Presented below is the unaudited balance sheet as of December 31, 2007, prepared by the bookkeeper of Zues Manufacturing Corporation.

Your firm has been engaged to perform an audit, during which the following data are found:
1. Checks totaling $14,000 in payment of accounts payable were mailed on December 31, 2007 but were not recorded until 2008. Late in December 2007, the bank returned a customer's $2,000 check, marked "NSF," but no entry was made. Cash includes $100,000 restricted for building purposes.
2. Included in accounts receivable is a $30,000 note due on December 31, 2010 from Zues' president.
3. During 2007, Zues purchased 500 shares of common stock of a major corporation that supplies Zues with raw materials. Total cost of this stock was $51,300, and market value on December 31, 2007 was $47,000. The decline in market value is considered temporary. Zues plans to hold these shares indefinitely.
4. Treasury stock was recorded at cost when Zues purchased 200 of its own shares for $32 per share in May 2007. This amount is included in investments.
5. On December 31, 2007, Zues borrowed $500,000 from a bank in exchange for a 10% note payable, maturing December 31, 2012. Equal principal payments are due December 31 of each year, beginning in 2008. This note is collateralized by a $250,000 tract of land acquired as a potential future building site, which is included in land.
6. The mortgage payable requires $50,000 principal payments, plus interest, at the end of each month. Payments were made on January 31 and February 28, 2008. The balance of this mortgage was due June 30, 2008. On March 1, 2008, prior to issuance of the audited financial statements, Zues consummated a noncancelable agreement with the lender to refinance this mortgage. The new terms require $100,000 annual principal payments, plus interest, on February 28 of each year, beginning in 2009. The final payment is due February 28, 2016.
7. The lawsuit liability will be paid in 2008.
8. Of the total deferred tax liability, $5,000 is considered a current liability.
9. The current income tax expense reported in Zues' 2007 income statement was $61,200.
10. The company was authorized to issue 100,000 shares of $50 par value common stock.

Required
Prepare a corrected classified balance sheet as of December 31, 2007. This financial statement should include a proper heading, format, and necessarydescriptions.

Transcribed Image Text:

ZUES MANUFACTURING CORPORATION Balance Sheet For the Year Ended December 31, 2007 Assets Liabilities & Stockholders' Equity Cash Accounts receivable (net) Inventories Prepaid income taxes Investments Land Building Machinery and equipment Goodwill S 225,000 345,700 560,000 40,000 57,700 450,000 1,750,000 1,964,000 37,000 S5.429.400 Accounts payable Mortgage payable Notes payable Lawsuit liability Income taxes payable Deferred tax liability Accumulated depreciation S 133,800 900,000 500,000 80,000 61,200 28,000 420,000 $2.123,000 Total Liabilities Common stock, $50 par; 40,000 2.231,000 1,075,400 $3,306.400 Total Assets shares issued Retained earnings Total Stockholders' Equity Total Liabilities and Stockholders Equity $5,429,400