Halpem Company's controller prepared the following income statement and balance sheet at the end of the first year of the company's existence:
Income Statement
Sales revenue ........ $ 40,000
Cost of sales ......... (20,000)
Operating expenses ....... (8,000)
Net income ......... $ 12,000

Investigation shows that R&D costs include, among others, $8,000 of operating costs because €œthe company is not yet operating at capacity." In addition, R&D costs include $5,000 of materials that were wasted during early production because €œour employees made some unnecessary mistakes."
Required:
Prepare the financial statements according to GAAP.

Transcribed Image Text:

Balance Sheet Cash Inventory R&D costs Property, plant, and equipment (net) 33,000 Accounts payable 24,000 Notes payable 30,000 Common stock 20000 Retained eamings 5,000 40,000 50,000 12,000 $107,000 ธา 07,000