Rice Corporation is negotiating a loan for expansion purposes and the bank requires financial statements. Before closing

Question:

Rice is negotiating a loan for expansion purposes and the bank requires financial statements. Before closing the accounting records for the year ended December 31, 2011, Rice's controller prepared the following financial statements:

Additional information:
1. The company's is traded on an organized stock exchange.
2. The investment consists of short-term investments valued at $57,000. The remaining investments will not be sold until the year 2013.
3. Miscellaneous expense represents the before-tax loss from damages caused by an earthquake. The event is considered to be both unusual and infrequent.
4. Notes payable consist of two notes:
Note 1: $80,000 dated September 30, 2011. Principal and interest at 10% are due on September 30, 2012.
Note 2: $120,000 dated April 30, 2011. Principal is due in two equal installments of $60,000 plus interest on the unpaid balance. The two payments are scheduled for April 30, 2012, and April 30, 2013.
Interest on both loans has been correctly accrued and is included in accrued liabilities on the and selling and administrative expenses on the income statement.
5. Selling and administrative expenses include a $90,000 charge incurred by the company in restructuring some of its operations. The amount of the charge is material.

Required:
Identify and explain the deficiencies in the presentation of the statements prepared by the company's controller. Do not prepare corrected statements. Include in your answer a list of items, which require additional disclosure, either on the face of the statement or in a note.

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