The Ludmilla Corporation does not use the services of a professional accountant. At the end of its second year of operations, 20X2, the company's office manager prepared its financial statements.

Listed next in random order are the items appearing in these statements:

You are satisfied that the statements in which these items appear are correct, except for several matters that the office manager overlooked. The following information should have been entered on the books and reflected in the financial statements:
a. The amount shown for rent expense includes $2,000 that is actually prepaid for the first month in 20X3.
b. Of the amount shown for unexpired insurance, only $800 is prepaid for periods after 20X2.
c. Depreciation of trucks for 20X2 is $5,000.
d. $1,200 of the office supplies in the inventory shown earlier was actually issued and used during 20X2 operations.
e. Cash dividends of $4,000 were declared in December 20X2 by the board of directors. The company will distribute these dividends in February 20X3.
Prepare in good form the following corrected financial statements, ignoring income taxes:
1. Income statement for 20X2
2. Statement of changes in retained earnings for 20X2
3. Balance sheet at December 31, 20X2
It is not necessary to prepare a columnar analysis to show the transaction effects on each element of the accounting equation.

Transcribed Image Text:

Accounts receivable Paid-in capital Trucks Cost of goods sold Salaries expense Unexpired insurance Rent expense $32,400 100,000 33,700 157,000 86,000 1,800 19,500 285,000 9,300 14,800 Office supplies inventory Notes payable Merchandise inventory Accounts payable Notes receivable Utilities expense Net income Retained earnings $ 2,000 8,000 61,000 14,000 2,500 5,000 8,200 Advertising expense Cash January 1, 20X2 December 31, 20x2 18,000 26,200