Costa Company_Financial statements

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Description

Module 1 – SLP

Costa Company

Costa Company

31-Dec-12

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

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 solidifying the understanding of basic concepts. As part of this
first SLP, you’ll 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. 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.

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 $70,500 on hand.

• There’s a check for $5,000 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.)

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