033,000	$4,393,000	$2,915,230
Net Income							$484,770			$484,770
	$11,807,000	$11,807,000	$269,050	$269,050	$11,858,230	$11,858,230	$7,910,000	$7,910,000	$40,000	$1,517,770	$4,393,000	$2,915,230
Retained Earnings - Dec 31,2019									$1,477,770			$1,477,770
	$11,807,000	$11,807,000	$269,050	$269,050	$11,858,230	$11,858,230	$7,910,000	$7,910,000	$1,517,770	$1,517,770	$4,393,000	$4,393,000

FRP 1
Income Tax Adjustment Worksheet
Income Before Income Tax from Income Statement in Project Information		$700,000
Impact of Adjustments that Impact Income
Decrease in Sales Revenue		($90,000)
Increase in Bad Debt Expenses		($9,640)
Increase in Inventory		$61,000
Increase in Depreciation Expense - Buildings		($50,000)
Increase in Interest Expenses		($5,000)
Decrease in Insurance Expenses		$40,000
Corrected Income Before Income Tax		$646,360
x Tax Rate		25%
Correct Income Tax Expense		$161,590
Less: Recorded Income Tax Expense		($175,000)
Amount of Income Tax Adjustment		($13,410)