New West Company recently hired a new accountant whose first task was to prepare the financial statements for the year ended December 31, 2021. The following is what he produced:

The owner of the company, Lily Oliver, is confused by the statements and has asked you for your help. She doesn?t understand how, if her Owner?s Capital account was $75,000 at December 31, 2020, owner?s equity is now only $24,680. The accountant tells you that $24,680 must be correct because the balance sheet is balanced. The accountant also tells you that he didn?t prepare a statement of owner?s equity because it is an optional statement. You are relieved to find out that, even though there are errors in the statements, the amounts used from the accounts in the general ledger are the correct amounts.

InstructionsPrepare the correct multiple-step income statement, statement of owner?s equity, and classified balance sheet. You determine that $5,000 of the loan payable on the equipment must be paid during 2022.?

If a company uses a periodic inventory system, does it have to show on its income statement all of the details as to how cost of goods sold was calculated? Why or why not?

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NEW WEST COMPANY Income Statement December 31, 2021 Sales $395,000 $ 5,500 3,480 Less: Unearned revenue Purchase discounts 8,980 Total revenue 386,020 Cost of goods sold Purchases 232,000 Less: Purchase returns and allowances 4,000 Net purchases 236,000 Add: Sales returns and allowances 7,500 Cost of goods available for sale Add: Freight out Cost of selling merchandise Gross profit margin Operating expenses Freight in 243,500 9,500 253,000 133,020 4,500 Insurance expense 10,500 Interest expense Rent expense 2,500 18,000 Salaries expense Total operating expenses Profit margin 42,000 77,500 55,520 Other revenues Interest revenue $ 1,500 Investment by owner Other expenses Depreciation expense Drawings by owner Profit from operations 3,500 5,000 7,000 48,000 55,000 (50,000) $ 5,520 NEW WEST COMPANY Balance Sheet Year Ended December 31, 2021 Assets Cash $16,780 Accounts receivable 7,800 Merchandise inventory, January 1, 2021 Merchandise inventory, December 31, 2021 30,000 24,000 $70,000 Equipment Less: loan payable (for equipment purchase) 50,000 20,000 Total assets $98,580 Liabilities and Owner's Equity Long-term investment Accumulated depreciation-equipment $50,000 21,000 Sales discounts 2,900 73,900 Total liabilities Owner's equity Total liabilities and owner's equity 24,680 $98,580