P$3-41.$ Accounting changes and articulation of financial statements $($L$.$O$.3-4,$ L$.$O$.3-5)($Medium $20$ minutes$)$

The following presents Echo Mike Sound Systems$$ draft financial statements for December $2024,$ with comparative figures for $2023.$ Amounts are in $$000$s$.$

Balance Sheet as at December $31$

$2024202320242023$

Cash

$$280$

$$350$

Accounts payable

$$2,050$

$$1,900$

Accounts receivable $($gross$)$

$3,500$

$3,000$

Current portion of long$-$term debt

$500$

$500$

Less: allowance for doubtful accts

$(70)$

$(60)$

Current liabilities

$2,550$

$2,400$

Inventories

$1,330$

$1,230$

Long$-$term debt

$1,500$

$2,000$

Current assets

$5,040$

$4,520$

Total liabilities

$4,050$

$4,400$

Land

$800$

$800$

Preferred shares

$600$

$--$

Plant and equipment $($net$)$

$2,500$

$2,890$

Common shares

$1,500$

$1,500$

Goodwill

$320$

$320$

Retained earnings

$2,510$

$2,630$

Non$-$current assets

$3,620$

$4,010$

Total equity

$4,610$

$4,130$

Total assets

$$8,660$

$$8,530$

Total liabilities and equity

$$8,660$

$$8,530$

Cash flow statement for the year ended December $31$

$20242023$

Cash flow from operating activities

$1,604$

$1,400$

Cash flow from investing activities

$(100)$

$(700)$

Cash flow from financing activities

$(1,674)$

$(550)$

Net change in cash

$(170)$

$150$

Cash, January $1$

$450$

$300$

Cash, December $31$

$280$

$450$

Income statement for the year ended December $31$

$20242023$

Revenue

$$15,900$

$$14,200$

Operating expenses

$(13,500)$

$(12,300)$

Interest expense

$(180)$

$(200)$

Earnings before tax

$2,220$

$1,700$

Income taxes

$(666)$

$(510)$

Net income

$$$$1,554$

$$$$1,190$

During $2024(2023),$ the company declared and paid $$1,750,000($$$1,674,000)$ of dividends.

Required:

Before the above financial statements were finalized and issued, management found another sales invoice of $$100,000$ dated December $29,2024.$ Describe how this information should be reflected in Echo Mike$$s financial statements. Ignore the effect of income taxes.

The company omitted to record a $$350,000$ account payable for goods purchased in the $2023$ fiscal year. The inventory was correctly accounted for, and the payable was recorded and paid during the $2024$ fiscal year. Identify the effect of this information on the financial statements for $2023$ and $2024,$ and record any journal entries required.

Identify two articulation errors in the financial statements above.