Question

Where it says 2019 it actually meant 2016 and where it says 2018 it actually means 2015.

Apple, Inc., a privately held corporation, is negotiating a loan for expansion purposes and the bank requires audited financial statements. Before closing the accounting records for the year ended December 31, 2019, Apple's controller prepared the following comparative financial statements for 2019 and 2018: Apple, Inc. Balance Sheets December 31, 2016 and 2015 2016 2015 $ 300,000 $ 550,000 Cash Investment securities (reported at market; cost, $142,000) Accounts receivable Allowance for doubtful accounts Inventories Property and equipment ....... Accumulated depreciation .. Total assets 156,000 974,000 (100,000) 850,000 620,000 (300,000) $2,750,000 784,000 (64,000) 770,000 434,000 (242,000) $1,982,000 Accounts payable Accrued expenses Note payable, 5-year ... Estimated contingent liability .... Common stock, $10 par.. Additional paid-in capital .... $ 180,000 160,000 600,000 200,000 420,000 260,000 $ 154,000 40,000 600,000 420,000 260,000

Answer 1

Balance Sheet as on 31 December	2015	2016	Adjustments	Adjusted 2016	Adjustments
Cash	300,000	550,000	-	550,000
Investment securities (reported at market cost, $142,000)	-	156,000	(14,000)	142,000	Investments to be carried at Cost
Accounts Receivable	784,000	974,000	-	974,000
Allowance for doubtful accounts	(64,000)	(100,000)	-	(100,000)
Inventories	770,000	850,000	(30,000)	820,000	Inventories were overstated by $30,000
Property & Equipment	434,000	620,000	80,000	700,000	Add cost of equipment ($80,000), erroneously charged to Repairs
Accumulated Depreciation	(242,000)	(300,000)	(16,000)	(316,000)	Add $16,000 i.e. $80,000/ 5 years SLM depreciation on equipment
Total Assets	1,982,000	2,750,000	20,000	2,770,000
Accounts Payable	154,000	180,000	-	180,000
Accrued Expenses	40,000	160,000	-	160,000
Note payable, 5 year	600,000	600,000	-	600,000
Estimated Contingent liability	-	200,000	(200,000)	-	Contingent liability cannot be added to Balance Sheet
Common stock, $10 par	420,000	420,000	-	420,000
Additional paid-in capital	260,000	260,000	-	260,000
Retained Earnings	508,000	930,000	220,000	1,150,000
Total Liabilities	1,982,000	2,750,000	20,000	2,770,000

Income Statement for the year ended 31 December	2015	2016		Adjusted 2016	Adjustments
Net Sales	2,500,000	3,160,000	(30,000)	3,130,000	Overvalued inventory of $30,000
Operating expenses:
Cost of Sales	1,380,000	1,510,000	-	1,510,000
Selling & Administrative	730,000	984,000	(80,000)	904,000	Less cost of equipment ($ 80,000) from Repairs and Maintenance
Depreciation	36,000	58,000	16,000	74,000	Add $16,000 i.e. $80,000/ 5 years SLM depreciation on equipment
Estimated loss from Lawsuit	-	200,000	(200,000)	-	Contingent liability cannot be added to Income Statement
	2,146,000	2,752,000	(264,000)	2,488,000
Operating Income	354,000	408,000	234,000	642,000
Unrealized gain on Investment	-	14,000	(14,000)	-	Unrealized gains cannot be accounted in Income Statement
Net Income	354,000	422,000	220,000	642,000

Notes: The biggest client, who filed for bankruptcy and from whom $144,000 was receivable should be included in the notes to accounts.