Errors on the income statement and balance sheet


Problem:

Need some help creating a simple income statement and balance sheet. Pleas use the information provided below for Pickett Company for this application.

Below find a working trial balance for Pickett Company. This format is often used during the preparation phase of the financial statements since it provides a good overview.

Costa Company
31-Dec-12
Trial Balance (accounts in alphabetical order)
Accounts    Working Trial Balance    Balance Sheet    Income Statement
Debit    Credit    Debit    Credit    Debit    Credit
Accounts payable    $14,500    $14,500
Accounts receivable    $18,000    $18,000
Cash    41,500    41,500
Common stock    10,000    10,000
Depreciation expense    18,250    18,250
Cost of goods sold    402,610    402,610
Equipment (net of depreciation)    325,000    325,000
Insurance    1,500    1,500
Inventory    80,500    80,500
Long-term debt    105,000    105,000
Marketing    5,600    5,600
Misc. expenses    4,500    4,500
Paid-in capital    90,000    90,000
Property taxes    6,500    6,500
Rent    22,000    22,000
Retained earnings    156,400    245,500
Revenues    619,400    619,400
Salaries    61,940    61,940
Utilities    7,400    7,400

Total    $995,300    $995,300    $465,000    $465,000    $530,300    $619,400
Net Income $89,100

I need prepare an income statement and a balance sheet in good format after adjusting for the two errors below.

- A physical count of inventory indicates $70,500 on hand.

- There's a check for $5,000 from a customer that has not been recorded in the working trial balance. The sale was never recorded in the first place, so the transaction relating to this sale is missing.

In addition:

1. Please describe the effect of the errors on the income statement and balance sheet.
2. Is this company profitable? How do you determine whether or not this is the case.
3. Is the company in a solid financial position, i.e. comment on balance sheet.

Solution Preview :

Prepared by a verified Expert
Accounting Basics: Errors on the income statement and balance sheet
Reference No:- TGS01882704

Now Priced at $25 (50% Discount)

Recommended (92%)

Rated (4.4/5)