Question

Problem 5-4 a

The statement of financial position of Culver Corporation as at December 31, 2020, is as follows:

CULVER CORPORATION Statement of Financial Position December 31, 2020
Assets
Goodwill (Note 1)			$52,500
Buildings (Note 2)			1,230,000
Inventory			234,075
Investments—trading (Note 3)			75,000
Land			712,500
Accounts receivable			127,500
Investments in shares (FV-OCI) (Note 4)			65,250
Cash			131,925
Assets allocated to trustee for plant expansion
	Cash		90,000
	Treasury notes, at cost and fair value		103,500
			$2,822,250
Equities
Notes payable (Note 4)			$450,000
Common shares, unlimited authorized, 500,000 issued			862,500
Retained earnings			529,500
Accounts payable			189,000
Appreciation capital (Note 2)			427,500
Income tax payable			56,250
Reserve for depreciation of building			307,500
			$2,822,250

Note 1:	Goodwill in the amount of $52,500 was recognized because the company believed that the carrying amount of assets was not an accurate representation of the company's fair value. The gain of $52,500 was credited to Retained Earnings.
Note 2:	Buildings are stated at cost, except for one building that was recorded at its appraised value as management determined the building to be worth more than originally paid at acquisition. The excess of the appraisal value over cost was $427,500. Depreciation has been recorded based on cost.
Note 3:	Investments—trading are FV-NI (fair value through net income) investments and have a fair value of $56,250. Investments in shares (FV-OCI) have a fair value of $150,000. Both investments are currently recorded at cost.
Note 4:	Notes payable are long-term except for the current principal instalment due of $75,000.

(a)

Prepare a corrected classified statement of financial position in good form. The notes above are for information only. Assume that you have decided not to use the revaluation model for property, plant, and equipment. (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Buildings and Equipment.)

Answer 1

Prepare the statement of financial position as follows

CC Inc
Statement of Financial Position
December 31, 2020
Assets	Amount	Amount	Amount
Current Assets:
Cash		$131,925
Investments (Fair Value - Net Income)		$56,250
Accounts Receivable		$127,500
Inventory		$234,075
Total Current Assets			$549,750
Long-term Investments:
Investments (Fair Value - Other Comprehensive Income)		$150,000
Assets Allocated to Trustee for Expansion
Cash	$90,000
Treasury Notes	$103,500	$193,500
Total Long-term Investments			$343,500
Property, Plant and Equipment:
Land		$712,500
Building ($1,230,000 − $427,500)	$802,500
Deduct: Accumulated Depreciation	($307,500)	$495,000	$1,207,500
Total Assets			$2,100,750
Liabilities and Shareholders' Euity
Current Liabilities:
Accounts Payable		$189,000
Income Tax Payable		$56,250
Notes Payable - Current		$75,000
Total Current Liabilities			$320,250
Long-term Liabilities:
Notes Payable ($450,000 − $75,000)			$375,000
Total Liabilities			$695,250
Shareholders' Equity:
Common Shares, Unlimited Authorized, 500,000 Issued		$862,500
Retained Earnings		$458,250
Accumulated Other Comprehensive Income		$84,750
Total Shareholders' Equity			$1,405,500
Total Liabilities and Shareholders' Equity			$2,100,750

Notes:

Compute ending balance of retained earnings as follows

Particulars	Amount
Retained Earnings - Unadjusted	$529,500
Deduct: Goodwill	($52,500)
Deduct: Unrealized holding loss ($75,000 − $56,250)	($18,750)
Retained Earnings - Adjusted	$458,250

Compute accumulated other comprehensive income as follows

Particulars	Amount
Investments at Fair value	$150,000
Deduct: Book value of investments	$65,250
Unrealized gain on Investments - OCI	$84,750

Appraisal value of one building was not included in the above schedule as the revaluation model is not used and goodwill is also not included because it is internally generated.