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Balance Sheet Preparation for Smith Company

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AC 550
Project I
Balance Sheet

Debits Credits
Cash ?
Office Supplies 2640
Prepaid Insurance 2,200
Equipment 105,600
Accumulated Depreciation-Equipment 8,800
Trademarks 2,090
Accounts Payable 22,000
Wages Payable 1,100
Unearned Service Revenue 4,400
Bonds Payable due 2017 19,800
Common Stock 22,000
Retained Earnings 55,000
Service Revenue 22,000
Wages Expense 19,800
Insurance Expense 3,080
Rent Expense 2,640
Interest Expense 1,980 _______
Totals ? ?

Additional information:
1. Net loss for the year was $5,500.
2. No dividends were declared during 2010.

Prepare a classified balance sheet for Smith Company as of December 31, 2010.

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Solution Preview

See the Excel file for the balance sheet.

First the income statement components need to be removed from the balance sheet (bottom five lines) ...

Solution Summary

This solution prepares a balance sheet.

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The Smith Company - Preparation of Financial Statements

We are using the same company as in the first module. However, you need to consider some additional information.

One client had indicated that they were interested in purchasing $35,500 worth of products, so the bookkeeper recorded the transaction. However, the client has not actually committed to the purchase.

The bookkeeper may have made a mistake when computing cost of goods sold. She included total production costs for 2012 and did not adjust ending inventory for the $35,500 worth of units left at the end of the year. The amount of ending inventory was determined using a physical count.

Smith Company
Trial Balance (accounts in alphabetical order)
Debit Credit
Accounts payable 67,000
Accounts receivable 24,500
Cash 16,700
Common stock 10,000
Depreciation expense 24,350
Cost of goods sold 254,000
Equipment (net of depreciation) 296,000
Insurance 1,400
Inventory 25,000
Long-term debt 145,000
Marketing 4,500
Paid-in capital 90,000
Property taxes 8,900
Rent 18,000
Retained earnings ???
Revenues 406,000
Salaries 67,500
Utilities 6,700

Total 747,550 718,000

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 do not need to include the balance sheet. Consequently, 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. It is important to answer the questions as posed. The document should be two to four pages and written in a clear and concise manner or present tables as required.

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