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    Smith Company Dec 2012 Module 3 balance sheet

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    - One client had indicated that they were interested in purchasing $35,500 worth of products. However, the client has not actually committed to the purchase.
    - The bookkeeper may have made a mistake when computing cost of good 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.
    - The company made a secondary offering of stock and raised an additional $225,000.
    - 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 down payment is $50,000 and a note to the bank covers the rest.

    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) 425,000
    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 456,000
    Salaries 67,500
    Utilities 6,700

    Total 876,550 768,000
    Prepare a balance sheet for the company in good format. Update the balance sheet for the changes to income in module 2 and also consider the effect of paying the dividend. You do not need to include the income statement. Explain the changes on both balance sheet and income statement.

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    Solution Preview

    See Excel for new tab with module 3 changes.


    The new activity changes the balance sheet considerably but has no effect on revenues, expenses, and profits. The entries to record the new activity are shown below:

    To record new activity from Module 3:
    ...................................... Debit Credit
    Cash........................... 225,000
    Common stock..................................22,500 <-- presumed same ratio as existing stock/paid in capital amounts
    Paid in ...

    Solution Summary

    Your tutorial is 256 words plus a balance sheet and income statement in Excel. Click in cells to see how each amount was computed.