P5–3 (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Side Kicks Company and other related information for the year 2007 are presented on the next page SIDE KICKS COMPANY ADJUSTED TRIAL BALANCE DECEMBER 31, 2007 Debits Credits Cash $ 41,000 Accounts Receivable 1 63,500 Allowance for Doubtful Accounts $ 8,700 Prepaid Insurance 5,900 Inventory 308,500 Long-term Investments 339,000 Land 85,000 Construction Work in Progress 124,000 Patents 36,000 Equipment 400,000 Accumulated Depreciation of Equipment 140,000 Unamortized Discount on Bonds Payable 20,000 Accounts Payable 148,000 Accrued Expenses 49,200 Notes Payable 94,000 Bonds Payable 400,000 Common Stock 500,000 Premium on Common Stock 45,000 Retained Earnings 138,000 $1,522,900 $1,522,900 Additional information: 1. The LIFO method of inventory value is used. 2. The cost and fair value of the long-term investments that consist of stocks and bonds is the same. 3. The amount of the Construction Work in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed cost $85,000, as shown in the trial balance. 4. The patents were purchased by the company at a cost of $40,000 and are being amortized on a straight-line basis. 5. Of the unamortized discount on bonds payable, $2,000 will be amortized in 2008. 6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000. These bank loans are due in 2008. 7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2018. 8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding. Instructions Prepare a balance sheet as of December 31, 2007, so that all important information is fully disclosed.