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    Balance Sheet - Error Corrections

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    ABC Corporation
    Balance Sheet
    For the year ended December 31, 2007

    Assets

    Current Assets:
    Cash................................................ $ 18,000
    Trading securities (fair value, $32,000)........... 27,000
    Accounts receivable.................................75,000
    Merchandise inventory............................. 60,000
    Supplies inventory................................... 3,000
    Stock investment in subsidiary company......... 60,000............ $243,000
    Investments:
    Treasury stock............................................................... 78,000
    Tangible Fixed Assets:
    Buildings and land................................... 213,000
    Less: Reserve for depreciation..................... 60,000.............. 153,000
    Deferred Charges:
    Unamortized discount on bonds payable................................... 3,000
    Other Assets:
    Cash surrender value of life insurance.................................... 54,000
    ......................................................................................... $531,000

    Liabilities and Capital

    Current Liabilities:
    Accounts payable.................................. $45,000
    Reserve for income taxes.......................... 42,000
    Customer's accounts with credit balances.......... 3..................... $87,003

    Long-Term Liabilities:
    Bonds payable................................................................. 120,000
    Total Liabilities........................................................ 207,003

    Capital Stock:
    Capital stock.......................................... 225,000
    Earned surplus.......................................... 74,997
    Cash dividends declared.............................. 24,000................ 323,997
    ............................................................................................. $531,000

    List the corrections needed to present in good form the balance sheet below. Errors include misclassifications, lack of adequate disclosure, and poor terminology. Do not concern yourself with the arithmetic. If an item can be classified in more than one category, select the category most favored by the authors of your textbook.

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    https://brainmass.com/business/financial-statements/172130

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    Corrections
    1. "For the year ended" in the title should be deleted.
    2. Trading securities should be reported at their fair value.
    3. The amount of Allowance for Doubtful Accounts should be disclosed and deducted from Accounts Receivable.
    4. The inventory costing method (cost, lower of cost or market) and the basis for pricing the inventory (LIFO, FIFO, etc.) should be disclosed.
    5. Stock Investment in Subsidiary should be classified as an investment.
    6. Treasury Stock is misclassified under Investments. It should appear as a deduction from the Stockholders' Equity section.
    7. Buildings and Land should be separated.
    8. "Reserve for" Depreciation should be "Accumulated" Depreciation.
    9. Unamortized Discount on Bonds Payable should be classified with and deducted from Bonds Payable.
    10. Cash Surrender Value of Life Insurance should be classified among Investments.
    11. "Reserve" ...

    Solution Summary

    The solution explains the errors in the given balance sheet and prepares a corrected balance sheet

    $2.19

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