The Hobbit Chapter 14
After Smaug smashed in the side of the mountain where the dwarves were hiding, he flew toward the lake town of Esgaroth. During the night, watchmen in the town watched lights flicker all over the mountain in the distance. They were not sure what to make of this. A glowing light appeared in the hills, and toward the lake the next day, and some of the people of the town shouted: "'The king beneath the mountain!...His wealth is like the sun, his silver like a fountain, his rivers golden run!'"
The people of Esgaroth were fortunate, however. Over 3/4 of them survived and their lands and cattle were unharmed. They shivered in the cold and also mourned Bard, because they saw him fall into the lake with the dragon. Suddenly, Bard appeared. He survived because he dove into the water and escaped the burning town. The people of the town wanted to make him king. The Master felt threatened, so he proposes that Bard be king of Dale, not Esgaroth. He told the people that everyone who supported Bard should leave and rebuild Dale. The people cried out for Bard again and the Master pleaded with them not the blame him for the destruction. He told the people that the dwarves were really at fault for disturbing the dragon. Bard tried to dismiss this, but then thought of the treasure in the mountain and the ruined city of Dale. He turned to the master and asked that they not argue with each other, but tend to the wounded.
Everywhere, people thought of the treasure. Many of the survivors got sick in the cold night and eventually died. Bard ordered things as he liked, but used the name of the Master for authority. He sent a messenger to the wood-elves to ask for assistance, but they already knew of the event because all of Mirkwood was abuzz with the news. Bard's messengers found the wood-elves already approaching with a small army intending to get some of the treasure of the mountain. The Elvenking took pity on the people and sent them food and supplies. A large number of lake men took up arms and went toward the mountain with the elves. Others remained behind to begin the arduous task of rebuilding the town.
"They removed northward higher up the shore; for ever after they had a dread of the water where the dragon lay. He would never again return to his golden bed, but he was stretched cold as stone, twisted upon the floor of the shallows. There for ages his huge bones could be seen in calm weather amid the ruined piles of the old town." Chapter 14, pg. 254