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Fall Corporation's capital structure consists of 500,000 authorized shares of common stock, of which 100,000 have been issued and are still outstanding. At December 31, 2023, an analysis of the accounts and discussions with company officials revealed the following information: Cash.........................................................................................913,481 Investment in trading securities...................................................... 5,180,000 Fair value adjustment (trading securities debit balance)............................50,000 Accounts receivable (trade accounts)..................................................501,785 Allowance for uncollectible accounts (debit balance).............................. 8,000 Inventory...................................................................................140,000 Land (used for Building under Construction)...................................... 824,700 Pension plan assets.................................................................... 1,300,000 Building under construction........................................................ 3,000,000 Property, plant and equipment .........................................................664,000 Accumulated depreciation ..............................................................200,000 Right of use asset........................................................................ 200,000 Patents......................................................................................204,000 Deferred tax asset..........................................................................20,464 Accounts payable........................................................................ ..90,000 4% Notes payable (maturity 7/1/26 - $40,000 due July 1, 2024)................ 160,000 Interest payable............................................................................18,562 Warranty payable........................................................................ 22,320 Discount on bonds payable............................................................ 102,660 Bonds payable.......................................................................... 5,000,000 Lease payable..............................................................................192,024 Projected benefit obligation......................................................... 1,030,000 Deferred tax liability..................................................................... 40,000 Common stock ($1 par value).......................................................... 100,000 Paid in capital in excess of par....................................................... 280,000 Retained earnings, January 1, 2023..................................................1,877,435 Accumulated other comprehensive income (debit balance)........................(10,000) Sales revenue.......................................................................... 7,289,015 Cost of goods sold.....................................................................2,971,090 Depreciation expense.................................................................... 40,000 General and administrative expenses..................................................600,000 Selling expenses..........................................................................800,000 Amortization expense.....................................................................24,000 Dividend revenue....................................................................... 150,000 Interest expense........................................................................ 357,200 Gain on investments (realized)..........................................................450,000 Gain on settlement of lawsuit.........................................................1,200,000 Pension expense...........................................................................130,000 Lease expense...............................................................................57,976 REQUIRED: 1 Prepare a trial balance for the above accounts. 2 Prepare adjusting journal entries as of December 31, 2023, as follows. Parts (b) and (c) use the Inventory for Fall Company 3120-B03 F23 Excel Data file. ROUND TO WHOLE NUMBERS. a) The fair value of the Investments in Trading Securities is $5,800,000. Record the unrealized gain or loss. (Note that there is a previous debit balance in the Fair Value Adjustment account of $50,000.) d) Accrue unused vacation pay that can be taken in 2024 in the amount of $25,000. (All of the vacation pay of $20,000 from 2022 was taken in 2023 Debit General and Administrative expense for these salaries). e) On January 1, 2022, Fall Company leased some equipment for $250,000. The correct Right-of-Use asset was recorded and amortized for one year. However, the bookkeeper made the second of five payments of $57,976 on January 1, 2023, and again incorrectly recorded the transaction as follows on January 1: Lease expense $57,976 Cash $57,976 f) Accrue annual interest expense on the lease in (e) at 8%. g) Record the second year of amortization for the lease in (e). h) The bookkeeper recorded the two semiannual bond interest payments on June 30 and December 31 as follows, instead of correctly using the effective interest method: 6/30/23 Interest expense $175,000 Cash $175,000 12/31/23 Interest expense $175,000 Cash $175,000 i) Prepare the income tax accrual assuming the tax rate is 20%. The differences between book and tax are as follows: Future deductible amounts: Warranty expense and vacation pay from parts (b) and (c). (Ignore the other adjusting entries from this year for the accrual). Include reversals of 2022 warranty expense of $60,000 and 2022 vacation payable of $20,000 as well as this years warranty and vacation expense accruals. Future taxable amount: Tax depreciation was $160,000, whereas book depreciation was only $40,000. Taxable income for 2023 is $4,417,160. There are previous balances in Deferred Tax Assets of $20,464 and Deferred Tax Liabilities of $40,000. 3 Prepare an adjusted trial balance. 4 - Prepare a multiple-step income statement for the year ended December 31, 2023, including the earnings per share information. WARRANTY, PENSION, SALARY AND LEASE EXPENSES SHOULD BE INCLUDED IN GENERAL AND ADMINISTRATIVE EXPENSES ON THE INCOME STATEMENT. BAD DEBT EXPENSE SHOULD BE INCLUDED IN SELLING EXPENSES. 5 Prepare a Statement of Retained Earnings for the year ended December 31, 2023. 6 Prepare a Classified Balance Sheet as of December 31, 2023. 7 Fall Company is building a bigger manufacturing facility with plans to quadruple sales of its boards. We currently have one sales representative per region. Using an analytical tool of your choice, in which markets should they expand? You must justify your suggestions with graphs, tables, etc. Check figures: Net income = $3,625,977; Total Assets = $12,235,979. Trial Balance check figures: 12/31/23 - $18,099,356 AJEs - $1,738,724

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