Identifying and correcting financial reporting errors Filmore Company is a sole proprietor- ship that has just completed its first year of operations as a manufacturer of metal bookshelves. The owner's profit goal for the company is to earn $60,000 after taxes from the business. The owner has an effective tax rate of 33 percent. The owner has been so busy planning, installing, and managing the new manufacturing operations that she has paid little attention to designing and implementing an adequate accounting system. At year end the company secretary, who has had no accounting training, was asked to prepare an income statement. He prepared the following report.

The owner of the company is very disappointed by the first year results. After reviewing the reports, however, she realized that the financial statement that was prepared had some errors in it. She decided to seek professional accounting help. An analysis of the company's data reveals that account titles and balances shown in the Yearly Report are correct. However, the following adjustments are needed:

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Sales... Cash Expenses: Purchases of materials Purchase of manufacturing equipment. Salaries, office personnel Wages, factory employees Rent, equipment... Rent, building Office supplies Utilities Commissions Total expenses Loss...... FILMORE COMPANY Yearly Report December 31, 1992 $169,500 53,000 $222,500 $ 66,000 62,000 31,000 58,000 2,200 14,400 1,100 6,000 7,700 248,400 ($ 25,900)