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Solution_Project 1 - 11"Reserve" for Income Taxes...

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Project I answer 1."For the year ended" in the title should be deleted. 2. Trading securities should be reported at their fair value. 3. The amount of Allowance for Doubtful Accounts should be disclosed and deducted from Accounts Receivable. 4. The inventory costing method (cost, lower of cost or market) and the basis for pricing the inventory (LIFO, FIFO, etc.) should be disclosed. 5. Stock Investment in Subsidiary should be classified as an investment. 6. Treasury Stock is misclassified under Investments. It should appear as a deduction from the Stockholders' Equity section. 7. Buildings and Land should be separated. 8. "Reserve for" Depreciation should be either "Allowance for" or "Accumulated" Deprecia-tion. 9. Unamortized Discount on Bonds Payable should be classified with and deducted from Bonds Payable. 10. Cash Surrender Value of Life Insurance should be classified among Investments.
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Unformatted text preview: 11. "Reserve" for Income Taxes should be titled Income Taxes Payable. 12. The small balance of $3 for customer's accounts with credit balances, while not erroneously classified, might be offset against and buried in the Accounts Receivable account because it is so small in amount. 13. The maturity date and the interest rate should be disclosed for the Bonds Payable. 14. "Capital Stock" listed as title should be "Stockholders' Equity;" "Capital stock" listed as account should be “Common stock.” 15. More information relative to the capital stock, such as par value and the number of shares authorized, issued, and outstanding should be disclosed. 16. "Earned surplus" should not be used; Retained Earnings is the preferred title. 17. Cash dividends declared is actually Dividends Payable and should be classified as a current liability....
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