P4-7 LO 4.3 AICPA Adapted Complex Balance Sheet Presented below is the unaudited balance sheet as of December 31, 2019, prepared by Zeus Manufacturing Corporation's bookkeeper. Zeus Manufacturing Corporation Balance Sheet for the Year Ended December 31, 2019 Assets Liabilities and Shareholders' Equity Cash $225,000 Accounts payable $ 133,800 Accounts receivable (net) 345,700 Mortgage payable 900,000 Inventories 560,000 Notes payable 500,000 Prepaid income taxes 40,000 Lawsuit liability 80,000 Investments 57,700 Income taxes payable 61,200 Land 450,000 Deferred tax liability 28,000 Building 1,750,000 Accumulated depreciation 420,000 Machinery and equipment 1,964,000 Total Liabilities $2,123,000 Goodwill 37,000 Common stock, $50 par; 40,000 shares issued $2,231,000 Total Assets $5,429,400 Retained earnings 1,075,400 Total Shareholders' Equity $3,306,400 Total Liabilities and Shareholders' Equity $5,429,400 Your company has been engaged to perform an audit, during which you discover the following information: 1. Checks totaling $14,000 in payment of accounts payable were mailed on December 31, 2019, but were not recorded until 2020. Late in December 2019, 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, 2022, from Zeus's president. 3. During 2019, Zeus purchased 500 shares of common stock of a major corporation that supplies Zeus with raw materials. Total cost of this stock was $51,300, and fair value on December 31, 2019, was $51,300. Zeus plans to hold these shares indefinitely. 4. Treasury stock was recorded at cost when Zeus purchased 200 of its own shares for $32 per share in May 2019. This amount is included in investments. 5. On December 31, 2019, Zeus borrowed $500,000 from a bank in exchange for a 10% note payable, maturing December 31, 2024. Equal principal payments are due December 31 of each year beginning in 2020. 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. Pay- ments were made on January 31 and February 28, 2020. The balance of this mortgage was due June 30, 2020. On March 1, 2020, prior to issuance of the audited financial statements, Zeus consummated a non- cancelable agreement with the lender to refinance this mortgage. The new terms require $100,000 annual