Your firm has been engaged to examine the financial statements of Sheffield Corporation for the year 2020. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2,2015 . The client provides you with the information. Other assets include: Prepaid expenses Plant and equipment less accumulated depreciation of $1,420,000 Cash surrender value of life insurance policy Unamortized bond discount Notes receivable (short-term) Goodwill Land Current liabilities include: Accounts payable Notes payable (due 2023) Estimated income taxes payable Premium on common stock Long term liabilities include: Unearned revenue Dividends payable (cash) 8x, bonds payable (due May 1, 2025) $511,000155,000142,000147,000$955,000 8% bonds payable (due May 1, 2025) $1,439,000750,000 Stockholders' equity includes: Retained earnings $2,740,250 Common stock, par value $10; authorized 200,000 shares, 183,000 shares issued $4,570,2501,830,000 The supplementary information below is also provided. 1. On May 1,2020, the corporation issued at 96.90,$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. In 2018 , the ending inventory was overstated by $187,000. The ending inventories for 2019 and 2020 were correctly computed. b. In 2020, accrued wages in the amount of $225,000 were omitted from the balance sheet, and these expenses were not charged on the income statement. c. In 2020,a gain of $172,000 (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 Sheffield'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 Sheffield's line. The competitor announced its new line on January 14, 2021. Sheffield 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 foxed costs. 4. You learned on January 28, 2021, prior to completion of the audit, of heavy damage because of a recent fire to onle of Sheffield's two plants; the loss will not be reimbursed by insurance. The newspapers described the event in detail. SHEFFIELD CORPORATION Balance Sheet Assets 5 $