Project #38259 - Accounting

Introduction to Financial Accounting

Costa Company

In the first Case you had the opportunity to review the financial statements of two companies and make some comparisons. This course is not about preparing financial statements, but some practice helps explain the concepts and solidify the understanding of basic concepts. As part of this first SLP, you will have the opportunity to acquire some hands-on experience by creating a simple income statement and balance sheet. You will use the information provided below for Costa Company for this application. Future SLP applications will be based on the company of your choice.

Below find a working trial balance for Costa 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.

Costa Company
31-Dec-14
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

Required:

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 $84,200 on hand.
  • There’s a check for $15,000 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.

In addition:

  1. 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? (Comment on balance sheet.)

Support your conclusion with information from the financial statements.

SLP Assignment Expectations

Always include the name of the organization(s), time period covered, and source of information. It is important to answer the questions as posed. The document should be 2 to 4 pages and written in a clear and concise manner. Do not forget to include tables as required. Support your discussion or tables with references in APA format. You are encouraged to use Excel or other compatible spreadsheet software when computations are involved. You can turn in the spreadsheet instead of the Word document. The content should be equivalent to the page length suggested for a word processing document.

Subject Business
Due By (Pacific Time) 25/08/2014
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