Mountain State Sporting Goods (Fraud Investigation Phases I-III.)

Appendix B GL Adjusting Entries 12/31/2006

Type Date Entry Date Split Debit Credit Balance Checking 38,220

2,267,631 2,251,689

Total Checking 2,267,631 2,251,689 54,162

Inventory 236,681

Adjusting Entry 12/31/2006 02/18/2007 Cost of Goods Sold 27,894

Total Inventory 27,894 - 264,575

Equipment 64,642 15,476

Total Equipment 15,476 - 80,118

Accumulated Depreciation (54,376)

Adjusting Entry 12/31/2006 02/18/2007 Depreciation Expense 5,860

Total Accumulated Depreciation - 5,860 (60,236)

Leasehold Improvements - 15,000

Adjusting Entry 12/31/2006 08/20/2006 Outside Services 15,000

Total Leasehold Improvements 15,000 15,000 -

Loan to Employees - 45,000

Adjusting Entry 12/31/2006 03/01/2007 Sales 45,000 Total Loan to Employees 45,000 45,000 -

Other Asset 1,253 Total Other Asset - - 1,253

Line of Credit - 20,000

Adjusting Entry 12/31/2006 03/01/2007 Payroll Liability 20,000 Total Line of Credit 20,000 20,000 -

Payroll Liabilities Payable (15,843) 15,843

10,190 Adjusting Entry 12/31/2006 03/01/2007 Line of Credit 20,000

Total Payroll Liabilities Payable 15,843 30,190 (30,190)

Type Date Entry Date Split Debit Credit Balance Sales Tax Payable (12,456)

12,456 13,802

Total Sales Tax Payable 12,456 13,802 (13,802)

Long Term Debt (24,534) 3,593

13,500 Total Long Term Debt 3,593 13,500 (34,441)

Capital Stock (1,000) Total Capital Stock - - (1,000)

Dividends - 10,767

Total Dividends 10,767 - 10,767

Retained Earnings (232,587) 33,227

Total Retained Earnings 33,227 - (199,360)

Sales - 2,240,901

Adjusting Entry 12/31/2006 03/01/2007 Loan from Employee 45,000

Total Sales 45,000 2,240,901 (2,195,901)

Cost of Goods Sold - 1,789,186

Adjusting Entry 12/31/2006 02/18/2007 Inventory 27,894 Total Cost of Goods Sold 1,789,186 27,894 1,761,292

Advertising and Promotion - 4,216

Total Advertising and Promotion 4,216 - 4,216

Delivery - 11,155

Total Delivery 11,155 - 11,155

Depreciation Expense -

Adjusting Entry 12/31/2006 02/18/2007 Accumulated Depreciation 5,860

Total Depreciation Expense 5,860 - 5,860

Insurance Expense - 25,089

Total Insurance Expense 25,089 - 25,089

Type Date Entry Date Split Debit Credit Balance

Interest Expense - 1,648

Total Interest Expense 1,648 - 1,648

Misc. Expense - 3,940

Total Misc. Expense 3,940 - 3,940

Office Supplies - 1,040

Total Office Supplies 1,040 - 1,040

Officers Compensation - 65,000

Total officers Compensation 65,000 - 65,000

Outside Labor - 9,192

Adjusting Entry 12/31/2006 08/20/2006 Leasehold Improvements 15,000

Total Outside Labor 24,192 - 24,192

Postage - 932

Total Postage 932 - 932

Rent Expense - 24,000

Total Rent Expense 24,000 - 24,000

Repairs and Maintenance - 1,297

Total Repairs and Maintenance 1,297 - 1,297

Salaries & Wages - 139,723

Total Salaries & Wages 139,723 - 139,723

Supplies - 1,992

Total Supplies 1,992 - 1,992

Taxes & Licenses - 45,711

Total Taxes & Licenses 45,711 - 45,711

Type Date Entry Date Split Debit Credit Balance

Telephone Expense - 3,374

Total Telephone Expense 3,374 - 3,374

Travel and Entertainment - 3,126

Total Travel and Entertainment 3,126 - 3,126

Utilities - 7,198

Total Utilities 7,198 - 7,198

Interest Income - 6,730

Total Interest Income - 6,730 (6,730)

4,670,566 4,670,566 -