Precision Corporation was organized on January 1, 2018. At the end of 2018, the company had not yet employed an accountant; however, an employee who was ?good with numbers? prepared the following statements at that date:

* Cash equivalents are short-term investments readily convertible to cash whose value is unlikely to change.

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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PRECISION CORPORATION December 31, 2018 $ 180,000 Income from sales of merchandise Total amount paid for goods sold during 2018 (90,000) Selling costs (25,000) Depreciation (on service vehicles used) (12,000) Income from services rendered 52,000 Salaries and wages paid (62,000) PRECISION CORPORATION December 31, 2018 Resources Cash $ 32,000 Merchandise inventory (held for resale) 42,000 Service vehicles 50,000 Retained earnings (profit earned in 2018) 32,250 Grand total $156,250 Debts $ 17,750 Payables to suppliers Note owed to bank 25,000 13,000 55,750 Due from customers Total Supplies on hand (to be used in rendering services) Accumulated depreciation* (on service vehicles) Common stock, 6,500 shares $15,000 12,000 65.000 Total 92,000 Grand total $147,750 *This repre sents the portion of the service vehicles that has been used up to date.