Q) 24-1 (Subsequent Events) Your firm has been engaged to examine the financial statements of Almaden Corporation for the year 2014. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2009. The client provides you with the following information.

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ALMADEN CORPORATION

Balance Sheet

DECEMBER 31,2014

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Assets Liabilities

Current assets $ 1,881,100 Current liabilities $ 962,400

Other assets 5,171,400 Long-term liabilities 1,439,500

Capital 4,650,600

_________ __________

$ 7,052,500 $7,052,500

An analysis of current assets discloses the following.

Cash (restricted in the amount of $300,000 for plant expansion) $ 571,000

Investment in land 185,000

Accounts receivable less allowance of $30,000 480,000

Inventories (LIFO flow assumption) 645,100

1,881,100

Other assets include:

Prepaid expenses $ 62,400

Plant and equipment less accumulated depreciation of $1,430,000 4,130,000

Cash surrender value of life insurance policy 84,000

Unamortized bond discount 34,500

Notes receivable (short-term) 162,300

Goodwill 252,000

Land 446,200

$ 5,171,400

Current liabilities include:

Account payable $ 510,000

Notes payable (due 2017) 157,400

Estimated income taxes payable 145,000

Premium on common stock 150,000

$ 962,400

Long-term liabilities include:

Unearned revenue $ 489,500

Dividends payable (cash) 200,000

8% bonds payable (due May 1, 2019) 750,000

$1,439,500

Capital includes:

Retained earnings $2,810,600

Common stock, par value $10; authorized 200,000 shares, 184,000 shares issued 1,840,000

$4,650,600

The supplementary information below is also provided.

1. On May l, 201,4, the corporation issued at 95.4, $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.

(a) [n2012, the ending inventory was overstated by $183,000. The ending inventories for 2013 and

2014 w ere correctly computed.

(b) In 201,4, accrued wages in *re amount of $225,000 were omitted from the balance sheet, and

these expenses were not charged on the income statement.

(c) 1n2014, a gain of $175,000 (net of tax) on the sale 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 Almaden's

primary line, now being produced in a specially designed new plant. Because of manufacturing innovations,

the competitor's line will be of comparable quality but priced 50% below Almaden's line.

The competitor announced its new line on January 1,4,20L5. Almaden 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.

4. You learned on January 28,201,5, prior to completion of the audit, of heavy damage because of a

recent fire to one of Almaden's two plants; the loss will not be reimbursed by insurance. The newspapers

described the event in detail.

lnstructions

Analyze the above information to prepare a corrected balance sheet for Almaden 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.