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...
1175).
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 investors. Some companies do not allow the pre-IPO shareholders to sell stock during and for 180 days after an offering to avoid the negative messages. By doing so, the company…
