• Issue(s)
• Rule(s)
• Analysis
• Conclusion

1. Using Word (examinations, summaries, disclosure notes) and/or Excel (financial statements, journal entries), explain a corrected balance sheet and statement of income and retained earnings, including supporting schedules that incorporate the following:
   1. Evaluation of the issuance of common stock.
   2. Assessment of the accounting for start-up costs.
   3. Analysis of the capitalization vs. expense treatment.
   4. Evaluation of revenue recognition including income deferral.
   5. Formulation of the accounting treatment for net operating losses.
   6. Calculation of the earnings per share.
   7. Explain a statement of cash flows.
   8. Explain a complete set of financial statement disclosure notes.

Year 2 Check figures:

Balance Sheet Allowance for D/A $23,500 Operating Lease- Building: $286,103 Deferred income tax asset $11,030 Total net PP&E $255,119 Interest payable $9,900 Income taxes payable $67,422 Operating lease payable office building, long term: $248,103 Total Liabilities & Equity $1,050,573

Income Statement COGS $640,728 Depr and amort $54,024 Net income, after taxes $226,920 EPS: Weighted avg shares outstanding 16,000

Cash Flows: Net cash from operations $331,785 Net cash from financing $240,000

Disclosures in Notes to F/S's: 1) Summary of Significant Accounting Policies 2) Notes payable 3) Leases and Other Commitments 4) Income Taxes 5) Fair value of financial instruments 6) Information about major customers

7) Reconciliation of Net Income to Net Cash Flows from Operating Activities (this is needed ONLY IF the cash flow statement was done with the direct method)