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CP$4-8($Static$)$ Using Financial Reports: Evaluating Financial Information as a Bank Loan Officer LO$4-1,4-2,4-3$

Zoltar Moving Company has been in operation for over $30$ years providing moving services for local households and businesses. It is now December $31,2024,$ the end of the annual accounting period. Assume that the company has not done well financially during the year, although revenue has been fairly good. The two stockholders manage the company, but they have not given much attention to recordkeeping. In view of a serious cash shortage, they have applied to your bank for a $$30,000$ loan. You requested a complete set of financial statements. The following $2024$ annual financial statements were prepared by a clerk and then were given to your bank.

ZOLTAR MOVING COMPANY

Balance Sheet

At December $31,2024$

Assets

Cash $$2,000$

Receivables $3,000$

Supplies $4,000$

Equipment $40,000$

Prepaid insurance $6,000$

Remaining assets $27,000$

Total assets $$82,000$

Liabilities

Accounts payable $$9,000$

Stockholders' Equity

Common stock $(10,000$ shares outstanding$)$ $$30,000$

Retained earnings $43,000$

Total liabilities and stockholders' equity $$82,000$

ZOLTAR MOVING COMPANY

Income Statement

For the Period Ended December $31,2024$

Transportation revenue $$85,000$

Expenses:

Salaries expense $17,000$

Supplies expense $12,000$

Other expenses $18,000$

Total expenses $47,000$

Net income $$38,000$

After briefly reviewing the statements and $$looking into the situation,$$ you requested that the statements be redone $($with some expert help$)$ to $$incorporate depreciation, accruals, inventory counts, income taxes, and so on$.$ As a result of a review of the records and supporting documents, the following additional information was developed:

The Supplies of $$4,000$ shown on the balance sheet has not been adjusted for supplies used during $2024.$ A count of the supplies on hand on December $31,2024,$ showed $$1,800$ worth of supplies remaining.

The insurance premium paid in $2024$ was for years $2024$ and $2025.$ The total insurance premium was debited in full to Prepaid Insurance when paid in $2024$ and no adjustment has been made.

The equipment cost $$40,000$ when purchased January $1,2024.$ It has an estimated annual depreciation of $$8,000.$ No depreciation has been recorded for $2024.$

Unpaid $($and unrecorded$)$ salaries at December $31,2024,$ amounted to $$3,200.$

At December $31,2024,$ transportation revenue collected in advance amounted to $$7,000.$ This amount was credited in full to Transportation Revenue when the cash was collected earlier during $2024.$

The income tax rate is $25$ percent.

Required:

Record the six adjusting entries required on December $31,2024,$ based on the preceding additional information.

Recast the preceding statements after taking into account the adjusting entries.

What is the impact of the omission of the adjusting entries?

For both the unadjusted and adjusted balances, calculate these ratios for the company. There were $10,000$ shares outstanding all year. Assume the correct amount of total assets at the beginning of the year was $$46,400.$

earnings per share.

total asset turnover.