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Nybrostrand Company 31-Dec-11 Income Statement correct error

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 $42,500 worth of products, so the bookkeeper recorded the transaction. However, the client has not actually committed to the purchase.

The bookkeeper may have made a mistake when computing cost of good sold. She included total production costs for 2011 and did not adjust ending inventory for the $42,500 worth of units left at the end of the year. The amount of ending inventory was determined using a physical count.

Nybrostrand Company

31-Dec-11

Trial Balance (accounts in alphabetical order)

Debit

Credit

Accounts payable

78,000

Accounts receivable

36,500

Cash

16,700

Common stock

10,000

Depreciation expense

24,350

Cost of goods sold

317,000

Equipment (net of depreciation)

395,000

Insurance

1,400

Inventory

34,000

Long-term debt

127,000

Marketing

4,500

Paid-in capital

50,000

Property taxes

16,900

Rent

28,000

Retained earnings

?

Revenues

586,000

Salaries

78,500

Utilities

6,700

Total

959,550

851,000

Prepare an income statement for the company in good format. Always include the name of the company and the priod 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.

Solution Summary

Your tutorial is attached. You don't need to fixed ending inventory because the count would have brought this to the attention of the firm and recording the count would put ending inventory and cost of goods sold in the correct amounts.

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