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P5-3 Eastwood Company

Price: $3.50

P5-3 (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Eastwood Company and other related information for the year 2012 are presented on the next page.

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
Equity Investments (long term)  339,000
Land  85,000
Construction in process  124,000
Patents  36,000
Equipment  400,000
Accumulated Depreciation - Equipment  240,000
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 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 2013.
6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000.
These bank loans are due in 2013.
7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2023.
8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were
issued and outstanding.

Prepare a balance sheet as of December 31, 2012, so that all important information is fully disclosed.

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