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Financial Statement Review
Costa Company
Balance Sheet
Assets
Cash
Accounts Receivable
Equipment (net of depreciation)
Inventory
Total Assets
Liabilities
Accounts Payable
Long-term Debt
Total Liabilities
Stockholder's Equity
Common Stock
Paid in Capital
Retained Earnings
Total Stockholder's Equity
Total Liabilities and Stockholder
Equity
Costa Company
Income Statement
Revenue
Cost of Goods Sold
Gross Profit
Expenses
Depreciation Expense
Insurance
Marketing
Misc Expense
Property Taxes
Salaries
Utilities
Rent
Total Expenses
Net Income
Balance Sheet errors effect the presentation of assets, liabilities, and equity where the Income Statement errors effect the classification of revenues and expenses (Kieso, Weygandt, & Warfield 2008, p 1174).The physical count of inventory shows the asset was overstated by $10,000. The omission of the sales transaction and the check showed the cash to be understated by $5,000 and the retained earnings to be overstated by $5,000. On the Income Statement, the Cost of Goods sold was understated by $410,000, Revenue was understated by $5,000, and Net Income was overstated by $5,000.
In determining profitability, the gross profit rate measures sales over….....