Trial Balance (accounts in alphabetical order)
Accounts payable 67,000
Accounts receivable 24,500
Common stock 10,000
Depreciation expense 24,350
Cost of goods sold 234,000
Equipment (net of depreciation) 316,000
Long-term debt 145,000
Paid-in capital 90,000
Property taxes 8,900
Retained earnings ?
Total 780,850 780,850
Part I: Income Statement
For Part I, consider additional information below.
• One client had indicated that they were interested in purchasing $50,000 worth of products, so the bookkeeper recorded the transaction. However, the client has not actually committed to the purchase.
• The bookkeeper already corrected the sales account. However, the bookkeeper may have made a mistake when computing cost of goods sold. She included total production costs for 2015 and did not adjust ending inventory for the $50,000 worth of units left at the end of the year. The amount of ending inventory was determined using a physical count.
Prepare an income statement for the company in good format. Also, explain the adjustments separately. Always include the name of the company and the period covered in the title. Don’t forget dollar signs where appropriate. You will not need all the accounts listed above. How does the income or loss compare to the original income statement? Explain the importance of the matching concept.
Part II: Balance Sheet
For Part II, consider additional information below. You also need to consider additional information of Part I above.
Additional information for Part II:
• The company made a secondary offering of stock and raised an additional $250,000 which includes $225,000 of Paid-in Capital.
• The company had already paid $22,000 in dividends before deciding on the offering.
• The company now has cash to invest in a piece of raw land on which to build in the future. The investment takes place before year end. The cost of the land is $400,000, the downpayment is $40,000 and a note to the bank covers the rest.
Prepare a balance sheet for the company in good format with additional information above. Update the balance sheet for the changes to income in Part I and also consider the effect of paying the dividend.
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