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Sorenson Manufacturing was incorporated on January 3, 20X1. The corporation's financial statements for its first year's operations were not examined by a PA. You have been engaged to audit the financial statements for the year ended December 31, 20X2, and your examination is substantially completed. A partial trial balance of the company's accounts is given below: EXHIBIT EP 14-6 Sorenson Manufacturing Corporation Partial Trial Balance at December 31, 20X2 TRIAL BALANCE Cash Accounts receivable Allowance for doubtful accounts Inventories Machinery Equipment Accumulated amortization Patents Leasehold improvements Prepaid expenses Goodwill DEBIT $11,000 42,500 38,500 75,000 29,000 85,000 26,000 10,500 24,000 CREDIT $500 10,000

Sorenson Manufacturing was incorporated on January 3, 20X1. The corporation's financial statements for its first year's operations were not examined by a PA. You have been engaged to audit the financial statements for the year ended December 31, 20X2, and your examination is substantially completed. A partial trial balance of the company's accounts is given below: EXHIBIT EP 14-6 Sorenson Manufacturing Corporation Partial Trial Balance at December 31, 20X2 TRIAL BALANCE Cash Accounts receivable Allowance for doubtful accounts Inventories Machinery Equipment Accumulated amortization Patents Leasehold improvements Prepaid expenses Goodwill DEBIT $11,000 42,500 38,500 75,000 29,000 85,000 26,000 10,500 24,000 CREDIT $500 10,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sorenson Manufacturing was incorporated on January 3, 20X1. The corporation's financial statements for its first year's operations were not examined by a PA. You have been engaged to audit the financial statements for the year ended December 31, 20X2, and your examination is substantially completed. A partial trial balance of the company's accounts is given below: EXHIBIT EP 14-6 Sorenson Manufacturing Corporation Partial Trial Balance at December 31, 20X2 TRIAL BALANCE Cash Accounts receivable Allowance for doubtful accounts Inventories Machinery Equipment Accumulated amortization Patents Leasehold improvements Prepaid expenses Goodwill DEBIT $11,000 42,500 38,500 75,000 29,000 85,000 26,000 10,500 24,000 CREDIT $500 10,000 The following information relates to accounts that may yet require adjustment: 1. Patents for Sorenson's manufacturing process were purchased January 2, 20X2, at a cost of $68,000. An additional $17,000 was spent in December 20X2 to improve machinery covered by the patents and charged to the patents account. The patents had a remaining legal term of 17 years. 2. The balance in the goodwill account includes $24,000 paid December 30, 20X1, for an advertising program estimated to increase Sorenson's sales over a period of four years following the disbursement. 3. The leasehold improvement account includes (1) the $15,000 cost of improvements, with a total estimated useful life of 12 years, which Sorenson, as tenant, made to leased premises in January 20X1; (2) movable assembly line equipment costing $8,500, which was installed in the leased premises in December 20X2; and (3) real estate taxes of $2,500 paid by Sorenson, which, under the terms of the lease, should have been paid by the landlord. Sorenson paid its rent in full during 20X2. A 10-year non- renewable lease was signed January 3, 20X1, for the leased building that Sorenson used in manufacturing operations. No amortization of the leasehold improvements has been recorded. Required: Prepare adjusting entries as necessary. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Transcribed Image Text:Sorenson Manufacturing was incorporated on January 3, 20X1. The corporation's financial statements for its first year's operations were not examined by a PA. You have been engaged to audit the financial statements for the year ended December 31, 20X2, and your examination is substantially completed. A partial trial balance of the company's accounts is given below: EXHIBIT EP 14-6 Sorenson Manufacturing Corporation Partial Trial Balance at December 31, 20X2 TRIAL BALANCE Cash Accounts receivable Allowance for doubtful accounts Inventories Machinery Equipment Accumulated amortization Patents Leasehold improvements Prepaid expenses Goodwill DEBIT $11,000 42,500 38,500 75,000 29,000 85,000 26,000 10,500 24,000 CREDIT $500 10,000 The following information relates to accounts that may yet require adjustment: 1. Patents for Sorenson's manufacturing process were purchased January 2, 20X2, at a cost of $68,000. An additional $17,000 was spent in December 20X2 to improve machinery covered by the patents and charged to the patents account. The patents had a remaining legal term of 17 years. 2. The balance in the goodwill account includes $24,000 paid December 30, 20X1, for an advertising program estimated to increase Sorenson's sales over a period of four years following the disbursement. 3. The leasehold improvement account includes (1) the $15,000 cost of improvements, with a total estimated useful life of 12 years, which Sorenson, as tenant, made to leased premises in January 20X1; (2) movable assembly line equipment costing $8,500, which was installed in the leased premises in December 20X2; and (3) real estate taxes of $2,500 paid by Sorenson, which, under the terms of the lease, should have been paid by the landlord. Sorenson paid its rent in full during 20X2. A 10-year non- renewable lease was signed January 3, 20X1, for the leased building that Sorenson used in manufacturing operations. No amortization of the leasehold improvements has been recorded. Required: Prepare adjusting entries as necessary. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
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