29 Jun Question Module 1 – SLP
Question
Module 1 – SLP
Costa Company
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
In the first Case you had the opportunity to review the financial statements of two companies and make some comparisons. This course is not about preparing financial statements, but some practice helps explain the concepts and solidifying the understanding of basic concepts. As part of this first SLP, you’ll have the opportunity to acquire some hands on experience by creating a simple income statement and balance sheet. 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.
• 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. 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.)
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