Balance Sheet Adjustments the Updated Balance Sheet Essay

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Total Length: 572 words ( 2 double-spaced pages)

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Balance Sheet Adjustments

The updated balance sheet for Module 2 is as follows:

Balance Sheet

Assets

Current Assets

Cash

Accounts Receivable

Inventory

Property, Plant, and Equipment

Equipment

Total Assets

Liabilities and Stockholder's Equity

Current Liabilities

Accounts Payable

Long-Term Debt

Long-Term Debt

Total Liabilities

Stockholder's Equity

Common Stock

Paid In Capital

Retained Earnings

Total Stockholder's Equity

Total Liabilities & Stockholder's Equity

Because the customer did not commit to the purchase, the Sales account would have been credited the 45,500 and the inventory account debited 45,500 to correct the original transaction. The computation of the cost of goods sold affects the income statement, not the balance sheet. Because the ending inventory was computed by using a physical account, the ending inventory would have adjusted itself to the 25,000 for the final balance sheet amount; therefore, no adjustment is needed (Kieso, 2008, p. 1175).

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Managers often pay dividends before an IPO to keep from sending negative messages to the investing community or to adjust assets that have become overvalued from stock prices (Martin, 2009). The amount of cash on hand can send a negative message to potential investors and raise questions as to the reason for the offering. Managers may seek to reduce cash on hand to average (non-dividend paying) or industry average to avoid a discount on stock in an offering. Dividends paid before an offering adjusts cash on hand to keep from sending negative messages where the market has overvalued the business. Adjusting the cash on hand decreases the offer price and underperforms to adjust the value to a truer value of the business. This is referred to as the 'window of opportunity'.

Stock sales by insiders also send negative messages to.....

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