Discussion:
The following adjustments have not been made in the accounts:
1. Inventory on hand at 30 June 2014 valued at $94,250.
2. Goods worth $5,000 which had been ordered FOB shipping point have not yet been received.
3. The company estimates that 2% of accounts receivable will be uncollected.
4. It was discovered that $780 for office equipment had been charged in error to the purchases account on 1st July 2013.
5. Depreciation of buildings, delivery vehicles and office equipment is undertaken using the straight-line method. The useful life of the delivery vehicle is 10 years with a residual value of $500. The useful of the office equipment is 3 years with zero residual value. The office equipment was purchased on 1st January 2014.
6. Buildings have 20 years of useful life with $8,900 residual value.
7. Interest expense accrued, $325.
8. Unexpired insurance, $130.
9. The shareholders are to be paid a dividend of $22,750 in the current year.
10. The note receivable is a 6 month note issued on 1st January 2014 at 5% per annum. The maker of the note has formally indicated that he will not honor the note.
Required:
1. Prepare a worksheet and make the relevant adjustments in the worksheet.
2. Prepare the income statement for the year ended 30 June 2015 in accordance with GAAP.
3. Prepare the statement of retained earnings for the year ended 30 June 2015.
4. Prepare the statement of financial position as at 30 June 2015 in accordance with GAAP.
Discuss the performance of this company using appropriate rations