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The Hearth & Stove Corp. is preparing financial statements. The following unadjusted trial balance has been prepared: The following facts are also available at the end of 2010: a) The inventory on hand is $46,700 according to the physical count. b) The allowance for doubtful accounts should have a balance of $5,600. c) The office equipment is depreciated at a rate of 8% per year (straight line) d) There are supplies of $1,200 on hand. e) On March 31 of this year, the company bought a $1,800 insurance policy with a 12- month term. f) Customers have not yet been billed for products delivered on the last day of the year. The products have a retail value of $54,000. The cost of goods sold for this transaction was properly recorded. g) Income tax is estimated to be 40% of all income before income tax. No income tax has been recorded or paid. Required: 1. Prepared adjusting journal entries to reflect the information in parts a) to g) above. 2. Prepare a balance sheet and income statement reflecting the adjusted balances.

Hearth & Stove Corp Trial Balance December 31, 2010 Debit Credit 44,300 Accounts payable Accounts receivable Advertising expense Accumulated depreciation office equipment Allowance for doubtful accounts Cash Cost of goods sold Common shares Dividends declared Insurance expense Interest expense Interest revenue Inventory Land Long-term investments Mortgage payable Notes payable - short term Office equipment Office expense Prepaid insurance Retained earnings, opening Revenue received in advance Sales Supplies inventory Supplies expense Miscellaneous expense Rent expense Wages expense 211,090 12,800 39,800 4,500 16,800 660,000 45,000 10,400 1,800 2,640 840 50,000 145,000 312,600 297,000 10,800 72,000 13,100 0 45,820 34,800 1,222,000 400 4,200 15.430 72,000 144.600 744.860 1744.860

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