Textbook Problem

Bryant Corporation was incorporated on December 1, 2018, and began operations one week later. Before closing the books for the fiscal year ended November 30, 2019, Bryant’s controller prepared the following financial statements:

Bryant 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. a. Included in selling and administrative expenses were $5,000 of software development expense related to costs incurred on software being developed for sale to others. The technological feasibility of the software has been established.
2. b. Based on an aging of the accounts receivable as of November 30, 2019, it was estimated that $36,000 of the receivables will be uncollectible.
3. c. Inventories at November 30, 2019, did not include work-in process inventory costing $12,000 sent to an outside processor on November 26, 2019.
4. d. A $3,000 insurance premium paid on November 30, 2019, on a policy expiring one year later was charged to insurance expense.
5. e. On June 1, 2019, a production machine purchased for $24,000 was charged to repairs and maintenance expense. For financial and tax purposes, Bryant depreciates machines of this type using the straight-line method over a 5-year life with no salvage value.
6. f. R&D 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, 2020. Bryant initiated a 5-ycar amortization of the $150,000 total cost during the fiscal year ended November 30, 2019.
7. g. During December 2019, 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. This lawsuit is deemed to be a subsequent event that should be recognized in the current fiscal year and a reasonable accrual based on an estimate of the court’s award to the plaintiff is $50,000.
8. h. The 21% effective tax rate was determined to be appropriate for calculating the provision for income taxes for the fiscal year ended November 30, 2019. Ignore computation of the deferred portion of income taxes.

   Required:

9. 1. Prepare the necessary correcting entries.
10. 2. Prepare a corrected balance sheet for Bryant as of November 30, 2019, and a corrected income statement for the year ended November 30, 2019.