You will use the information provided below for Pickett Company for this application.
Below find a working trial balance for Pickett Company. This format is often used during the preparation phase of the financial statements since it provides a good overview. The module 2 background information has a very simple example, which may be helpful.
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
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.
1. Please 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, i.e. comment on balance sheet.
Modular SLP Expectations
Always include the name or the organization(s), time period covered and source of information. 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.
Please describe the effect of the errors on the income statement and balance sheet.
The cash goes up, inventory goes down, sales goes up and cogs goes up (see arrows on the spreadsheet).
Is this company profitable? How do you determine whether or not this is the case.
You review operating income on the income statement --- yes, the firm is quite profitable.
Is the company in a solid financial position, i.e. comment on balance sheet.
Yes, they have assets that are mostly from profitable operatings (retained earnings) versus contributions from owners (stock and paid in capital) and debt (liabilities). So, they are ...
Your discussion is 347 words. The two errors are discussed and the financial statements are shown "before" and "after" the errors are corrected.