You recently joined the internal auditing department of Marcus Clothing 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 company rents its facilities. The land that appears in the statement is being held for future sale. 

2. The notes receivable account contains one note that is due in 2023. The balance of $53,000 includes $3,000 of accrued interest. The next interest payment is due in July 2022. 

3. The notes payable account contains one note that is due in installments of $20,000 per year. All interest 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. 

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

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MARCUS CLOTHING CORPORATION Balance Sheet At December 31, 2021 Assets Current assets: Cash $ 137,000 Accounts receivable (net) 80,000 Notes receivable 53,000 Inventory 240,000 Investments 66,000 Total current assets 576,000 Other assets: $ 200,000 320,000 27,000 22,000 Land Equipment (net) Prepaid expenses (for the next 12 months) Patent (net) Total other assets 569,000 Total assets $1,145,000 (continued)