The Carson Company Was Started at the Beginning of the Current

question 47

Essay

The Carson Company was started at the beginning of the current year when it acquired $20,000 by issuing common stock to its owners.During the year,the company incurred the following cash costs: $$\begin{array} {| l | r| } \hline \text { Direct material costs } & \$ 10,000 \\\hline \text { Direct labor costs } & 8,000 \\\hline \text { Overhead costs } & 4,000 \\\hline \text { Selling and administrative costs } & 2,000\\\hline \end{array}$$ The company produced 5,000 units of product and sold 4,500 units.The average selling price was $7.00 per unit.The accountant who prepared the firm's financial statements misclassified the selling and administrative costs as product costs.
Required:
Demonstrate the impact of the error on the company's financial statements by completing the following schedule. $\begin{array}{c}\begin{array}{|l|}\hline \\\hline \text { Income statement: } \\\hline \text { Revenue } \\\hline \text { Less: Cost of goods sold } \\\hline \text { Gross margin } \\\hline \text { Less: Selling, general, and } \\\text { administrative expenses } \\\hline \text { Net income } \\\hline \text { Balance sheet: } \\\hline \text { Assets } \\\hline \text { Cash } \\\hline \text { Inventory } \\\hline \text { Total assets } \\\hline \text { Equity } \\\hline \text { Common stock } \\\hline \text { Retained earnings } \\\hline \text { Total equity }\\\hline \end{array}\begin{array}{l|}\hline\text { Scenario 1: With the error }\\\hline\\\hline\\\hline\\\hline\\\hline\\\\\hline\\\hline\\\hline\\\hline\\\hline \\\hline \\\hline \\\hline \\\hline \\\hline \\\hline \end{array}\begin{array}{l|}\hline\text { Scenario 2: Without the error }\\\hline\\\hline\\\hline\\\hline\\\hline\\\\\hline\\\hline\\\hline\\\hline\\\hline \\\hline \\\hline \\\hline \\\hline \\\hline \\\hline \end{array} \end{array}$

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Definitions:

Strategic Planning

The process of defining an organization's strategy or direction and making decisions on allocating its resources to pursue this strategy.

Relational Concern

Relational Concern is the attention and consideration given to managing and nurturing relationships, emphasizing the importance of interpersonal connections and communication.

Power

The ability or capacity to direct or influence the behavior of others or the course of events.

Force

The exertion of power or influence to make someone or something act or move in a certain way, often used within the context of achieving objectives.