Using Financial Reports: Identifying and Correcting Deficiencies in an Income Statement and a Statement of Financial Position Performance Corporation was organized on January 1, 2011. At the end of 2011, 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 of the deficiencies that you can identify in these statements. Give a brief explanation of each one.
2 Prepare a proper income statement for Performance Corporation for 2011 (correct profit is \(\$ 30,000\) ) and a proper statement of financial position at December 31,2011 (correct total assets are \(\$ 142,000)\).

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Performance Corporation December 31, 2011 Income from sales of merchandise $175,000 Total amount paid for goods sold during 2011 (90,000) Selling costs (25.000) Depreciation (on service vehicles used) Income from services rendered (10,000) 52,000 Salaries and wages paid (62,000) Performance Corporation December 31, 2011 Resources Cash Merchandise inventory (held for resale) Service vehicles Retained earnings (profit earned in 2011) Grand total Debts Payable to suppliers $ 32,000 42,000 50,000 30,000 $154,000 $ 22,000 Note owed to bank 25,000 Due from customers 13.000 Tota 60,000 Supplies on hand (to be used in rendering services) $ 15,000 Accumulated depreciation** (on service vehicles) 10,000 Share capital, 6,500 shares 65,000 Total 90,000 Grand total $150,000 Accumulated depreciation represents the cost related to the used portion of the asset and should be subtracted from the asset balance.