Question: Performance Corporation was organized on January 1,
Performance Corporation was organized on January 1, 2015. At the end of 2015, the company had not yet employed an accountant; however, an employee who was “good with numbers†prepared the following statements at that date:
PERFORMANCE CORPORATION
December 31, 2015
Income from sales of merchandise………………………………………………...$180,000
Total amount paid for goods sold during 2015…………………………………. (90,000)
Selling costs……………………………………………………………………………………. (25,000)
Depreciation (on service vehicles used) ……………………………………………. (12,000)
Income from services rendered…………………………………………………………. 52,000
Salaries and wages paid…………………………………………………………………… (62,000)
Required:
1. List all deficiencies that you can identify in these statements. Give a brief explanation of each one.
2. Prepare a proper income statement (correct net income is $32,250 and income tax expense is
$10,750) and balance sheet (correct total assets are $140,000).
Transcribed Image Text:
PERFORMANCE CORPORATION December 31, 2015 Resources $ 32,000 42,000 Cash Merchandise inventory (held for resale) Service vehicles 50,000 Retained earnings (profit earned in 2015) 32,250 Grand total $156,250 Debts Payables to suppliers $ 17,750 25,000 13,000 Note owed to bank Due from customers Total $ 55,750 Supplies on hand (to be used in rendering services) $15,000 12,000 Accumulated depreciation* (on service vehicles) Common stock, 6,500 shares 65,000 Total 92,000 Grand total $147,750 *This represents the portion of the service vehicles that has been used up to date.
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