One client indicated that they were interested in purchasing $42,500 worth of products, so the bookkeeper recorded the transaction. However, the client has not actually committed to the purchase.
The bookkeeper already corrected the sales account. However, the bookkeeper may have made a mistake when computing cost of goods sold. She included total production costs for 2014 and did not adjust ending inventory for the $42,500 worth of units left at the end of the year. The amount of ending inventory was determined using a physical count.
Nybrostrand Company 31-Dec-14 Trial Balance (accounts in alphabetical order)
|
|
Debit
|
Credit
|
|
Accounts payable
|
|
$ 78,000
|
|
Accounts receivable
|
$ 36,500
|
|
|
Cash
|
30,000
|
|
|
Common stock
|
|
10,000
|
|
Depreciation expense
|
24,350
|
|
|
Cost of goods sold
|
307,000
|
|
|
Equipment (net of depreciation)
|
415,000
|
|
|
Insurance
|
1,400
|
|
|
Inventory
|
34,000
|
|
|
Long-term debt
|
|
127,000
|
|
Marketing
|
4,500
|
|
|
Paid-in capital
|
|
50,000
|
|
Property taxes
|
16,900
|
|
|
Rent
|
28,000
|
|
|
Retained earnings
|
|
?
|
|
Revenues
|
|
586,000
|
|
Salaries
|
78,500
|
|
|
Utilities
|
6,700
|
|
|
|
|
|
|
Total
|
982,850
|
982,850
|
Prepare income statement in good format.How does the income or loss compare to the original income statement? Explain the importance of the matching concept.