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P5 4

Kishwaukee Ltd.'s statement of financial position as of December 31, 2019 requires corrections. Goodwill of £120,000 was incorrectly credited to retained earnings and should be recognized as an intangible asset. Accumulated depreciation on buildings of £410,000 was misclassified as a current liability and should be reclassified as a contra-asset. A corrected classified statement of financial position must be prepared reclassifying goodwill, accumulated depreciation, and removing the gain on goodwill from retained earnings.

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Monica Hutagaol
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418 views3 pages

P5 4

Kishwaukee Ltd.'s statement of financial position as of December 31, 2019 requires corrections. Goodwill of £120,000 was incorrectly credited to retained earnings and should be recognized as an intangible asset. Accumulated depreciation on buildings of £410,000 was misclassified as a current liability and should be reclassified as a contra-asset. A corrected classified statement of financial position must be prepared reclassifying goodwill, accumulated depreciation, and removing the gain on goodwill from retained earnings.

Uploaded by

Monica Hutagaol
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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P5.

4 (LO1, 2) (Preparation of a Corrected Statement of Financial Position) The statement of


financial position of Kishwaukee Ltd. as of December 31, 2019, is as follows.

Note 1: Goodwill in the amount of £120,000 was recognized because the company believed
that book value was not an accurate representation of the fair value of the company. The gain
of £120,000 was credited to Retained Earnings.

Note 2: Notes payable are non-current except for the current instalment due of £100,000.

Instructions
Prepare a corrected classified statement of financial position in good form. The notes above
are for information only.
Kishwaukee Ltd.
Statement of Financial Position
December 31, 2019
Assets
Current Assets  
£
Goodwill
120.000
Inventory 312.100
Accounts Receivable 170.000
Cash on hand 175.900
  778.000
Non-current Assets  
1.640.00
Buildings
0
Land 950.000
Treasury shares (50.000 shares) 87.000
Assets allocated to trustee for plant expansion  
  Cash in bank 70.000
  Treasury notes, at cost and fair value 138.000
2.885.00
 
0
3.663.00
Total Assets
0
Liabilities and Equities
Current liabilities
£
Short-term notes payable
100.000
Income taxes payable 75.000
Accumulated Depreciation Buildings 410.000
  585.000
Non-current liabilities  
Long-term notes payable 500.000
  500.000
Equities  
Share capital—ordinary, authorized and issued, 1,000,000 shares, no 1.150.00
par 0
Retained earnings 858.000
Non-controlling interest 570.000
2.578.00
  0
3.663.00
Total Liabilities and Equities
0

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