BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
45 views

Financial statements

We-Sell Realty, organized August 1, 2016, is owned and operated by Omar Farah. How many errors can you find in the following statements for We-Sell Realty, prepared after its first month of operations?

Chapter 1, Problem 1.25EX, Financial statements We-Sell Realty, organized August 1, 2016, is owned and operated by Omar Farah. , example  1

Chapter 1, Problem 1.25EX, Financial statements We-Sell Realty, organized August 1, 2016, is owned and operated by Omar Farah. , example  2

Chapter 1, Problem 1.25EX, Financial statements We-Sell Realty, organized August 1, 2016, is owned and operated by Omar Farah. , example  3

a)

To determine

Financial statements:

Financial statements refer to those statements, which are prepared by the Company according to particular formats in accounting to show its financial position.

Financial statements include the following statements:

  • Cash flow statement
  • Income statement
  • Balance sheet
  • Statement of Owner's Equity

To Identify: The errors in the given financial statements of Company WSR.

Explanation

Income statement:

This is the financial statement of a company which shows all the revenues earned and expenses incurred by the company over a period of time. The following mistakes are present in the given income statement.

  • The income statement is prepared for the month of August; hence it should be labeled “For the Month Ended August 31, 2016.”
  • The miscellaneous expense is shown as the last expense in the income statement.
  • In the given income statement, the total expenses of $115,850 is subtracted from the sales commissions of $140,000. But the subtraction is done wrong resulting in a false net income amount of $25,000. The correct net income should be $24,150.

Statement of owner's’ equity:

This statement reports the balance of owner’s equity after all the adjustments like additional capital, net income from income statement and drawings at the end of the particular period.

  • The heading of the statement of owner’s equity should show Company WSR instead of “Company OF”. The statement of owner's equity is prepared for the month of August; hence it should be labeled “For the Month Ended August 31, 2016.”
  • The heading of the statement of owner’s equity is showing an incorrect year. It should be 2016 rather than 2015.
  • In the given income statement, the total expenses of $115,850 is subtracted from the sales commissions of $140,000. But the subtraction is done wrong resulting in a false net income amount of $25,000. The correct net income should be $24,150...

b)

To determine

To Prepare: The correct financial statements of Company WSR.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Explain how costs are assigned to activities.

Managerial Accounting: The Cornerstone of Business Decision-Making

AMORTIZATION SCHEDULE a. Set up an amortization schedule for a 25,000 loan to be repaid in equal installments a...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What is a contra-asset?

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)