FIN.ACCTG:ACC 101 CUST.CONNECT-W/ETXT C
9th Edition
ISBN: 9781260685657
Author: Libby
Publisher: MCG
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Textbook Question
Chapter 1, Problem 1.4CP
Using Financial Reports: Identifying and Correcting Deficiencies in an Income Statement and
Performance Corporation was organized on January 1, 2015. At the end of 2015, the company had not yet completed an accountant: however, an employee who was “good with numbers” prepared the following statements at that date:
PERFORMANCE CORPORATION December 31,2015 | |
Income from sales of merchandise | $180,000 |
Total amount paid for goods sold during 2015 | (90,000) |
Selling costs | (25,000) |
(12,000) | |
Income from services rendered | 52,000 |
Salaries and wages paid | (62,000) |
PERFORMANCE CORPORATION December 31,2015 | ||
Resources | ||
Cash | $32,000 | |
Merchandise inventory (held for resale) | 42,000 | |
Service vehicles | 50,000 | |
32,250 | ||
Grand total | $156,250 | |
Debts | ||
Payables to suppliers | $ 17,750 | |
Note owed to bank | 25,000 | |
Due from customers | 13,000 | |
Total | $55,750 | |
Supplies on hand (to be used in rendering services) | $15,000 | |
Accumulated depreciation* (on service vehicles) | 12,000 | |
Common stock, 6,500 shares | 65,000 | |
Total | 92,000 | |
Grand total | $147,750 | |
*This represents the portion of the service vehicles that has been used up to date. |
Required:
- 1. List all deficiencies that you can identify in these statements. Give a brief explanation of each one.
- 2. Prepare a proper income statement (correct net income is $32,250 and income tax expense $10,750) and balance sheet (correct total assets are $140,000).
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(Error Analysis) The before-tax income for Lonnie Holdiman Co. for 2017 was $101,000 and $77,400 for 2018. However, the accountant noted that the following errors had been made:1. Sales for 2017 included amounts of $38,200 which had been received in cash during 2017, but for which the related products were delivered in 2018. Title did not pass to the purchaser until 2018.2. The inventory on December 31, 2017, was understated by $8,640.3. The bookkeeper in recording interest expense for both 2017 and 2018 on bonds payable made the following entry on an annual basis.Interest Expense 15,000Cash 15,000The bonds have a face value of $250,000 and pay a stated interest rate of 6%. They were issued at a discount of $15,000 on January 1, 2017, to yield an effective-interest rate of 7%. (Assume that the effective-yield method should be used.)4. Ordinary repairs to equipment had been erroneously charged to the Equipment account during 2017 and 2018. Repairs in the amount of $8,500 in 2017 and…
Shown below is an income statement for 2015 that was prepared by a poorly trained bookkeeper of Howell Corporation.
Howell Corporation
INCOME STATEMENT
31-Dec-15
Sales revenue ???
sales discount 2,500
sales returns and allowances 6,200
net sales ???
Interest revenue 19,500
beginning inventory 500,000
purchases ???
ending inventory 356,500
Cost of goods sold 75% beginning inventory
Selling expenses 145,000
Administrative expense 215,000
Interest expense 13,000
Net income 127,300
Instructions
Prepare an multiple steps income statement for 2015 for Howell Corporation in good form.
Chapter 1 Solutions
FIN.ACCTG:ACC 101 CUST.CONNECT-W/ETXT C
Ch. 1 - Define accounting.Ch. 1 - Briefly distinguish financial accounting from...Ch. 1 - Prob. 3QCh. 1 - Prob. 4QCh. 1 - Prob. 5QCh. 1 - Complete the following: Name of Statement...Ch. 1 - What information should be included in the heading...Ch. 1 - What are the purposes of (a) the income statement,...Ch. 1 - Explain why the income statement and the statement...Ch. 1 - Prob. 10Q
Ch. 1 - Prob. 11QCh. 1 - Explain the equation for the income statement....Ch. 1 - Explain the equation for the balance sheet. Define...Ch. 1 - Explain the equation for the statement of cash...Ch. 1 - Explain the equation for retained earnings....Ch. 1 - The financial statements discussed in this chapter...Ch. 1 - Prob. 17QCh. 1 - Prob. 18QCh. 1 - (Supplement A) Briefly differentiate between a...Ch. 1 - Prob. 20QCh. 1 - Which of the following is not one of the four...Ch. 1 - Prob. 2MCQCh. 1 - Prob. 3MCQCh. 1 - Which of the following regarding retained earnings...Ch. 1 - Which of the following is not one of the four...Ch. 1 - Prob. 6MCQCh. 1 - Prob. 7MCQCh. 1 - Which of the following is true regarding the...Ch. 1 - Prob. 9MCQCh. 1 - Prob. 10MCQCh. 1 - Matching Elements with Financial Statements M1-1...Ch. 1 - Matching Financial Statement Items to Financial...Ch. 1 - Prob. 1.3MECh. 1 - Prob. 1.1ECh. 1 - Matching Financial Statement Items to Financial...Ch. 1 - Matching Financial Statement Items to Financial...Ch. 1 - Preparing a Balance Sheet Honda Motor Corporation...Ch. 1 - Completing a Balance Sheet and Inferring Net...Ch. 1 - Prob. 1.6ECh. 1 - Preparing an Income Statement and Inferring...Ch. 1 - Prob. 1.8ECh. 1 - Inferring Values Using the Income Statement and...Ch. 1 - Inferring Values Using the Income Statement and...Ch. 1 - Preparing an Income Statement and Balance Sheet...Ch. 1 - Preparing an Income Statement and Balance Sheet...Ch. 1 - Preparing a Statement of Stockholders Equity...Ch. 1 - Focus on Cash Flows: Matching Cash Flow Statement...Ch. 1 - Preparing an Income Statement, Statement of...Ch. 1 - Analyzing a Student's Business and Preparing an...Ch. 1 - Comparing Income with Cash Flow (Challenging)...Ch. 1 - Evaluating Data to Support a Loan Application...Ch. 1 - Preparing an Income Statement, Statement of...Ch. 1 - Analyzing a Students Business and Preparing an...Ch. 1 - Prob. 1.3APCh. 1 - Prob. 1.1CONCh. 1 - Finding Financial Information LO1-1 Refer to the...Ch. 1 - Prob. 1.2CPCh. 1 - Comparing Companies within an Industry Refer to...Ch. 1 - Using Financial Reports: Identifying and...Ch. 1 - Prob. 1.5CPCh. 1 - Prob. 1.6CPCh. 1 - Prob. 1.7CP
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