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    Corrections needed to present the balance sheet in good form

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    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.

    Khan 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

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    https://brainmass.com/business/financial-statements/corrections-needed-to-present-the-balance-sheet-in-good-form-171979

    Solution Preview

    Solution:

    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 ...

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