Describe the effect of the errors on the income statement and balance sheet.
Question
You will use the
information provided below for Costa Company for this application. Below find a
working trial balance for Costa Company. This format is often used during the
preparation phase of the financial statements since it provides a good overview.
Required:
Your
task is to 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.
¢ Theres 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.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? (Comment on balance sheet.)
Modular SLP Assignment Expectations
Always
include the name of the organization(s), time period covered and source of
information. It is important to answer the questions as posed. The
document should be from 2 to 4 pages and written in a clear and concise manner.
Dont forget to include tables as required. Support your discussion or tables
with references in APA format. You are encouraged to use Excel or other
compatible spreadsheet when computations are involved. You can turn in the
spreadsheet instead of the Word document. The content should be equivalent to
the page length suggested for a word processing document.
Tips from the Professor
You need to make two
adjustments to the data that is given in the assignment. You can first adjust
the trial balance than go to the financial statements. Each adjustment will
have two sides. Thus, debit & credit sides of the trial balance will remain
equal after the adjustments. Email me if you have any doubts.
After you are done
with the two adjustments, please prepare income statement & balance sheet
in good format.
Please do not forget
to include analysisof your work as required by
points 1, 2, & 3.
| 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 | 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 | 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
Describe the effect of the errors on the income statement and balance sheet
