Comprehensive - Bryant Corporation was incorporated on December 1, 2006 and began operations one week later. Before closing the books for the fiscal year ended November 30, 2007, Bryant’s controller prepared the following financial statements:

Balance Sheet November 30, 2007
Assets	Liabilities and Stockholders’ Equity
Current assets	Current liabilities
Cash	$180,000	Accounts payable and accrued expenses	$592,000
Accounts receivable	480,000	Income taxes payable	168,000
Less: Allowance for doubtful accounts	59,000	Total current liabilities	$760,000
Inventories	430,000	Stockholders’ equity
Prepaid insurance	15,000	Common stock, $10 par value	$400,000
Total current assets	$1,046,000	Retained earnings	392,000
Property, plant, and equipment	426,000	Total stockholders’ equity	$792,000
Less: Accumulated depreciation	40,000	Total Liabilities and Stockholders’ Equity	$1,552,000
Research and development costs	120,000
Total Assets	$1,552,000

 

Statement of Income For Year Ended November 30, 2007
Net sales	$2,950,000
Operating expenses
Cost of sales	$1,670,000
Selling and administrative	650,000
Depreciation	40,000
Research and development	30,000
Total expenses	$2,390,000
Income before income taxes	$560,000
Income tax expense	168,000
Net Income	$392,000

Bryant Corporation 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:

1. Included in selling and administrative expenses were $5,000 of costs incurred on software being developed for sale to others. The technological feasibility of the software has been established.

2. Based on an aging of the accounts receivable as of November 30, 2007, it was estimated that $36,000 of the receivables will be uncollectible.

3. Inventories at November 30, 2007 did not include work-in-process inventory costing $12,000 sent to an outside processor on November 26, 2007.

4. A $3,000 insurance premium paid on November 30, 2007 on a policy expiring one year later was charged to insurance expense.

5. Bryant adopted a pension plan on June 1, 2007 for eligible employees to be administered by a trustee. Based upon actuarial computations, the first 12 month’s accrued pension plan expense was estimated at $45,000.

6. On June 1, 2007 a production machine purchased for $24,000 was charged to repairs and maintenance. Bryant depreciates machines of this type on the straight-line method over a five-year life, with no salvage value, for financial and tax purposes.

7. Research and development 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, 2008. Bryant initiated a five-year amortization of the $150,000 total cost during the fiscal year ended November 30, 2007.

8. During December 2007 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. A reasonable accrual based on an estimate of the court’s award to the plaintiff is $50,000.

9. The 30% effective tax rate was determined to be appropriate for calculating the provision for income taxes for the fiscal year ended November 30, 2007. Ignore computation of deferred portion of income taxes.

Required

1. Prepare the necessary correcting entries.

2. Prepare a corrected balance sheet of Bryant Corporation as of November 30, 2007 and a corrected statement of income for the year ended November 30, 2007.