P4-6

1.

(1)

Balance Report should be Balance Sheet.

(2)

Balance sheet is reported on a certain date. Therefore, For year ended

December 31, 2013 should be altered to December 31, 2013.

(3)

Major headings should be included for assets, liabilities, and shareholders

equity.

(4)

Inventory should be valued at the lower of cost or market.

(5)

Treasury stock should not be classified under Long-Term Investments. It is a

deduction from the total of contributed capital and retained earnings.

(6)

Marketable securities (short-term) should be classified under Current Assets

rather than Long-Term Investments.

(7)

Patents should be classified under Intangibles rather than Property, Plant, and
Equipment.

(8)

Patents are usually reported at book value.

(9)

Cash surrender value of life insurance should be classified under Long-Term

Investments.

(10)

Discount on bonds payable is a contra-liability account and should be placed

immediately after the Bonds Payable account under Long-Term Liabilities.

(11)

Accumulated depreciation: buildings is not a current liability. It is a contraasset account and should be placed immediately after the Buildings account
in Property, Plant, and Equipment.

(12)

Additional paid-in capital on common stock should be included in the

Contributed Capital section of Shareholders Equity.

(13)

Sinking fund to retire bonds is a long-term investment.

(14)

Preferred stock should be included in the Contributed Capital section.

(15)

Additional paid-in capital on preferred stock should be included in the

Contributed Capital section.

(16)

Accumulated Depreciation: Equipment should be listed as a contra account to

the Equipment account in Property, Plant, and Equipment.

(17)

Current taxes payable should be listed as a current liability.

(18)

Shareholders Equity is a better term than Owners Equity for a

corporation.

(19)

The unrealized gain on write-up of marketable securities should be titled

unrealized increase to avoid confusion with a gain reported on the income
statement. Furthermore, it should be reported as a component of accumulated
other comprehensive income.

P4-6

2.

(continued)
(20)

The unrealized gain on write-up of inventory should be eliminated because

generally accepted accounting principles do not allow inventories to be valued
at higher of cost or market.

(21)

Allowance for Doubtful Accounts is a contra-asset account and should be

listed directly after Accounts Receivable.

(22)

Total Equities should be altered to Total Liabilities and Shareholders

Equity.

(23)

Each section of the balance sheet should be subtotaled.

CUTLER CORPORATION
Balance Sheet
December 31, 2013

Assets
Current Assets:
Cash....................................................................
Marketable securities, short-term.......................
Accounts receivable............................................
Less: Allowance for doubtful accounts................
Inventory, at cost (market value, $28,000).........
Total current assets.......................................
Long-Term Investments:
Investment in D Company bonds (at book value)
Cash surrender value of life insurance................
Sinking fund to retire bonds................................
Total long-term investments..........................
Property, Plant, and Equipment:
Land....................................................................
Buildings.............................................................
Less: Accumulated depreciation..........................
Equipment..........................................................
Less: Accumulated depreciation..........................
Total property, plant, and equipment............
Intangibles:
Patents (net).......................................................
Trademarks.........................................................
Total intangibles............................................
Total Assets...............................................................
(continued on next page)

$6,300
10,000
$15,900
(700)

15,200
27,200
$
5,000
6,000

$58,700
7,300
18,300

$40,800
(17,100)
$19,000
(7,000)

$11,300
23,700
12,000
$5,200
5,700

47,000

10,900
$134,900

P4-6

(concluded)
Liabilities
Current Liabilities:
Accounts payable.................................................................
Wages payable.....................................................................
Current taxes payable..........................................................
Total current liabilities...................................................
Long-Term Liabilities:
Bonds payable.....................................................................
Less: Discount on bonds payable.........................................
Total Liabilities.........................................................................

$13,000
3,000
9,600
$46,000
(3,900)

Shareholders Equity
Contributed Capital:
Preferred stock, $50 par.....................................................
$15,000
Common stock, $2 par.......................................................
8,000
Additional paid-in capital on preferred stock......................
5,100
Additional paid-in capital on common stock.........................
23,200
Total contributed capital...............................................
Retained earnings....................................................................
Accumulated Other Comprehensive Income:
Unrealized increase in value of available-for-sale securities
1,300
Total contributed capital, retained earnings, and accumulated
other comprehensive income........................................
Less: Treasury stock (at cost).............................................
Total Shareholders Equity........................................................
Total Liabilities and Shareholders Equity.................................

$25,600
42,100
$ 67,700

$51,300
16,000

$68,600
(1,400)
$ 67,200
$134,900