A Client Has Asked You to Review and Correct the Following

question 157

Essay

A client has asked you to review and correct the following income statement:
Additional information:
a.A $3,500 machine tune-up was recorded as an asset.
b.The costs of buying a $120,000 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,a 10-year useful life,and a zero salvage value was depreciated $23,000 for the full year.
d.The power and electricity costs of running a machine were treated as an expense for the year.The costs amounted to $56,000.
e.The costs of insuring a piece of equipment while it was in transit amounted to $5,000,and those costs were capitalized.
Required:
1.List any errors that you find.
2.Correct the errors and prepare another income statement.

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Definitions:

Goods

Tangible items that are manufactured or produced for sale.

Voidable Title

A legal status indicating that a title to ownership can be rendered void or cancelled due to certain defects or fraud, but remains valid until annulled.

Bad Check

A check that cannot be processed because the account on which it is drawn does not have sufficient funds.

Seller Transfers

The act of a seller handing over the rights, responsibilities, and ownership of products or property to the buyer.