The following balance sheet is submitted to you for inspection and review.

Appalachian Freight Company

Balance Sheet

December 31, 2011

Assets

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,050

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,500

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204,000

Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,800

Property, plant, and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376,800

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $747,150

Liabilities and Owners’ Equity

Miscellaneous liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,600

Loan payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,200

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,250

Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,000

Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .458,100

Total liabilities and owners’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $747,150

In the course of the review, you find the following data:

(a) The possibility of uncollectible accounts on accounts receivable has not been considered. It is estimated that uncollectible accounts will total $4,800.

(b) The amount of $45,000 representing the cost of a large-scale newspaper advertising campaign completed in 2011 has been added to the inventories because it is believed that this campaign will benefit sales of 2012. It is also found that inventories include merchandise of $16,250 received on December 31 that has not yet been recorded as a purchase.

(c) The books show that property, plant, and equipment have a cost of $556,800 with depreciation of $180,000 recognized in prior years. However, these balances include fully depreciated equipment of $85,000 that has been scrapped and is no longer on hand.

(d) Miscellaneous liabilities of $3,600 represent salaries payable of $9,500, less noncurrent advances of $5,900 made to company officials.

(e) Loan payable represents a loan from the bank that is payable in regular quarterly installments of $6,250.

(f) Tax liabilities not shown are estimated at $18,250.

(g) Deferred income tax liability arising from temporary differences totals $44,550. This liability was not included in the balance sheet.

(h) Capital stock consists of 6,250 shares of preferred 6% stock, par $20, and 9,000 shares of common stock, stated value $1.

(i) Capital stock had been issued for a total consideration of $283,600; the amount received in excess of the par and stated values of the stock has been reported as paid-in capital. Net income and dividends were recorded in Paid-In Capital.

Instructions:

Prepare a corrected balance sheet with accounts properly classified.