Your firm has been engaged to examine the financial statements of Nash 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. Nash Corporation Balance Sheet December 31, 2020 Assets Liabilities Current assets $1,867,000 Current liabilities Other assets 5,173,000 Long-term liabilities Stockholders' equity $7,040,000 $949,000 1,470,000 4,621,000 $7,040,000 An analysis of current assets discloses the following. Cash (restricted in the amount of $299,000 for plant expansion) Investments in land Accounts receivable less allowance of $30,000 Inventories (LIFO flow assumption) $566,000 186,000 471,000 644,000 $1,867,000 Other assets include: Prepaid expenses Plant and equipment less accumulated depreciation of $1,439,000 Cash surrender value of life insurance policy Unamortized bond discount Notes receivable (short-term) Goodwill Land $64,000 4,123,000 85,000 39,000 164,000 258,000 440,000 $5,173,000 Current liabilities include: Accounts payable Notes payable (due 2023) Estimated income taxes payable Premium on common stock $500,000 154,000 144,000 151,000 $949,000 Long-term liabilities include: Unearned revenue Dividends payable (cash) 8% bonds payable (due May 1, 2025) $493,000 197,000 780,000 $1,470,000 Stockholders' equity includes: Retained earnings Common stock, par value $10; authorized 200,000 shares, 180,000 shares issued $2,821,000 1,800,000 $4,621,000 The supplementary information below is also provided. 1. On May 1, 2020, the corporation issued at 95.00, $ 780,000 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. The bookkeeper made the following mistakes. a. In 2018, the ending inventory was overstated by $181,000. The ending inventories for 2019 and 2020 were correctly computed. b. In 2020, accrued wages in the amount of $229,000 were omitted from the balance sheet, and these expenses were not charged on the income statement. C. In 2020, a gain of $171,000 (net of tax) on the sale of certain plant assets was credited directly to retained earnings. A major competitor has introduced a line of products that will compete directly with Nash's primary line, now being produced in a specially designed new plant. Because of manufacturing 3. 3. A major competitor has introduced a line of products that will compete directly with Nash'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 Nash's line. The competitor announced its new line on January 14, 2021. Nash indicates that the facturing and selling expenses, but permit recovery of only a portion of fixed costs. You learned on January 28, 2021, prior to completion of the audit, of heavy damage because of a recent fire to one of Nash's two plants; the loss will not be reimbursed by insurance. The newspapers described the event in detail. 4. Analyze the above information to prepare a corrected balance sheet for Nash 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.) NASH CORPORATION Balance Sheet December 31, 2020 Assets Current Assets Cash 1,867,000 T Accounts Receivable T Less IT Allowance for Doubtful Accounts Notes Receivable