Question

The Unadjusted Trial Balance has been prepared (provided below and also in ThreeBrothers worksheet.xlsx), showing only those accounts with a non-zero balance. You have gathered the following information that will be helpful in preparing any necessary adjusting entries (add any accounts necessary). Good luck!

ThreeBrothers	Unadjusted Trial Balance
	Dec. 31, 2017
	debit	credit
Cash	4,400,000
Accounts Receivable	22,500,000
Allowance for Bad Debts		20,000
Inventory	2,500,000
Purchases	85,832,500
Construction in Progress Inventory	36,000,000
Billings on Contract		35,000,000
PP&E	60,000,000
Accumulated Depreciation		36,000,000
Accounts Payable		18,000,000
Income Tax Payable		136,000
Common Stock		1,500,000
Retained Earnings		33,444,000
Sales Revenue		134,500,000
Sales Returns	2,017,500
NEWPROD Revenue		9,000,000
FITTRACKER Revenue		10,000,000
Cost of NEWPROD Sold	8,100,000
Cost of FITTRACKER Sold	4,500,000
General and Admin	51,750,000
TOTAL	277,600,000	277,600,000

Also, in addition to its normal operations, ThreeBrothers's management entered into a long-term agreement on September 1, 2017 to supply its internally developed smart-phone-interactive fitness equipment, FITTRACKER, and maintenance support to a regional 24-hour fitness chain. The details of the agreement call for ThreeBrothers to be paid $10,000,000 up front for the equipment and 3 years of maintenance support (beginning on agreement date). The fitness chain could have bought just the equipment for $9,000,000 with no support, and they could have independently contracted for the maintenance support for $2,000,000 for the three-year period. ThreeBrothers has arranged with a 3^rd-party manufacturer to make and ship the equipment direct to customers so ThreeBrothers does not carry any FITTRACKER inventory. The cost of the equipment sold to the fitness chain was $4,500,000. ThreeBrothers has recorded the $10,000,000 as a point-of-sale transaction.

1. I need the adjusting journal entry and closing journal entry, if necessary. Thank You.

Answer 1

Adjustment journal entry is as follows:

Date	Particulars	Dr($)	Cr($)
01.09.2017	Fittracker Revenue Dr	10000000
	To Cost of Fittracker sold		4500000
	To Profit on sale of Fittracker		5500000	(Balancing figure)
	(Being sale of equipment from vendor directly to customer wrongly recorded as POS sale now adjusted)

Closing Entry is as follows:

31.12.2017	Sales Revenue Dr	134500000
	NEWPROD revenue Dr	9000000
	Profit on sale of FITTRACKER Dr	5500000
	Profit & Loss A/c Dr	37200000		(Balancing figure)
	To Inventory		2500000
	To Construction in Progress Inventory		36000000
	To Purchases		85832500
	To Sales Returns		2017500
	To Cost of NEWPROD		8100000
	To General & Admin		51750000
	(Being accounts closed and net loss recognized in P/L a/c)
31.12.2017	Retained Earnings A/c Dr	37200000
	To Profit & Loss A/c		37200000
	Being net loss trf to Retained Earnngs A/c