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Illini Company, Inc.
Balance Sheet
as of 12/31/20X0
Assets
Current Assets:
Cash			$1,500,000
Accounts receivable, net			18,000
Inventory			50,000
Total current assets			1,568,000
Equipment			90,000
Goodwill			20,000
Total assets			$1,678,000
Liabilities and shareholders' equity
Shareholders' equity:
Common stock, 20,000 shares outstanding, $1 par			$20,000
Additional paid-in capital			280,000
Retained earnings			1,378,000
Total shareholders' equity			1,678,000
Total liabilities and shareholders' equity			$1,678,000

• Note that all additional paid-in capital (APIC) sub accounts (e.g., APIC-options and APIC-treasury stock), if any, are tracked in the Additional paid-in capital account on the Balance Sheet.
• Illini provides a one-year warranty for one of its products. Based on industry experience, the estimated total warranty costs are 6% of sales. Sales of the product in 20X1 and 20X2 are $350,000 and $400,000, respectively. Actual warranty claims in 20X1 and 20X2 are $10,000 and $30,000, respectively. Out of the $30,000 claims in 20X2, $12,000 is related to the 20X1 sale.

Project 1.5 Balance Sheet

Date	Account Name		Debit	Credit
20X1	Warranty expense		[A]
		Estimated warranty liability - 20X1		[B]
	Estimated warranty liability - 20X1		[C]
		Cash		[D]
20X2	Estimated warranty liability - 20X1		[E]
		Cash		[F]
20X2	To make up the under-estimation of warranty expense in 20X1:
	Warranty expense		[G]
		Cash		[H]
20X2	Warranty expense		[I]
		Estimated warranty liability - 20X2		[J]
20X2	Estimated warranty liability - 20X2		[K]
		Cash		[L]

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