Problem - Preparation of a Corrected Balance Sheet
Presented below and on the next page is the balance sheet of Kishwaukee Corporation as of December 31, 2010.
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KISHWAUKEE CORPORATION Balance Sheet December 31, 2010
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Assets
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Goodwill (Note 2)
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$120,000
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Buildings (Note 1)
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1,640,000
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Inventories
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312,100
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Land
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950,000
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Accounts receivable
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170,000
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Treasury stock (50,000 shares, no par)
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87,000
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Cash on hand
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175,900
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Assets allocated to trustee for plant expansion
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Cash in bank
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70,000
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U.S. Treasury notes, at cost and fair value
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138,000
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$3,663,000
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Equities
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Notes payable (Note 3)
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$600,000
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Common stock, authorized and issued, 1,000,000 shares, no par
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1,150,000
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Retained earnings
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858,000
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Appreciation capital (Note 1)
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570,000
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Federal income taxes payable
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75,000
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Reserve for depreciation recorded to date on the building
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410,000
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$3,663,000
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Note 1: Buildings are stated at cost, except for one building that was recorded at appraised value. The excess of appraisal value over cost was $570,000. Depreciation has been recorded based on cost.
Note 2: Goodwill in the amount of $120,000 was recognized because the company believed that book value was not an accurate representation of the fair market value of the company. The gain of $120,000 was credited to Retained Earnings.
Note 3: Notes payable are long-term except for the current installment due of $100,000.
Required - Prepare a corrected classified balance sheet in good form. The notes above are for information only.