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I am trying to figure out part B (the balance sheet). For some reason my assets are not balancing to my liabilities/equity, and I can

I am trying to figure out part B (the balance sheet). For some reason my assets are not balancing to my liabilities/equity, and I can not figure out why. Any help would be great!

The unadjusted pre-closing 12/31/20 account balances for the Low Company are listed below:

Net Sales

$12,000

Net Purchases

8,376

Selling Expenses

708

Cash

564

Machines

6,424

Accumulated Depreciation, Machines

2,000

Accounts Payable

1,445

Retained Earnings

4,182

Allowance for Doubtful Accounts

50

Building

6,000

Accumulated Depreciation, Building

585

Common Stock

5,000

Accounts Receivable

1,240

Depreciation Expense, Machines

1,000

Inventory @ 1/1/20 (periodic method used)

950

During your audit, you discover the following four items that have yet to be recorded:

  1. No depreciation on the building has been recorded in 2020. Depreciation on the building is based on Double-Declining Balance. It was purchased on 1/1/18 and has an estimated useful life of 40 years. The estimated salvage value is $500.
  2. Low exchanged a machine for a similar machine on 12/31/20. The original machine cost $3,700 and had a book value of $3,000. The new machine had a fair value of $3,200. Low paid $400 in cash. The exchange did not have commercial substance.
  3. Low uses the Income Statement approach to record bad debts. At 12/31/20, Bad Debt Expense is estimated to be 3% of Sales.
  4. Ending Inventory is to be estimated using the Gross Profit Method. The historic Gross Profit percentage is 40%.

Required

  1. Record journal entries for items #1-#3 above; show supporting computations. In addition, compute ending inventory per #4 above; show supporting computations. Assume adjusting/closing entries to adjust inventory, close Purchases, and Record CGS were properly made.
  2. Draft the 2020 Condensed Income Statement and the 12/31/20 Balance Sheet. Use the Cabrera (Textbook Illustration 4-3 in Chapter 4) and the Uptown Cabinet (Textbook Illustration 3-41 in Chapter 3) format examples in the text. Assume no taxes. Do not include EPS.

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