Intermediate Accounting: P24-1 Your firm has been engaged to examine the financial statements

Intermediate Accounting 
P24-1 Subsequent Events 
Your firm has been engaged to examine the financial statements of Almaden Corporation for the year 2010. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2005. The client provides you with the information below. 
Balance Sheet 
December 31, 2010 
Current assets 1,881,100 Current liabilities 962,400 
Other assets 5,171,400 Long-term liabilities 1,439,500 
7,052,500 Capital 4,650,600 

An analysis of current assets discloses the following. 
Cash (restricted in the amount of $300,000 for plant expansions) 571,000 
Investment in land 185,000 
Accounts receivable less allowance of $30,000 480,000 
Inventories (LIFO flow assumptions) 645,100 
Other assets include: 
Prepaid expenses 62,400 
Plant and equipment less accum. 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 
Current Liabilities include: 
Accounts payable 510,000 
Notes Payable (due 2013) 157,400 
Estimated income taxes payable 145,000 
Premium on common stock 150,000 
Long-term liabilities include: 
Unearned revenue 489,500 
Dividend payable (cash) 200,000 
8% bonds payable (due May 1, 2015) 750,000 
Capital includes: 
Retained earnings 2,810,600 
Capital stock, par value $10/ authorized 200,000 share, 184,000 shares issued. 1,840,000 

The supplementary information below is also provided: 
1.      On May 1, 2010, the corporation issued at 94.4. $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.) In 2008, the ending inventory was overstated by $183,000. The ending inventories for 2009 and 2010 were correctly computed. 
(b.) In 2010, 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 2010, a gain of $175,00 (net of tax) on the sale of certain plant assets were credited directly to retained earnings. 
3. 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 competitors’ line will be of comparable quality but priced 50% below Almaden’s line. The competitor announced its new line on January 14, 2011. 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 apportion of fixed costs. 
4. You learned on January 28, 2011 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.
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