Question - Balance Sheet Adjustment and Preparation
The adjusted trial balance of Eastwood Company and other related information for the year 2010 are presented on the next page.
EASTWOOD COMPANY Adjusted Trial Balance December 31, 2010
Debits Credits
Cash $ 41,000
Accounts Receivable 163,500
Allowance for Doubtful Accounts $ 8,700
Prepaid Insurance 5,900
Inventory 208,500
Long-term Investments 339,000
Land 85,000
Construction Work in Progress 124,000
Patents 36,000
Equipment 400,000
Accumulated Depreciation of Equipment 240,000
Unamortized Discount on Bonds Payable 20,000
Accounts Payable 148,000
Accrued Expenses 49,200
Notes Payable 94,000
Bonds Payable 200,000
Common Stock 500,000
Paid-in Capital in Excess of Par-Common Stock 45,000
Retained Earnings 138,000
$1,422,900 $1,422,900
Additional information:
1. The LIFO method of inventory value is used.
2. The cost and fair value of the long-term investments that consist of stocks and bonds is the same.
3. The amount of the Construction Work in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed cost $85,000, as shown in the trial balance.
4. The patents were purchased by the company at a cost of $40,000 and are being amortized on a straight-line basis.
5. Of the unamortized discount on bonds payable, $2,000 will be amortized in 2011.
6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000. These bank loans are due in 2011.
7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2021.
8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding.
Instructions - Prepare a balance sheet as of December 31, 2010, so that all important information is fully disclosed.