Eyelash Extension Co.’s liabilities as reported on the June 30, 2020, balance sheet are shown below, along with its statement of changes in equity.

Accounts payable ...................................................................... $179,400
Notes payable, due 2022 ............................................................ 480,000
Total liabilities ............................................................................ $659,400

                                                       Eyelash Extension Co.
                                              Statement of Changes in Equity
                                                For Year Ended June 30, 2020
Jan Suzette, capital, June 30, 2019 ........................................... $481,000
Profit ............................................................................................. 196,400
Total ............................................................................................ $677,400
Less: Withdrawals ....................................................................... 285,000
Jan Suzette, capital, June 30, 2020 .......................................... $392,400

Jan is selling the business. A potential buyer has hired an accountant to review the accounting records and the following was discovered:

a. Eyelash Extension Co. began selling a new product line this past year that offered a warranty to customers. It is expected that $48,000 of warranty work will result next year based on first-year sales. No entry was prepared on June 30 to show this.

b. Annual property taxes of $20,690 are due July 31, 2020; the income statement shows only one month of property expense resulting from an entry correctly recorded on July 31, 2019.

c. Interest on the notes payable is paid quarterly. No entry has been recorded since the last quarterly payment of $8,200 on May 1, 2020.

d. $16,200 of new office furniture was purchased on account and received on June 28. This transaction has not been recorded.

e. Unearned revenue of $21,000 has been included on the income statement.

Required

Using the information provided, prepare a corrected statement of changes in equity and liabilities section of the balance sheet (ignore PST/GST and round all calculations to the nearest whole dollar).

Analysis Component: Which GAAP is violated when accrued liabilities are not recorded? Explain your answer.