Here is the problem: (Balance Sheet Adjustment and Preparation) The adjusted tri
ID: 2344939 • Letter: H
Question
Here is the problem:(Balance Sheet Adjustment and Preparation) The adjusted trial balance of Side Kicks Company and other related information for the year 2004 is presented below.
Chapter 5
SIDE KICKS COMPANY
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2004
Debits Credits
Cash $ 41,000
Accounts Receivable 163,500
Allowance for Doubtful Accounts $ 8,700
Prepaid Insurance 5,900
Inventory 308,500
Long-term Investments 339,000
Land 85,000
Construction Work in Progress 124,000
Patents 36,000
Equipment 400,000
Accumulated Depreciation of Equipment 140,000
Unamortized Discount on Bonds Payable 20,000
Accounts Payable 148,000
Accrued Expenses 49,200
Notes Payable 94,000
Bonds Payable 400,000
Capital Stock 500,000
Premium on Capital Stock 45,000
Retained Earnings 138,000
$1,522,900 $1,522,900
Additional information:
1. The inventory has a replacement market value of $353,000. 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 2005.
6. The notes payable represent bank loans that are secured by long-term investments
carried at $120,000. These bank loans are due in 2005.
7. The bonds payable bear interest at 11% payable every December 31, and are due
January 1, 2015.
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, 2004, so that all important information is
fully disclosed.
Explanation / Answer
SIDE KICKS COMPANY
BALANCE SHEET AS ON DECEMBER 31, 2007
ASSETS
LIABILITIES
CURRENT ASSETS
CURRENT LIABILITES
Cash
41,000
Long term notes payable (due in 2011)
94,000
Prepaid
Insurance
5,900
Accounts payable
1,48,000
Accounts receivable
1,63,500
Dividend payable
Less:
Allowance for doubtful debts
-8,700
Accrued Liabilities
49,200
Inventories
308,500
Total Current Liabilities
2,91,200
Franchise
510,200
Total Current Assets
Investments
Long term Liabilities
Long term
Investments
3,39,000
Long term
Investments
in stocks
3,39,000
8% Bonds Payable (Due in 2021)
400,000
Less: Unamortised discount, amortized $2,000 every year
20,000
380,000
Property Plant & Equipment
Land
85,000
Owner's Equity
Construction
work in progress
1,24,000
Common Stock - 600,000 shares are authorized, at par value of $1 each, out of which, 500,000 shares were issued and outstanding.
less:
Accumulated
Depreciation
0
Equipment
400,000
less:
Accumulated
Depreciation
140,000
260,000
Common stock
5,00,000
Patent
40,000
Additional
Paid in Capital
45,000
Less:
Amortization
4,000
36,000
5,05,000
Retained earnings
138,000
683,000
TOTALS
1,354,200
TOTALS
1,354,200
Notes:
1. The LIFO method of inventory value is used.
2. Cost and fair value of the long term investments is the same.
3. Construction work in progress represents the costs expended on a building constructed on own Land.
SIDE KICKS COMPANY
BALANCE SHEET AS ON DECEMBER 31, 2007
ASSETS
LIABILITIES
CURRENT ASSETS
CURRENT LIABILITES
Cash
41,000
Long term notes payable (due in 2011)
94,000
Prepaid
Insurance
5,900
Accounts payable
1,48,000
Accounts receivable
1,63,500
Dividend payable
Less:
Allowance for doubtful debts
-8,700
Accrued Liabilities
49,200
Inventories
308,500
Total Current Liabilities
2,91,200
Franchise
510,200
Total Current Assets
Investments
Long term Liabilities
Long term
Investments
3,39,000
Long term
Investments
in stocks
3,39,000
8% Bonds Payable (Due in 2021)
400,000
Less: Unamortised discount, amortized $2,000 every year
20,000
380,000
Property Plant & Equipment
Land
85,000
Owner's Equity
Construction
work in progress
1,24,000
Common Stock - 600,000 shares are authorized, at par value of $1 each, out of which, 500,000 shares were issued and outstanding.
less:
Accumulated
Depreciation
0
Equipment
400,000
less:
Accumulated
Depreciation
140,000
260,000
Common stock
5,00,000
Patent
40,000
Additional
Paid in Capital
45,000
Less:
Amortization
4,000
36,000
5,05,000
Retained earnings
138,000
683,000
TOTALS
1,354,200
TOTALS
1,354,200
Notes:
1. The LIFO method of inventory value is used.
2. Cost and fair value of the long term investments is the same.
3. Construction work in progress represents the costs expended on a building constructed on own Land.