Pour itrm has been engaged to excamine the financial statements of Sandhili Corporation for the year 2020 . The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its or ganization on lanuary 2,2015 . The client provides you with the information. An analysis of current assets discloses the following. Cash (restricted in the amount of $304,000 for plant expansion) $564000 An analysis of current assets discloses the following. Cash (restricted in the amount of $304,000 for plant expansion) Investments in land Accounts receivable less allowance of $30,000 Inventories (LIFO flow assumption) Other assets include: Prepaid experses Plant and equipment less accumulated depreciation of $1,404,000 Cash surrender value of life insurance policy Unamortized bond discount Notes receivable (short-term) Goodwill $64,000 4,202,000 82,000 40,500 160,000 254,000 Land 449,0005,251,500 Current liabilities include: Accounts payable Notes payable (due 2023) Estimated income taxes payable Premium on common stock Long-term liabilities include: Unearned revenut Dividends paryable (cash) 196,000 88 bonds payable (due May 1. 2025) 750.000 The supplementary information below is also provided. 1. On May 1, 2020, the corporation issuedat 94.60,$750,000 of bonds to finance plant expansion. The long term bond agreement provided for the annual payment of inter est every May 1. The existing plant was pledged as security for the loan Use the straight-line method for discount amortization. 2. The bookkeeper made the foliowing mistakes. 2. The bookldeper made the following mistakos. 3. In 2018, the ending inventory was overstated by 5182,000 . The ending inventories for 2019 and 2020 were coerectly computed. b. In 2020 , accrued wiges in the amount of $225,000 were omitted from the balance sheet, and these eqpenses were not charmed on the income statement: c. In 2020, a gain of $173,000 (net of t a) on the sabe of certain plant assets was credited directly to retained earnings. 3. A major competitor has introduced a line of products that will compete directly with Sundhil's primary line, now being. produced in a specially designed new plant. Because of nanufacturing innovations the competitor's line wib be of comparable quality but priced SOB below Sandhill's line. The competitor announced its new line ondarnary 14,2021. Sandhil indicates that the compary will meet the lower prices that are high enough to cover varisble marwufacturing and selling expenves, but permit recovery of only a portion of foxed costs. 4. You learned on January 28, 2021, prior to completion of the audit, of heay damage becisise of a recent fire to one of Sandhil's two plants; the loss wili not be reimbursed by insurance. The newipapers ofescribed the event in detail. Analyze the above information to prepare a corrected balance sleet for Sandhill in accordance with proper accounting and reporting. principles. Prepare a description of any notes that might need to be prepared. The books arectosed and adjustments to income are to be made through retained earnings. (the Current Assets in order of liquldity) (i) 5 thabilithes and stockholders' lquity I iabilities and Stochholdess' Fquity 3 57
