The following is the complete set of financial statements prepared by Oberlin Corporation:
Statement of Income and Retained Earnings
For the Fiscal Year Ended August 31, 2016

Balance Sheet
August 31, 2016
Continue to the next page.

Notes to Financial Statements:
1. Goodwill is not being reviewed for impairment. The goodwill was acquired in 2016
2. The amount, Due to Grant Inc. is contingent upon the outcome of a lawsuit which is currently pending. The amount of loss, if any, is not expected to exceed $300,000.
Required:
Identify and explain the deficiencies in the presentation of Oberlin€™s financial statements. There are no arithmetic errors in the statements. Organize your answer as follows:
1. Deficiencies in the statement of income and retained earnings
2. Deficiencies in the balance sheet
3. General comments
If an item appears on both statements, identify the deficiencies for each statement separately.

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$3,500,000 35 3,465,000 Sales Less discounts Net sales Less cost of goods sold Gross margin Less: 1039 2,426,000 Selling expenses General and administrative expenses $1,000,000 1,079,000 079 347,000 Operating earnings Add other revenues: $ 10,000 100,000 200,000 90,000 Purchase discounts Gain on increased fair value of real estate Gain on sale of treasury stock Correction of error in last year's statement Ordinary earnings Add gain on sale of fixed asset Earnings before income lax Less income lax expense Nel eamings Add beginning retained earmnings 400,000 $ 747,000 53,000 800,000 320,00 480,000 2,690,000 Less: Dividends(12% dividend declared but not yet issued Contingent liability (Nole 2) (120,000 300,00 $2,750,000 Ending retained eamings Assets Current Assets: Cash Accounts receivable, net $80,000 110,000 130,000 Total current assets 320,000 Other Assets: Land and building, net Inveslments in real estate (current value] Goodwill (Note 1) Discount on bonds payable Total other assets $4,000,000 1,668,000 250,000 42,000 5,960,000 $6,280,000 Total Assets Liabilities and Shareholders' Equity Current Liabilities: Accounts payable Income taxes payable Dividend payable Total current liabilities $ 160,000 300,000 120,000 580,000 Other Liabilities: Due to Grant Inc. (Nole 2) Accrued pension cost Bonds payable (including portion due within 1 year) Deferred taxes Total other liabilities $ 300,000 450,000 1,000,000 58,000 2 1,808,000 $2,388,000 3 Totdl liabilities Shareholders Equity: Common stock Paid-in capital in excess of par Retained earnings Tolal shareholders equity $1,000,000 142,000 2,750,000 3,892,000 Total Liabilities and Shareholders' Equity