Performance Corporation was organized on January 1.2012. At the end of 2012, the company had not yet employed an accountant; however, an employee who was “good with numbers” prepared the following statements at that date:

Required.1. List all deficiencies that you can identify in these statements. Give a brief explanation of each one.

2. Prepare a proper income statement (correct net income is $32,250 and income tax expense is $10,750) and balance sheet (correct total assets are$140.000).

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PERFORMANCE CORPORATION December 31. 2012 $180,000 Income from sales of merchandise Total amount paid for goods sold during 2012 Selling costs Depreciation (on service vehicles used) Income from services rend Salaries and wages paid (90,000) (25,000) (12,000) 52,000 (62,000) ered PERFORMANCE CORPORATION December 31, 2012 Resources Cash Merchandise inventory (held for resale) Service vehicles Retained earnings (profit earned in 2012) S 32,000 42,000 50,000 32,250 S156,250 Grand total Debts Payables to suppliers Note owed to bank Due from customers S 17,750 25,000 13,000 55,750 Total Supplies on hand (to be used in rendering services) $15,000 Accumulated depreciation (on service vehicles) 12,000 Common stock, 6,500 shares 65,000 Total Grand total 92.000 $147.750