Lee Manufacturing Corporation was incorporated on January 3, 2021. The corporation's financial statement for its first-year operations were not examined by a CPA. You have been engaged to examine the financial statements for the year ended December 31, 2022 and your examination is substantially completed. The corporation's trial balance at December 31, 2022 appears as follows: Account Name Debit Credit Cash 61,000 Accounts receivable 92,500 Allowance for doubtful accounts 500 Inventories 38,500 75,000 Machinery Equipment Accumulated depreciation 29,000 10,000 Patents 85,000 Leasehold improvements Prepaid expenses Organization costs 26,000 10,500 29,000 Goodwill 24,000 Licensing Agreement No. 1 Licensing Agreement No. 2 Accounts payable 50,000 49,000 147,500 Unearned revenue 12,500 300,000 Share capital Retained earnings, January 1, 2022 Sales 27,000 768,500 Cost of goods sold Selling and marketing expenses General and administrative expenses Interest expense Extraordinary losses 454,000 73,000 100,000 3,500 12,000 Total 1,239,000 1,239,000 The following information relates to accounts that may yet require adjustment: 1. Patents for Lee's manufacturing process were acquired January 2, 2022 at a cost of P68,000. An additional P17,000 was spent in December 2022 to improve machinery covered by the patents and charged to the patents account. Depreciation on fixed assets has been properly recorded for 2022 in accordance with Lee's practice, which provides a full year's depreciation for property on hand June 30 and no depreciation otherwise. Lee uses the straight-line method for all depreciation and amortizes its patents over their legal life.
Lee Manufacturing Corporation was incorporated on January 3, 2021. The corporation's financial statement for its first-year operations were not examined by a CPA. You have been engaged to examine the financial statements for the year ended December 31, 2022 and your examination is substantially completed. The corporation's trial balance at December 31, 2022 appears as follows: Account Name Debit Credit Cash 61,000 Accounts receivable 92,500 Allowance for doubtful accounts 500 Inventories 38,500 75,000 Machinery Equipment Accumulated depreciation 29,000 10,000 Patents 85,000 Leasehold improvements Prepaid expenses Organization costs 26,000 10,500 29,000 Goodwill 24,000 Licensing Agreement No. 1 Licensing Agreement No. 2 Accounts payable 50,000 49,000 147,500 Unearned revenue 12,500 300,000 Share capital Retained earnings, January 1, 2022 Sales 27,000 768,500 Cost of goods sold Selling and marketing expenses General and administrative expenses Interest expense Extraordinary losses 454,000 73,000 100,000 3,500 12,000 Total 1,239,000 1,239,000 The following information relates to accounts that may yet require adjustment: 1. Patents for Lee's manufacturing process were acquired January 2, 2022 at a cost of P68,000. An additional P17,000 was spent in December 2022 to improve machinery covered by the patents and charged to the patents account. Depreciation on fixed assets has been properly recorded for 2022 in accordance with Lee's practice, which provides a full year's depreciation for property on hand June 30 and no depreciation otherwise. Lee uses the straight-line method for all depreciation and amortizes its patents over their legal life.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter12: Corporations: Organization, Capital Structure, And Operating Rules
Section: Chapter Questions
Problem 34P
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