“cOne client had indicated that they were interested in purchasing $45,500 worth of products, so the…

One client had indicated that they were interested in purchasing $45,500 worth of products, so the bookkeeper recorded the transaction. However, the client has not actually committed to the purchase.

The bookkeeper already corrected the sales account. However, the bookkeeper may have made a mistake when computing cost of goods sold. She included total production costs for 2012 and did not adjust ending inventory for the $45,500 worth of units left at the end of the year. The amount of ending inventory was determined using a physical count.

Smith Company

31-Dec-12

Trial Balance (accounts in alphabetical order)

Debit

Credit

Accounts payable

67,000

Accounts receivable

24,500

Cash

30,000

Common stock

10,000

Depreciation expense

24,350

Cost of goods sold

234,000

Equipment (net of depreciation)

316,000

Insurance

1,400

Inventory

25,000

Long-term debt

145,000

Marketing

4,500

Paid-in capital

90,000

Property taxes

8,900

Rent

18,000

Retained earnings

Revenues

406,000

Salaries

67,500

Utilities

6,700

Total

760,850

718,000

Required

Prepare an income statement for the company in good format. Also, explain the adjustments separately. Always include the name of the company and the period covered in the title. Don't forget dollar signs where appropriate. You do not need to include the balance sheet. Consequently, you will not need all the accounts listed above. How does the income or loss compare to the original income statement? Explain the importance of the matching concept

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