You Recently Joined the Internal Auditing Department of Kaitlyn Sportswear

Essay

You recently joined the internal auditing department of Kaitlyn Sportswear Corporation. As one of your first assignments, you are examining a balance sheet prepared by a staff accountant.

In the course of your examination you uncover the following information pertaining to the balance sheet:
1. The land and buildings represent the corporate headquarters and manufacturing facilities.
2. The note receivable is due in 2020. The balance of $80,000 includes $5,000 of accrued interest. The next interest payment is due in July 2019.
3. The note payable is due in installments of $50,000 per year. Interest on both the notes and bonds is payable annually.
4. The company's investments consist of marketable equity securities of other corporations. Management does not intend to liquidate any investments in the coming year.
5. Deferred revenue will be recognized ratably (equally) over the next two years.

Required:
Identify and explain the deficiencies in the statement prepared by the company's accountant. Include in your answer items that require additional disclosure, either on the face of the statement or in a note.