CA5.4.

The first issue is that the basis for the valuation of marketable securities is missing and they should be at fair value and they should be classified as what type of securities they are. Next you can see that there is no allowance for doubtful accounts listed which is an issue because they need to report the accounts that are not being paid. Inventory is also missing how it is valued and as well as the method for pricing. Another issue is that the stock investment in subsidiary company should be listed under “investments” and should not be listed under current assets because it will be held for longer than one year. Treasury stock is not an asset, it is supposed to be presented under the stockholders equity section of the balance sheet as a deduction of common stock and should include the class, number of shares, and the basis of valuation. Buildings and land should not be together and the reserve for depreciation, which should be “accumulated depreciation”, should be a subtraction of only buildings. Cash surrender value of life insurance should be listed under investments and not under other assets. Reserve for income taxes should be called “tax payable”. Customer’s accounts with credit balances should not be included as its own part of the balance sheet because it would be a deduction of accounts receivables. Unamortized premium on bonds payable should be included under long-term liabilities as an addition to bonds payable. Deferred credits should not be listed on the balance sheet. Bonds payable should include its interest rate; interest payments dates, and maturity date should be shown. Common stock should include the number of shares authorized, issued and outstanding. Earned surplus should be called retained earnings. Cash dividends declared should be on the retained earnings statement as a reduction of retained earnings. These are the issues that