Reference no: EM132762679
Stiller Corp. prepared the following trial balance as of December 31, 2020. The adjusting entries for 2020 have been made, except for the items specifically noted below.
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,000
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,400
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400
Building. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,600
Miscellaneous assets (long-term). . . . . . . . . . . . . . . . . . . . . . . . 1,100
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,500
Note payable, 10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Common stock (par $10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,500
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,500
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $84,500 $84,500
There are errors and omissions reflected in the above trial balance, including the following. No correction has yet been recorded.
1. The $16,000 balance in accounts receivable represents the entire amount owed to the company; of this amount, $12,400 is from trade customers, and 5% of that amount is estimated to be uncollectible. The re- maining amount owed to the company represents a long-term advance to a customer.
2. Inventories include $2,000 of goods incorrectly valued at twice their cost (meaning they are reported at $4,000).
3. Office supplies still available at year-end total $500 and are included in the balance of inventories.
4. When the equipment and building were purchased new on January 1, 2015, they had estimated lives of 10 and 25 years, respectively. They have been depreciated using the straight-line method on the assumption of zero residual value, and depreciation has been credited directly to the asset accounts. Depreciation has been recorded for 2020.
5. The balance in the land account includes a $1,000 payment made as a deposit of earnest money on the pur- chase of an adjoining tract. The option to buy it has not yet been exercised and probably will not be exercised during the coming year.
6. The interest-bearing note dated April 1, 2020, matures March 31, 2021. Interest on it has not been recorded.
7. There are 2,500 common stock shares outstanding.
Required
Problem a. Prepare correcting and adjusting entries for the 7 items above.
Problem b. Prepare a classified balance sheet based upon the information provided after making all necessary adjusting and correcting entries