InstructionsRead ALL instructions before getting started!ABC Corpo.docx

InstructionsRead ALL instructions before getting started!ABC
Corporation is a new company that buys and sells office
supplies. Business began on January 1, 2015.Given on the first
two tabs are ABC's 12/31/15 Unadjusted Trial Balance and a list
of needed adjustments.1. Make all 12 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 "12-31-15 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 BALANCES AS OF 12/31/15.
3. Once the 12/31/15 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.
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, and Balance Sheet.
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. For purposes of
the Balance Sheet, be sure to prepare a classifed Balance Sheet.
Link your financial statements to your Adjusted Trial Balance.
If necessary, review financial statement preparation in Chapters
4 and 5 of your textbook for a quick refresher. 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 "Post-Close
T-Accounts" tab. Make sure your adjusting journal entries
are also on your Post-Close T-Accounts. They will not
automatically flow from tab-to-tab. (Helpful hint: After you
have completed and posted all of your adjusting entries,

make a duplicate copy of your "12-31-15 T-Accounts" tab to
replace the existing blank "Post-Close T Accounts" tab by
right clicking on the completed "12-31-15 T-Accounts" tab,
select Move or Copy, then click on "Create a Copy" and then
place at the desired location. You can then delete the original
"Post-Close T-Accounts" tab and rename the newly
duplicated tab as your "Post-Close T-Accounts" tab).7. The
final step is the Post-Closing Trial Balance, which will use the
ending balances from the Post-Close 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.-The Post-Closing Trial Balance should not have
any revenue, expense, gain, or loss (temporary) accounts.-Check
figure 1: Gross profit = $573,000.-Check figure 2: Income
before income taxes = $345,266.-Check figure 3: Total
Liabilities and Stockholders' Equity = $1,298,480.-Check figure
4: Adjusted Trial Balance debit and credit columns total
$2,010,321.-Check figure 5: Total Current Assets =
$1,145,045.-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").-DO NOT force any cells
to match check figures given. Any adjustments in the T-
Accounts or financial statements not supported by legitimate
adjusting or closing entries will be considered financial

statement misrepresentation sufficient to result in a failing
grade.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 the rest of your accounting curriculum.Please
review the grading rubric tab as you start work on the
assignment to make sure that you understand how your work
will be evaluated.
Unadjusted Trial BalanceABC CorporationUnadjusted Trial
BalanceDecember 31,
2015ParticularsDebitCreditCash707,650.00Accounts
receivable357,120.00Allowance for doubtful
accountsInventoryAllowance to Reduce Inventory to Market
Value- 0Purchases267,000.00Prepaid
insurance8,250.00Land88,000.00Building37,500.00Accumulated
depreciation: building1,150.00Equipment21,600.00Accumulated
depreciation: equipment9,000.00Patent20,000.00Accounts
payable40,750.00Notes payable40,000.00Income taxes
payable88,000.00Unearned rent revenue15,000.00Bonds
Payable700,000.00Discount on Bonds
Payable51,520.00Common stock125,000.00PIC In Excess of
Par-Common Stock40,000.00Retained earningsTreasury
stock20,000.00Dividends28,000.00Sales
Revenue790,000.00Advertising expense9,240.00Wages
expense62,150.00Office expense14,370.00Depreciation
expense10,150.00Utilities expense33,600.00Insurance
expense24,750.00Income taxes
expense88,000.00Total1,848,900.001,848,900.00
Adjustments Needed1On March 1, ABC purchased a one-year
liability insurance policy for $33,000.Upon purchase, the
following journal entry was made:Dr Prepaid insurance33,000Cr
Cash33,000The expired portion of insurance must be recorded
as of 12/31/15.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 on February 1, 2015
for $37,500 with a remaining useful life of 25 years and a
salvage value of $3,000. The method of depreciation for the
building is straight-line. The equipment was purchased on
February 1, 2015 for $21,600 with a remaining useful life of 4
years and a salvage value of $1,800. 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 $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
Cash15,000Cr Unearned rent revenue15,000The unearned
revenue account must be adjusted to reflect the amount earned
as of 12/31/15.4Per timecards, from the last payroll date
through December 31, 2015, ABC's employees have worked a
total of 275 hours.Including payroll taxes, ABC's wage expense
averages about $21 per hour. The next payroll date is January
5, 2016.The liability for wages payable must be recorded as of
12/31/15.5On November 30, 2015, ABC borrowed $40,000 from
American National Bank by issuing an interest-bearing note
payable.This loan is to be repaid in three months (on February
28, 2016), along with interest computed at an annual rate of 9%.
The entry made on November 30 to record the borrowing
was:Dr Cash40,000Cr Notes payable40,000On February 28,
2016 ABC must pay the bank the amount borrowed plus
interest. Assume the beginning balance for Notes Payable is
correct.Interest through 12/31/15 must be accrued on the
$20,000 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, 2015, and the inventory on-hand atthat
time totaled $50,000, which reflects historical cost. A review

of inventory data further indicated that current replacement
value of the ending inventory is $45,000, the retail sales value
of the ending inventory is $182,000, estimatedcost of
completion and disposal is 72.5% of retail, and normal profit
margin is 1.25% of retail value.Record the adjusting entry for
properly recognizing 2015 Cost of Goods Sold.Additionally,
ABC adheres to GAAP by recording ending inventory at the
lower of cost or market at a total inventory level.Be sure to
make an additional adjustment, if necessary, to properly value
ending inventory using the Loss and Allowance methodology.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, 2015.
Record the impairment if any.The expected future undiscounted
net cash flows for this intangible asset totals $15,000, and the
fair value of the asset is $17,500.8On 7/1/15, ABC purchased
4,000 shares of its own stock from existing stockholders as
treasury stock. The cost of the treasury stock was $5 per share,
or $20,000 in total. The effects of this transaction are already
shown in the unadjusted trial balance. On 12/31/15,ABC
reissued 2,000 shares of the treasury stock at $8 per share.
Record the journal entry required for the reissuance of the
treasury stock. 9On 12/31/15, ABC issued 9,000 shares of $3
par value common stock at the closing market price of $4 per
share. Prepare ABC's journal entry to reflect the issuance of the
stock on 12/31/15.10On 7/1/15, ABC sold 10% bonds having a
maturity value of $700,000 for $648,480, resulting in an
effective yield of 12%. The bonds aredated 7/1/15, and mature
7/1/20. 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
12/31/15.Hint: Develop an abbreviated amortization schedule
to accurately determine the interest expense.11ABC Corporation
prepares an aging schedule on 12/31/15 that estimates total
uncollectible accounts at $25,000. 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:12Corporate 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, 2016 due
date.ABC's income tax rate is 40%. The entire year's income
tax expense was estimated at the beginning of 2015 to be
$96,000,so January through November income tax expense
recognized amounts to $88,000 (11/12 months).Since we are
assuming estimates are not made during the year, the balance in
Income taxes payable representsincome 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 (i.e. the
difference between total income tax expense and the amount
already accrued through November).
grading rubricGrading Rubric for AC322 Comprehensive
ProblemPointsEarnedAdjusting EntriesPoints PossiblePoints
Earned182803848586878880981081181289600Adjusted Trial
BalancePoints PossiblePoints EarnedCorrect totals (based on
formula)8Totals balance81600Income StatementPoints
PossiblePoints EarnedCorrect Format8Correct Income Before
Income Taxes (based on formula)8Correct Gross Profit (based
on formula)80Correct Income Tax Expense8Components Sum to
Net Income8400Balance SheetPoints PossiblePoints
EarnedCorrect Form80Assets=Liabilities+Stockholders
Equity8Correct Totals for Assets, Liab, & Equity10Components
Sum Correctly8340Statement of Retained EarningsPoints
PossiblePoints Earned0Correct Form8Correct Ending Retained
Earnings8160Closing EntriesPoints PossiblePoints
EarnedTOTAL POINTS01828Instructor
Comments:3848320After-Closing Trial BalancePoints
PossiblePoints EarnedCorrect totals (based on formula)8Totals

balance8160Total Grade2500
Performance-Based Assessment Grading Rubric
Exemplary Competent Needs Work
96-86 85-67 66-0
Analyzing,
Journalizing and
Posting of
Adjusting Entries
96 pts. [LO 1, 8, 9]
90% or more of
adjusting entries
are analyzed,
journalized and
posted correctly.
70-89% of
adjusting entries
are analyzed,
journalized and
posted correctly.
Less than 70% of
adjusting entries
are analyzed,
journalized and
posted correctly.
16-14 13-12 11-0
Preparation of
Adjusted Trial
Balance
16 pts. [LO 1, 8,9]
Adjusted Trial
Balance is 90%
or more correct.
Adjusted Trial
Balance is 70-
89% correct.
Adjusted Trial

Balance is less
than 70% correct.
90-81 80-63 62-0
Compilation of
Basic Financial
Statements
90 pts. [LO 1, 8, 9]
-Financial
statements are
>90% correct.
-Financial
statements are 70-
89% correct.
-Financial
statements are
<70% correct.
32-29 28-22 21-0
Analyzing,
Journalizing and
Posting of Closing
Entries
32 pts. [LO 1, 8, 9]
90% or more of
closing entries
are analyzed,
journalized and
posted correctly.
70-89% of closing
entries are
analyzed,
journalized and
posted correctly.
Less than 70% of

closing entries are
analyzed,
journalized and
posted correctly.
16-14 13-12 11-0
Preparation of
Post-Closing Trial
Balance
16 pts. [LO 1, 8, 9]
90% or more of
closing entries
are analyzed,
journalized and
posted correctly.
70-89% of
closing entries are
analyzed,
journalized and
posted correctly.
Less than 70% of
closing entries are
analyzed,
journalized and
posted correctly.
40-36 35-28 27-0
Overall
Professional
Preparation of
Project
40 pts. [LO 7]
Project is very
professionally
prepared with no
spelling errors.
Project is mostly
professional and

contains 1-2
spelling errors.
Project is not
professionally
prepared and
contains >2
spelling errors.
60-54 53-42 41-0
Application of
Electronic
Spreadsheet
Technology
(Microsoft Excel)
60 pts. [LO 2]
Highly skilled
application of
Excel, including
the prevalent use
of formulas and
cell links.
Moderately skilled
application of
Excel, including
moderate use of
formulas and cell
links.
Novice application
of Excel,
including little to
no use of
formulas and cell
links.

5.8
An accountant with the Atlanta Olympic Games was charged
with embezzling over $60,000 to purchase a Mercedes-Benz and
to invest in a certificate of deposit. Police alleged that he
created fictitious invoices from two companies that had
contracts with the Olympic Committee: International Protection
Consulting and Languages Services. He then wrote checks to
pay the fictitious invoices and deposited them into a bank
account he had opened under the name of one of the companies.
When he was apprehended, he cooperated with police to the
extent of telling them of the bogus bank account and the
purchase of the Mercedes-Benz and the CD. The accountant was
a recent honors graduate from a respected university who,
supervisors stated, was a very trusted and loyal employee.
a. How does the accountant fit the profile of a fraudster?
How does he not fit the profile?
b. What fraud scheme did he use to perpetrate his fraud?
c. What controls could have prevented his fraud?
d. What controls could have detected his fraud?

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