Accounting fundamentals involves completion of accounting cycle.

Barber-Williams, Inc. sells, installs, and services a variety of industrial equipment from several manufacturers.

Additional information:

1. The note payable, which originated in 2004, is due in four years, and carries simple interest at 7% annually. Interest for each year is paid annually on January 4 of the following year. The payment on January 4, 2007 was properly recorded, but no other entry regarding interest has been made in 2007.
2. The original cost of the land was $80,000. Because of soaring land values in the area, the CFO decided to write the land up to its market value, recognizing an extraordinary gain.
3. On October 1, 2007, the company signed a service contract with a large customer. The customer paid $48,000 in advance for services through September 30, 2009. Barber-Williams recorded this transaction by debiting Cash and crediting Service Revenue for $48,000.
4. During 2007, the company wrote off accounts receivable in the amount of $19,400 by debiting Bad Debt Expense and crediting Accounts Receivable. An aging of accounts receivable indicates that estimated uncollectible accounts at year-end are $23,500.
5. Product XL7 is a complex machine that requires specialized installation and calibration, which is included in the contract price. On December 31, 2007, Barber-Williams shipped an XL7 to a customer. It was actually installed in late January of 2008. The company recorded the sale of $86,000 in 2007. Since the machine (cost, $52,700) had been shipped, it was not included in ending inventory, but rather in cost of goods sold.
6. The operating expenses category properly includes all expenses except interest and income taxes.
7. Required: Prepare revised financial statements for Barber-Williams. Do this by modifying the existing Excel file. Attach explanations for any items that are changed. Note: Income tax expense on the income statement is computed as 40% of income before tax, Any change in income tax expense is to be plugged to "Deferred Income Tax", which is to be classified as a long-term liability. You may assume that income tax payable reported on the balance sheet is correct.

Barber-Williams, Inc.
Income Statement
Year Ended December 31, 2007

Barber-Williams, Inc.
Balance Sheet
December 31, 2007

Assets

Liabilities and Owners' Equity

Liabilities

(Note: all amounts are in US$)