A Client Has Asked You to Review and Correct the Following

question 51

Essay

A client has asked you to review and correct the following income statement.
Additional information:
a.A $5,500 machine tune-up was recorded as an asset.
b.The costs of buying a $90,000 piece of equipment on the last day of the fiscal year were treated as equipment expense.
c.An asset with a cost of $230,000,an estimated useful life of ten years,and a $20,000 salvage value was depreciated $23,000 for the full year.
d.The power and electricity costs of running a machine were treated as an asset for the year.The costs amounted to $16,000.
e.The $10,000 costs of installing the factory equipment in part b were treated as part of Rent expense.
Required:
1.List as many errors as you can find.
2.Prepare a correct income statement.

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Definitions:

Total Costs

Total Costs refer to the complete sum of all expenses incurred by a company in producing and selling goods or services, including both fixed and variable costs.

Limited

Refers to a finite amount or scope, often used in the context of resources, capabilities, or availability.

Bundled Choices

A rephrased definition would be: Marketing strategy where products or services are sold together as a single package, often at a discount, to encourage sales.

Voters

Individuals who have the legal right to vote in an election to choose representatives, enact laws, or decide on public policies.