P5-3 (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Ea
ID: 2491799 • Letter: P
Question
P5-3
(Balance Sheet Adjustment and Preparation) The adjusted trial balance of Eastwood Company and other related information for the year 2014 are presented as follows.
EASTWOOD COMPANY
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2014
Debit Credit
Cash $41,000
Accounts Receivable 163,500
Allowance for doubtful Accounts $8,700
Prepaid Insurance 5,900
Inventory 208,500
Equipment Investments (long term) 339,000
Land 85,000
Construction in Process (building) 124,000
Patents 36,000
Equipment 400,000
Accumulated Depreciation (equipment) 240,000
Discount on Bonds Payable 20,000
Accounts Payable 148,000
Accrued Liabilities 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 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 discount on bonds payable, $2,000 will be amortized in 2015.
6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000. These bank loans are due in 2015.
7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2025.
8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding.
P5-3 Instructions Prepare a balance sheet as of December 31, 2014, so that all important information is fully disclosed.
Explanation / Answer
Note- Prepaid Insurance can also be written off but due to lack of Information i have not written off. If we write off then Retained Earning will be $110100
It has been assumed that Trail balance ig given before Adjustment but Information About depreciation is not given hance depreciation has not been considered.
Patent Amortization per year= 40000/10year= $4000
Balance Sheet as at 31 Dec. 2014 Particulars Amount $ Cash $25,000.00 Accounts Receivable $163,500.00 Less: Allowances for Doubtful -$8,700.00 $154,800.00 Prepaid Insurance $5,900.00 Inventory $208,500.00 Equipment Investment $339,000.00 Land $85,000.00 Building under Construction $124,000.00 Patents $36,000.00 less: Amortization -$4,000.00 $32,000.00 Equipment $400,000.00 Less:Accum. Dep. -$240,000.00 $160,000.00 Discount on Bond Payble $20,000.00 less: Amortization -$2,000.00 $18,000.00 Total $1,152,200.00 Account Payble $148,000.00 Accrued Liabilities $49,200.00 Note Payble $94,000.00 Bond Payble $200,000.00 Common Stock $500,000.00 Paid-in Capital in Excess of Par $45,000.00 Retained Earning $138,000.00 Less: Amortization & Interest -$22,000.00 $116,000.00 Total $1,152,200.00Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.