Question: The trial balance of Eastwood Inc and other related information

The trial balance of Eastwood Inc. and other related information for the year 2014 follows:
Additional information:
1. The inventory has a net realizable value of $212,000. The FIFO method of inventory valuation is used.
2. The fair value- OCI investments' fair value is $478,000.
3. The amount of the Construction in Process account represents the costs to date on a building in the process of construction. (The company is renting factory space while waiting for the new building to be completed.) The land that the building is being constructed on cost $85,000, as shown in the trial balance.
4. The company purchased the patents at a cost of $40,000 and are being amortized on a straight-line basis.
5. Of the 520,000 discount on bonds payable, $2,000 will be amortized in 2015.
6. The notes payable represent bank loans that are secured by fair value-OCI invesm1ents carried at $120,000. These bank loans are due in 2015.
7. The bonds payable bear interest at 11% payable every December 31, and are due January 1, 2025.
8. For common shares, 600,000 are authorized and 500,000 are issued and outstanding.
(a) Prepare a statement of financial position as at December 31, 2014, ensuring that all important information is fully disclosed.
(b) From the perspective of a potential creditor, discuss the importance of proper classification of Eastwood's Construction in Process account.

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  • CreatedSeptember 18, 2015
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