Question: You are the accountant for Baldwin Company and your assistant

You are the accountant for Baldwin Company, and your assistant has prepared the following income statement for the year ended September 30, 2010:

You have uncovered the following errors:
a. Sales revenue includes $5,000 of items that have been back-ordered. (The items have not been delivered to the customers, and the customers have not been billed for the items.)
b. Selling expenses include $250 of allowances that were given to customers who received damaged products.
c. Insurance expense includes $100 worth of insurance that applies to 2011.
d. Administrative expenses include a loan made to worker who had some serious financial trouble and needed $500 to pay a hospital bill. The worker plans to repay the money by the end of December.

1. Prepare a corrected multistep income statement for the year. Baldwin shows sales as the net amount only on its income statement.
2. Write a memo to your assistant explaining why each error you found is incorrect and what the correct accounting treatment shouldbe.

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