Question: Jorha Company s condensed income statement for the year ended November

Jorha Company’s condensed income statement for the year ended November 30, 2014, is shown below.
Jorha Company
Income Statement
For Year Ended November 30, 2014
Fees earned........................................................................................................... $863,500
Operating expenses............................................................................................... 512,800
Net income........................................................................................................... $350,700
The liabilities reported on the November 30, 2014, balance sheet were:

Accounts payable ................................................................................................ $ 26,230
Mortgage payable................................................................................................. 328,698
Total liabilities..................................................................................................... $354,928

Louis Jorha, the owner, is looking for additional financing. A potential lender has reviewed Jorha’s accounting records and discovered the following:
a. Mortgage payments are made annually each December 1. The December 1, 2014, payment has not yet been made or recorded. A partial amortization schedule for the mortgage follows:


b. Fees earned included $85,000 received for work to be done in January and February 2015.
c. Accrued salaries at November 30, 2014, totaling $11,500 have not been recorded.
d. $7,000 of office supplies purchased on account were received November 28; this transaction was not recorded.
e. Annual property taxes of $17,500 are due each December 1; no property taxes have been included on the income statement.

Required
Using the information provided, prepare a corrected income statement and liabilities section of the balance sheet.
Analysis Component: If you were paid an annual bonus based on net income, what ethical dilemma would you face regarding the aboveitems?
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  • CreatedJanuary 08, 2015
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