need responses for question 2. don't understand it.

thanks

ACCT 5385 W W7 W \041'" / The attached Statement of Financial Position was prepared by employees of your client, Cowboy Construction Company dated December 31, 2017. The Statement is not accompanied by footnotes, but you have discovered the following: o The average completion period for the company's jobs is 18 months. The company's method of journalizing contract transactions is summarized in the following pro forma entries. 0 Cowboy both owns and leases equipment used on construction jobs. Typically, its equipment lease contracts provide that Cowboy may return the equipment upon completion of a job or may apply all rentals in ill toward purchase of the equipment. About 70 percent of lease payments made in the past have been applied to the purchase of equipment. While leased equipment is in use, rents are charged to the account payments made on leased equipment (except for $1 balance) and to jobs on which the equipment has been used. In the event of purchase, the balance in the payments made on leased equipment account is transferred to the machinery and equipment account, and the depreciation and other related accounts are corrected. 0 Management is unable to develop dependable estimates of costs to complete contracts in progress. 0 Cowboy has not early adopted either the new recognition or lease accounting standard. Required: 1. Identify the inappropriate or weaknesses in the nancial statement presentation. 2. For each item identied in part 1, indicate the preferable i.e., appropriate or GAAP treatment and explain why it is appropriate. Current Assets: Cash 3 182,200 Accounts receivable (less allowance of $14,000 for doubtful accounts) Materials. supplies, labor. and overhead charged to construction Materials and supplies not charged to construction Deposits made to accutc performance 01 Contract: Lacs Current: Liabilities: . Accounts payable to subcontractors Payable for materials and supplies Accrued payroll Accrued interest on mortgage note Estimated taxes payable Net working capital Property, Plant, and Equipment (at cost): Carl Land and equipment $ 983,300 Machinery and equipment 905,000 Payments made on leased equipment 230.799 $2. 1 19,000 Dderred Charges: Prepaid taxes and other expenses Points charged on mortgage note 220.700 2,026,000 288,000 300,000 $3,076,900 3 141,100 65,300 8,260 12,000 66,000 292,660 $2,784,240 Value 3 673,300 567,000 Depreciation $3 1 0, 000 338.000 230,699 1 $878. 699 $1,240,301 1 1,700 1 10,800 1,262,801 Total net working capital and noncun-un Less Deferred Liabilities: ' Mortgage note payable Uneamed revenue on work in progress Total net assets Stockholders' Equity: 6% preferred stock at par value Common stock at par value Paid-in surplus Retained earnings Treasury stock av; cost ( 370) shares) Total stockholders' equity 300.000 1.898.000 $400,000 800,000 210,000 483,641 w 54.041041 2,198,000 51,34,041 1 $1,849.04]