Prepare corrected balance sheet per attached problem including reclassification of accounts plus adjusting and correcting entries.© BrainMass Inc. brainmass.com March 4, 2021, 7:56 pm ad1c9bdddf
Entries to be made:
1. Five year bonds are amortized as 49,500 / 60 mo x 7 months = $5775. Income statement effects of any entries are posted directly to retained earnings since the books are closed.
2a. The inventory error in 2006 will not result in an entry because the inventories are correct for 2007 and 2008. It is likely that the correction of an error occurred in 2007, even though inadvertent. Both 2006 and 2007 income statements are incorrect, but they cancel one another. All of 2008 (including the opening inventory) should be correct although I could wonder about LIFO calculations, if more information was presented.
2b. Entry recorded.
2c. No entry required for the balance sheet only, but if an income statement was presented, the amount would show as a gain on sale. Assumption made that fixed assets and accumulated depreciation have been properly accounted for.
3. No entry required.
4.No entry required.
Disclosures to be made in notes to the financial statements:
1. Bonds Payable - On May 1, 2008, the corporation issued $750,000 of bonds to finance plant expansion. The bonds are due and payable on May 1, 2013 with annual interest ...
The lengthy solution includes comprehensive responses about adjustments and disclosures needed for Sabrina Corporation. This is a complex problem requesting corrections, adjustments, reclassifications and disclosure items for proper financial statement presentation.