Principles of Accounting

Financial Accounting – Income Statement

We are using the same company as in the first module. However, you need to consider some additional information.

One client had indicated that they were interested in purchasing $45,500 worth of products, so the bookkeeper recorded the transaction. However, the client has not actually committed to the purchase.
The bookkeeper already corrected the sales account. However, the bookkeeper may have made a mistake when computing cost of goods sold. She included total production costs for 2012 and did not adjust ending inventory for the $45,500 worth of units left at the end of the year. The amount of ending inventory was determined using a physical count.
Smith Company

31-Dec-12

Trial Balance (accounts in alphabetical order)
Debit
Credit

Accounts payable

67,000

Accounts receivable
24,500

Cash
30,000

Common stock

10,000

Depreciation expense
24,350

Cost of goods sold
234,000

Equipment (net of depreciation)
316,000

Insurance
1,400

Inventory
25,000

Long-term debt

145,000

Marketing
4,500

Paid-in capital

90,000

Property taxes
8,900

Rent
18,000

Retained earnings

???

Revenues

406,000

Salaries
67,500

Utilities
6,700

Total
760,850
718,000

Required

Prepare an income statement for the company in good format. Also, explain the adjustments separately. Always include the name of the company and the period covered in the title. Don’t forget dollar signs where appropriate. You do not need to include the balance sheet. Consequently, you will not need all the accounts listed above. How does the income or loss compare to the original income statement? Explain the importance of the matching concept.

Modular SLP Assignment Expectations

It is important to answer the questions as posed. The document should be two to four pages and written in a clear and concise manner or present 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. The content should be equivalent to the page length suggested for a word processing document.

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