Problem 24-1 Your firm has been engaged to examine the financial statements of Ivanhoe Corporation for the year 2017. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2012. The client provides you with the information beloww IVANHOE CORPORATION BALANCE SHEET DECEMBER 31, 2017 Lsties Assets Curet assets r a S 000 000 Ln sa00 Captal 471500 7,24500 .1250 An analysis of current assets discloses the following. Cash (restricted in the amount of $295,000 for plant expansion) 2000 Investments in land Accounts receivable less allowance of $30,000 Inventories (LIFO fow assumption) a000 Other assets include Prepaid expenses Plant and equipment less accumulated depreciation of $1,451,000 000 Cash surrender value of life insurance policy 43300 Unamortized bond discount Notes receivable (short-term) 4000 Goodwill 2u.00 e000 Land Current liabilities include: Accounts payable Notes payable (due 2020) Estimated income taxes payable s00 Premium on common stock. s.000 Long-term liabilities include: Unearned revenue Dividends payable (cash) 00 7.000 8%% bonds payable (due May 1, 2022) Capital includes Retained earnings Common stock, par value $10; authorized 200,000 shares, 183,000 shares issued L.000 M.2IL300 The supplementary information below is also provided. On May 1, 2017, the corporation issued at 94.20, $750,000 of bonds to finance plant expansion. The long-term bond agreement provided for the annual payment of interest 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 following mistakes in 2015, the ending inventory was overstated by $180,000. The ending inventories for 2016 and 2017 were comecty computed In 2017, accrued wages in the amount of $224,000 were omitted from the balance sheet, and these expenses were not charged on the income statement.. In 2017, a gain of $178,000 (net of tax) on the sale of certain plant assets was credited directly to retained eanings A major competitor has introduced a line of products that will compete directly with Ivanhoe's primary line, now being produced in a specially designed new plant. Because of manufacturing innovations, the competitor's line will be of comparable qualty but priced 50% below Ivanhoe's ine. The competitor announced its new line on January 14, 2018 vanhce indicates that the company will meet the lower prices that are high enough to cover variable manufacturing and selling expenses, but permit recovery of only a portion of fixed costs. aYou learned on January 28, 2018, prior to completion of the audit, of heavy damage because of a recent fire to one of vanhce's two plants; the loss will not be reimbursed by insurance. The newspapers described the evente in detail Analyze the above information to prepare a corrected balance sheet for Ivanhoe in accordance with proper accounting and reporting principles. Prepare a description of any notes that might need to be prepared. The books are closed and adjustments to income are to be made through retained earnings. (List current assets in order of liquidity. Enter account name only and do not provide descriptive information.) Balance Sheet Assets Liabilities and Stockholders' Equity Problem 24-1 Your firm has been engaged to examine the financial statements of Ivanhoe Corporation for the year 2017. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2012. The client provides you with the information beloww IVANHOE CORPORATION BALANCE SHEET DECEMBER 31, 2017 Lsties Assets Curet assets r a S 000 000 Ln sa00 Captal 471500 7,24500 .1250 An analysis of current assets discloses the following. Cash (restricted in the amount of $295,000 for plant expansion) 2000 Investments in land Accounts receivable less allowance of $30,000 Inventories (LIFO fow assumption) a000 Other assets include Prepaid expenses Plant and equipment less accumulated depreciation of $1,451,000 000 Cash surrender value of life insurance policy 43300 Unamortized bond discount Notes receivable (short-term) 4000 Goodwill 2u.00 e000 Land Current liabilities include: Accounts payable Notes payable (due 2020) Estimated income taxes payable s00 Premium on common stock. s.000 Long-term liabilities include: Unearned revenue Dividends payable (cash) 00 7.000 8%% bonds payable (due May 1, 2022) Capital includes Retained earnings Common stock, par value $10; authorized 200,000 shares, 183,000 shares issued L.000 M.2IL300 The supplementary information below is also provided. On May 1, 2017, the corporation issued at 94.20, $750,000 of bonds to finance plant expansion. The long-term bond agreement provided for the annual payment of interest 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 following mistakes in 2015, the ending inventory was overstated by $180,000. The ending inventories for 2016 and 2017 were comecty computed In 2017, accrued wages in the amount of $224,000 were omitted from the balance sheet, and these expenses were not charged on the income statement.. In 2017, a gain of $178,000 (net of tax) on the sale of certain plant assets was credited directly to retained eanings A major competitor has introduced a line of products that will compete directly with Ivanhoe's primary line, now being produced in a specially designed new plant. Because of manufacturing innovations, the competitor's line will be of comparable qualty but priced 50% below Ivanhoe's ine. The competitor announced its new line on January 14, 2018 vanhce indicates that the company will meet the lower prices that are high enough to cover variable manufacturing and selling expenses, but permit recovery of only a portion of fixed costs. aYou learned on January 28, 2018, prior to completion of the audit, of heavy damage because of a recent fire to one of vanhce's two plants; the loss will not be reimbursed by insurance. The newspapers described the evente in detail Analyze the above information to prepare a corrected balance sheet for Ivanhoe in accordance with proper accounting and reporting principles. Prepare a description of any notes that might need to be prepared. The books are closed and adjustments to income are to be made through retained earnings. (List current assets in order of liquidity. Enter account name only and do not provide descriptive information.) Balance Sheet Assets Liabilities and Stockholders' Equity