Your firm has been engaged to examine the financial statements of Almaden Corporation for the year 2012. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2007. The client provides you with the information below.

Problem 241 Your firm has been engaged to examine the financial statements of Almaden Corporation for the year 2012. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2007. The client provides you with the information below. ALMADEN CORPORATION BALANCE SHEET DECEMBER 31, 2012 Assets Current assets Liabilities $1,885,720 Other assets 5,192,322 Current liabilities $967,730 Longterm liabilities 1,494,890 Capital 4,615,422 $7,078,042 $7,078,042 An analysis of current assets discloses the following. Cash (restricted in the amount of $302,730 for plant expansion) $572,400 Investments in land 186,460 Accounts receivable less allowance of $30,840 481,700 Inventories (LIFO flow assumption) 645,160 $1,885,720 Other assets include: Prepaid expenses Plant and equipment less accumulated depreciation of $1,439,500 $63,780 4,141,000 Cash surrender value of life insurance policy 84,720 Unamortized bond discount 38,592 Notes receivable (shortterm) 163,880 Goodwill 252,220 Land 448,130 $5,192,322 Current liabilities include: Accounts payable Notes payable (due 2015) $512,910 158,530 Estimated income taxes payable 145,700 Premium on common stock 150,590 $967,730 Longterm liabilities include: Unearned revenue Dividends payable (cash) $490,490 200,400 8% bonds payable (due May 1, 2017) 804,000 $1,494,890 Capital includes: Retained earnings $2,761,522 Capital stock, par value $10; authorized 200,000 shares, 185,390 shares issued 1,853,900 $4,615,422 The supplementary information below is also provided. 1. On May 1, 2012, the corporation issued at 95.2, $804,000 of bonds to finance plant expansion. The longterm bond agreement provided for the annual payment of interest every May 1. The existing plant was pledged as security for the loan. Use the straightline method for discount amortization. 2. The bookkeeper made the following mistakes. (a) In 2010, the ending inventory was overstated by $184,190. The ending inventories for 2011 and 2012 were correctly computed. (b) In 2012, accrued wages in the amount of $227,240 were omitted from the balance sheet, and these expenses were not charged on the income statement. (c) In 2012, a gain of $176,670 (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 14, 2013. 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, 2013, 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. 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. (List current assets in order of liquidity.) ALMADEN CORPORATION Balance Sheet December 31, 2012 Assets $ $ : $ $ : $ Liabilities and Stockholders' Equity $ $ $ : $ Your answer is partially correct. Your firm has been engaged to examine the financial statements of Almaden Corporation for the year 2012. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2007. The client provides you with the information below. ALMADEN CORPORATION BALANCE SHEET DECEMBER 31, 2012 Assets Current assets Liabilities $1,885,720 Other assets 5,192,322 Current liabilities $967,730 Longterm liabilities 1,494,890 Capital 4,615,422 $7,078,042 $7,078,042 An analysis of current assets discloses the following. Cash (restricted in the amount of $302,730 for plant expansion) $572,400 Investments in land 186,460 Accounts receivable less allowance of $30,840 481,700 Inventories (LIFO flow assumption) 645,160 $1,885,720 Other assets include: Prepaid expenses Plant and equipment less accumulated depreciation of $1,439,500 $63,780 4,141,000 Cash surrender value of life insurance policy 84,720 Unamortized bond discount 38,592 Notes receivable (shortterm) 163,880 Goodwill 252,220 Land 448,130 $5,192,322 Current liabilities include: Accounts payable $512,910 Notes payable (due 2015) 158,530 Estimated income taxes payable 145,700 Premium on common stock 150,590 $967,730 Longterm liabilities include: Unearned revenue $490,490 Dividends payable (cash) 200,400 8% bonds payable (due May 1, 2017) 804,000 $1,494,890 Capital includes: Retained earnings $2,761,522 Capital stock, par value $10; authorized 200,000 shares, 185,390 shares issued 1,853,900 $4,615,422 The supplementary information below is also provided. 1. On May 1, 2012, the corporation issued at 95.2, $804,000 of bonds to finance plant expansion. The longterm bond agreement provided for the annual payment of interest every May 1. The existing plant was pledged as security for the loan. Use the straightline method for discount amortization. 2. The bookkeeper made the following mistakes. (a) In 2010, the ending inventory was overstated by $184,190. The ending inventories for 2011 and 2012 were correctly computed. (b) In 2012, accrued wages in the amount of $227,240 were omitted from the balance sheet, and these expenses were not charged on the income statement. (c) In 2012, a gain of $176,670 (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 14, 2013. 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, 2013, 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. 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. (List current assets in order of liquidity.) ALMADEN CORPORATION Balance Sheet December 31, 2012 Assets $ $ : $ $ : $ Liabilities and Stockholders' Equity $ $ $ : $ Click if you would like to Show Work Open Show Work for this question: Problem 241 Your firm has been engaged to examine the financial statements of Almaden Corporation for the year 2012. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2007. The client provides you with the information below. ALMADEN CORPORATION BALANCE SHEET DECEMBER 31, 2012 Assets Current assets Liabilities $1,885,720 Other assets 5,192,322 Current liabilities $967,730 Longterm liabilities 1,494,890 Capital 4,615,422 $7,078,042 $7,078,042 An analysis of current assets discloses the following. Cash (restricted in the amount of $302,730 for plant expansion) $572,400 Investments in land 186,460 Accounts receivable less allowance of $30,840 481,700 Inventories (LIFO flow assumption) 645,160 $1,885,720 Other assets include: Prepaid expenses Plant and equipment less accumulated depreciation of $1,439,500 $63,780 4,141,000 Cash surrender value of life insurance policy 84,720 Unamortized bond discount 38,592 Notes receivable (shortterm) 163,880 Goodwill 252,220 Land 448,130 $5,192,322 Current liabilities include: Accounts payable $512,910 Notes payable (due 2015) 158,530 Estimated income taxes payable 145,700 Premium on common stock 150,590 $967,730 Longterm liabilities include: Unearned revenue $490,490 Dividends payable (cash) 200,400 8% bonds payable (due May 1, 2017) 804,000 $1,494,890 Capital includes: Retained earnings $2,761,522 Capital stock, par value $10; authorized 200,000 shares, 185,390 shares issued 1,853,900 $4,615,422 The supplementary information below is also provided. 1. On May 1, 2012, the corporation issued at 95.2, $804,000 of bonds to finance plant expansion. The longterm bond agreement provided for the annual payment of interest every May 1. The existing plant was pledged as security for the loan. Use the straightline method for discount amortization. 2. The bookkeeper made the following mistakes. (a) In 2010, the ending inventory was overstated by $184,190. The ending inventories for 2011 and 2012 were correctly computed. (b) In 2012, accrued wages in the amount of $227,240 were omitted from the balance sheet, and these expenses were not charged on the income statement. (c) In 2012, a gain of $176,670 (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 14, 2013. 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, 2013, 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. 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. (List current assets in order of liquidity.) ALMADEN CORPORATION Balance Sheet December 31, 2012 Assets $ $ : $ $ : $ Liabilities and Stockholders' Equity $ $ $ : $ Click if you would like to Open Show Work Show Work for this question: Almaden Company Balance Sheet as at December 31, 2012. Current Assets: Cash Cash surrender value of Insurance Plolicy Accounts Receivable Less Allowance for Uncollectibles Notes Receivable. Prepaid Expenses Inventories $ 269,670 84,720 512,540 -30,840 Total Current Assets Less 481,700 163,880 63,780 645,160 1,708,910 Non Current Assets Cash restricted for Plant 302,730 Land (448,130+186,460) 634,590 Plant & Equipmnent 5,580,500 Less Accumulated Depreciation -1,439,500 4,141,000 Goodwill 252,220 Unamortized Discount on Bonds(38,592-7,718) 30,874 Total Non Current Assets 5,361,414 Total Assets Liabilities & Equities: Current Liabilities: 512,910 490,490 145,700 200,400 227,240 1,576,740 Long Term Liabilities: Notes Payable (due 2015) 8% Bond Payable (due 2017) 158,530 804,000 Total Long Term Liabilities Total Liabilities Less 962,530 2,539,270 Premium on Common Stock Retained Earnings. (2,761,522+718-227,240) 7 Total Equities Total Liabilities & Equities. Intangible Assets: missing line missing line missing line missing line Property Plant and Equipment: missing line ??? Accumulated Depreciation ??? Goodwill 1,853,900 150,590 2,526,564 4,531,054 7,070,324 The book was not good in accounting. He had no idea of classification of assets and liabilitiis. However, reclassification of assets and liabilities do not require any ajustment. Balance sheet has to be simply redrafted. Informatio provided for adjustment is dealt with as under: 1. Amortizaiion of Bond discount is to be adjusted for ist year (2012). An adjusting entry is needed as follows: 2. (a) 7,718 Overstatement of Closing Inventories in 2010 overstated Net Income and 2010. Net Income of 2011 was understated in 2011 by the same amount as the ending inventories of 2010 was beginning inventory for 2011. So the overstatement of net income of 2011 was offset by understating the net income of 2011. The year 2012 was not affected by this mistake and as such no adjustment is required. (b)By not recording accrued wages in 2012, net income was overstated by $227,240. This needs adjustment to Retained Earnings. Adjusting entry is: Retained Earnings 227,240 Accrued Wages (To adjust Accrued Wages not recorded) ??? ??? ??? ??? ????? ??? ??? ??? ??? ??? ??? Liabilities and Stockholder's Equity Current Liabilites: Accounts Payable ??? Unearned Revenue ??? Income taxes payable ??? Dividends payable ??? salaries and wages payable ??? missing line ??? total current liabilities Long term Liabilites ??? missing line ??? missing line ??? ??? Total Liabilities Stockholder's Equity missing line ??? missing line ??? ??? missing line ??? Total Stockholders' Equity Total Liabilities and Stockholders' Equity Analysis & Notes. Retained Earnings 7,718 Unamottized Discount (to adjust unamortized bond discount) ??? missing line Total Assets 7,070,324 Accounts Payable Uneqrned Revenues Income Tax Payable Dividend Payable Accrued Wages Total Current Liabilities Less Current Assets: Cash Accounts Receivable ??? Allowance for Uncollectibles ??? Notes Receivable. Prepaid Expenses Inventories Total Current Assers 227,240 The question says that in 2012, a gain of sales of certain plant assets net of tax amounting to $176,670 was directly credited to Retained Earnings Account. Hence no further adjustment is required. 3, The information provided is significant and this can be disclosed in the management discussion and analysis section by the management highlighting the threat and management's plan to handle it. 4.This information falls in the category of events after the balance sheet date and must be disclosed in the notes to the accounts. If the loss can be assessed it may be even adjusted in the accounts of 2012, otherwise disclosure of only this event is required. Since the books are already closed so adjustments made to Retained Earninfg wherever it was required. ??? ??? ??? ??? ??? ??? ??? ??? Your answer is partially correct. Your firm has been engaged to examine the financial statements of Almaden Corporation for the year 2012. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2007. The client provides you with the information below. ALMADEN CORPORATION BALANCE SHEET DECEMBER 31, 2012 Assets Current assets Liabilities $1,885,720 Other assets 5,192,322 Current liabilities $967,730 Longterm liabilities 1,494,890 Capital 4,615,422 $7,078,042 $7,078,042 An analysis of current assets discloses the following. Cash (restricted in the amount of $302,730 for plant expansion) $572,400 Investments in land 186,460 Accounts receivable less allowance of $30,840 481,700 Inventories (LIFO flow assumption) 645,160 $1,885,720 Other assets include: Prepaid expenses Plant and equipment less accumulated depreciation of $1,439,500 $63,780 4,141,000 Cash surrender value of life insurance policy 84,720 Unamortized bond discount 38,592 Notes receivable (shortterm) 163,880 Goodwill 252,220 Land 448,130 $5,192,322 Current liabilities include: Accounts payable $512,910 Notes payable (due 2015) 158,530 Estimated income taxes payable 145,700 Premium on common stock 150,590 $967,730 Longterm liabilities include: Unearned revenue $490,490 Dividends payable (cash) 200,400 8% bonds payable (due May 1, 2017) 804,000 $1,494,890 Capital includes: Retained earnings $2,761,522 Capital stock, par value $10; authorized 200,000 shares, 185,390 shares issued 1,853,900 $4,615,422 The supplementary information below is also provided. 1. On May 1, 2012, the corporation issued at 95.2, $804,000 of bonds to finance plant expansion. The longterm bond agreement provided for the annual payment of interest every May 1. The existing plant was pledged as security for the loan. Use the straightline method for discount amortization. 2. The bookkeeper made the following mistakes. (a) In 2010, the ending inventory was overstated by $184,190. The ending inventories for 2011 and 2012 were correctly computed. (b) In 2012, accrued wages in the amount of $227,240 were omitted from the balance sheet, and these expenses were not charged on the income statement. (c) In 2012, a gain of $176,670 (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 14, 2013. 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, 2013, 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. 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. (List current assets in order of liquidity.) ALMADEN CORPORATION Balance Sheet December 31, 2012 Assets $ $ : $ $ : $ Liabilities and Stockholders' Equity $ $ $ : $ Click if you would like to Show Work Open Show Work for this