Question

Bryant Corporation was incorporated on December 1, 2015, and began operations one week later. Before closing the books for the fiscal year ended November 30, 2016, Bryant’s controller prepared the following financial statements:

BRYANT CORPORATION

Balance Sheet

November 30, 2016

1	Assets
2	Current Assets:
3	Cash	$180,000.00
4	Accounts receivable	480,000.00
5	Less: Allowance for doubtful accounts	(59,000.00)
6	Inventories	430,000.00
7	Prepaid insurance	15,000.00
8	Total current assets	$1,046,000.00
9	Property, plant, and equipment	426,000.00
10	Less: Accumulated depreciation	(40,000.00)
11	R&D costs	120,000.00
12	Total Assets	$1,552,000.00
13	Liabilities and Shareholders’ Equity
14	Current Liabilities:
15	Accounts payable and accrued expenses	$592,000.00
16	Income taxes payable	168,000.00
17	Total current liabilities	$760,000.00
18	Shareholders’ Equity:
19	Common stock, $10 par value	$400,000.00
20	Retained earnings	392,000.00
21	Total shareholders’ equity	$792,000.00
22	Total Liabilities and Shareholders’ Equity	$1,552,000.00

BRYANT CORPORATION

Income Statement

For Year Ended November 30, 2016

1	Net sales	$2,950,000.00
2	Operating expenses:
3	Cost of goods sold	$1,670,000.00
4	Selling and administrative expense	650,000.00
5	Depreciation expense	40,000.00
6	Research and development expense	30,000.00
7	Total expenses	$2,390,000.00
8	Income before income taxes	$560,000.00
9	Income tax expense	168,000.00
10	Net income	$392,000.00

Bryant is in the process of negotiating a loan for expansion purposes, and the bank has requested audited financial statements. During the course of the audit, the following additional information was obtained:

a.	Included in selling and administrative expenses (specific account: software development expense) were $5,000 of costs incurred on software being developed for sale to others. The technological feasibility of the software has been established.
b.	Based on an aging of the accounts receivable as of November 30, 2016, it was estimated that $36,000 of the receivables will be uncollectible.
c.	Inventories at November 30, 2016, did not include work-in-process inventory costing $12,000 sent to an outside processor on November 26, 2016.
d.	A $3,000 insurance premium paid on November 30, 2016, on a policy expiring one year later was charged to insurance expense.
e.	On June 1, 2016, a production machine purchased for $24,000 was charged to factory repairs and maintenance. For financial and tax purposes, Bryant depreciates machines of this type using the straight-line method over a 5-year life with no salvage value.
f.	R&D costs of $150,000 were incurred in the development of a patent that Bryant expects to be granted during the fiscal year ending November 30, 2017. Bryant capitalized R&D costs and initiated a 5-year amortization of the $150,000 total cost during the fiscal year ended November 30, 2016.
g.	During December 2016, a competitor company filed suit against Bryant for patent infringement, claiming $200,000 in damages. Bryant’s legal counsel believes that an unfavorable outcome is probable. This lawsuit is deemed to be a subsequent event that should be recognized in the current fiscal year and a reasonable accrual based on an estimate of the court’s award to the plaintiff is $50,000.
h.	The 30% effective tax rate was determined to be appropriate for calculating the provision for income taxes for the fiscal year ended November 30, 2016. Ignore computation of the deferred portion of income taxes.

Required:

1.	Prepare the necessary correcting entries.
2.	Prepare a corrected balance sheet for Bryant as of November 30, 2016, and a corrected income statement for the year ended November 30, 2016.

PAGE 1 GENERAL JOURNAL Score: 215/225 DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT Nov. 30 Software Development Costs 5,000.00 Software Development Expense 5,000.00 Nov. 30 Allowance for Doubtful Accounts 23,000.00 Bad Debt Expense 23,000.00 Nov. 30 Inventories 12,000.00 Cost of Goods Sold 12,000.00 Nov. 30 Prepaid Insurance 3,000.00 Insurance Expense 3,000.00 Nov. 30° Property, Plant, and Equipment 24,000.00 2,400.00 Depreciation Expense Repairs and Maintenance Expense 24,000.00 2,400.00 Accumulated Depreciation Research and Development Expense Nov. 30 120,000.00 Research and Development Costs 120,000.00 Nov. 30° Loss from Litigation 50,000.00 Estimated Liability from Lawsuit 50,000.00 Nov. 30° Income Tax Expense Income Taxes Payable

Answer 1

Refer the below images for the above asked questions, in a detailed way of solution.

solution : Requirement : Journal entries Debit Debit credit credit particulars 9ooo a $ 5000 software To (Being to after Development costs Ale or & Selling g Admin expenses Capitalize Computer Software costs technological feasibility has been estobished) $ 230DD Allowance for Doubtful Accounts Alc or $23000 To Selling es Admin expenses (bad debts) (eing to reduce allowance account to balance. determined by aging of receivables (859000 of 36000)] $12000 Inventories All or $ 12000 so cost of goods sold (Being to adjost for work-in-process inventory held by outside processor.) prepaid insurance Ale or $3000 Go selling & Admin expenses (insurance) Bling to adjust for nonveregnition of prepaid 'expense) 3000 property, plant & equipment Alc or $24000 Deprecation expense Ale or $2400 To cost of goods sold (repairs & Maintenance) To Accomolated Depreciation Being to adjust for charge to repairs y maintenance purchased on 6/1/16, and to record depreciation to utrol16 ($240004 201 462) ] $24000 2400

$120000 $120000 Research as development expense Ale or To Research is development cost [Being to write off research is destclopment costs in accordance with CHAP ($150000 (f 150000 5 ] - go £iosco 10800 loss from litigation Alc. Dr 4 50oCo To estimated liability from lawsuit (Bling to record probable donages payable regarding Lawsuit for patent infringement), h. # 31620 $ 31690 To come tares parable 9o income tax expense (Being to adjust provision for year ended urolo6 [schedule ] ). schedule ① : Adpostment to income tax expense - year ended November 30, 2016- Unadjated infome before income taxel $560000 Add's Adjustments increasing income Recognition of computer Software Casset) $ 5ooo Reduction in allowance for doubtful accounty $ 23000 work in process inventory at outside processor Recognition et prepaid Pnsorance 1000 Reversal $2400 of 61116 charge h repairs & maintenance 1657000 Dedy Adjustments decreasing income o Depreciation expense on machine purchased olilit $ (2400) Research & development expense $ 120.00) Estimated loss from lawsuit (50000) Adiosted income before income taxes $454600

takes $454600 Adjosted income before Pneome Effective income tax rate Adjusted income tax expense Income tax expense per books Adjustment to reduce income day 136380 (1680) $ expense (31620) Reapeixement BRYANT CORPORATION Balance Sheet November 30, 2016 Assets Amoont Current Assets ? Eash Allounts receivable Less Allowance Inventeries prepaid insurance $ 180000 $ 470000 (3.000) for Doubtful accounts $442000 $ 18.00 $ 1084000 & 450000 $ 442400) $ 5000 property, plant y equipment ess- Accomolated Depreciation software development costs $1496600 Toial Assets → equity Liabitties & Shareholder's Corrent liabilities & Accounts payable y accrued expenses Estimated liability from lawsuits Income taxes payable $592000 I 50000 4136380 $ 778380 Toral corrent trobiotics $ 400000 Share holder's equity Common stock Retained earrings * $318220 Torall shareholder's exjoity $718220 1496600 eaquity 6 Shareholder's • Toral liabilities

Note * $392000 beginning balance + & 67000 (from schedule 1 -1 172400 ( from schedule o) f 1 31620 (scheddle ) BRYANT - Income for the year CORPORATION statement ended November 30, 2016. particolars Amount $ 2950ooo 9 1634000 Net Sales operating expenses : cost of goods sold getting y Admin Depreciation Research uy Development # 619000 $42400 St 150000 $2 445400 Total expenses $ $0 4600 operating income other items : Loss from litigation Income before income Income tax expense taxes & (5000) $454600 $ (136380) $318220 Net income