Problem:
Are companies having 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
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$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
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Long-Term Liabilities:
Bonds payable 120,000
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Total Liabilities 207,003
Capital Stock:
Capital stock 225,000
Earned surplus 74,997
Cash dividends declared 24,000 323,997
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$531,000