The following income statement, statement of cash flows, and additional information are available for PEK Company:

Additional information:
a. Beginning inventory and purchases for the one product the company sells are as follows:

b. During the year, the company sold 250,000 units at $5 each.
c. PEK uses the periodic FIFO method to value its inventory and the straight-line method to depreciate all of its long-term assets.
d. During the year-end audit, it was discovered that a January 3, 2010, transaction for the lump-sum purchase of a mixing machine and a boiler was not recorded. The fair market values of the mixing machine and the boiler were $200,000 and $100,000, respectively. Each asset has an estimated useful life of ten years with no residual value expected. The purchase of the assets was financed by issuing a $270,000 five-year promissory note directly to the seller. Interest of 8% is paid annually on December 31.
Required
1. Prepare a revised income statement and a revised statement of cash flows to take into account the omission of the entry to record the purchase of the two assets.
2. Assume the same facts as in (1), except that the company is considering the use of an accelerated method rather than the straight-line method for the assets purchased on January 3, 2010. All other assets would continue to be depreciated on a straight line basis. Prepare a revised income statement and a revised statement of cash flows assuming that the company decides to use the accelerated method for these two assets rather than the straight-line method, resulting in depreciation of $49,091 for 2010.
Treat the answers in requirements (3) and (4) as independent of the other parts.
3. Assume that PEK decides to use the LIFO method rather than the FIFO method to value its inventory and recognize cost of goods sold for 2010. Compute the effect (amount of increase or decrease) this would have on cost of goods sold, income tax expense, and net income.
4. Assume that PEK failed to record an estimate of bad debts for 2010. (Bad debt expense is normally included in €œother expenses.€) Before any adjustment, the balance in Allowance for Doubtful Accounts is $8,200. The credit manager estimates that 3% of the $800,000 of sales on account will prove to be uncollectible. Based on this information, compute the effect (amount of increase or decrease) of recognition of the bad debt estimate on other expenses, income tax expense, and netincome.

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PEK Company Income Statement For the Year Ended December 31, 2010 Sales revenue Cost of goods sold $1,250,000 Gross proft Depreciation on plant equipment Depreciation on buildings Interest expense Other expenses S 613,500 $58,400 12,000 33,800 83,800 188,000 425,500 127650 5 297850 Income before taxes Income tax expense (30% rate) Net income PEK Company Statement of Cash Flows For the Year Ended December 31, 2010 Cash flows from operating activities: $297,850 Net income Adjustments to reconcile net income to net cash provided by operating activities (includes depreciation expense) Net cash provided by operating activities 83,200 $381,050 Cash flows from financing activities: Dividends Net increase in cash (35,000) $346,050 Units Unit Cost Beginning inventory Purchases 50,000 $2.00 February 5 March 10 April 15 June 16 25,000 30,000 40,000 75,000 60,000 40,000 2.10 2.20 2.50 3.00 3.10 3.25 October 3