ACC 501 Module 1 SLP

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 solidifying the understanding of basic concepts. As part of this first SLP, youll 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-12

Trial Balance (accounts in alphabetical order)

AccountsWorking Trial BalanceBalance SheetIncome 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 $70,500 on hand.

Theres 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.)

Modular SLP 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 from 2 pages and written in a clear and concise manner. Don't 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 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