3. The Financial Statements provided by Jackson and Associates and the Financial Statements provided by PMI use different accounting methods (cash vs. accrual) and are therefore, not compatible a. Recompute the Income Statement and Balance Sheet provided by PMI on December 31, 2011 to make the two years comparable. b. Recalculate the Statement of Cash Flows provided by PMI for December 31, 2011 using the recalculated Income Statement and Balance Sheet as well as the correct beginning account balances. Discuss the differences between the Statement of Cash Flows provided by PMI and the Statement of Cash Flows prepared by you. Exhibit 8 - Income Statement for Year Ended December 31, 2011 (Prepared by PMI Sunset Medical, P.C. Income Statements For Year Ended December 31, 2011 Revenues Medical Revenues $ 1,601,050.52 Expenses Direct Expenses** General Expenses Interest Expense Depreciation Expense Total Expenses Net Operating Income $ 719,880.70 $ 567,372.88 $ 16,690.68 $ 34,147.56 $1,338,091.82 $ 262,958.70 $ 4,261.93 $ (36,050.84) Other Income Other Expense Total Other Income (Expense) Net Income $ (31,788.91) $ 231,169.79 Assets Cash $ (6,458.09) Accounts Receivable $ 426,876.79 $ $ 426,876.79 $ 38,879.88 19,659.78 $ $ Less: Allowance for Bad Debts Accounts Receivable, Net Accounts Receivable, Other Prepaid Expenses Notes Receivable - Employee Notes Receivable - Dr. Jones Property & Equipment Less: Accumulated Depreciation Property & Equipment, Net Total Assets $ 56,020.51 $ 308,150.84 $(156,023.56) $ 152,127.28 $ 687 106, 15 $ 127,018.91 $ $ Liabilities Accounts Payable FICA Withholding Payable Federal Withholding Payable State Withholding Payable State Tax Payable Notes Payable Total Liabilities $ $ $ 326,783.95 $ 233,303.29 $ 25,000.00 Stockholders' Equity Common Stock Retained Earnings Total Stockholders' Equity $ 208,303.29 $ 233,303.29 $ 687.106.15 Total Liabilities + Stockholders' Equity 3. The Financial Statements provided by Jackson and Associates and the Financial Statements provided by PMI use different accounting methods (cash vs. accrual) and are therefore, not compatible a. Recompute the Income Statement and Balance Sheet provided by PMI on December 31, 2011 to make the two years comparable. b. Recalculate the Statement of Cash Flows provided by PMI for December 31, 2011 using the recalculated Income Statement and Balance Sheet as well as the correct beginning account balances. Discuss the differences between the Statement of Cash Flows provided by PMI and the Statement of Cash Flows prepared by you. Exhibit 8 - Income Statement for Year Ended December 31, 2011 (Prepared by PMI Sunset Medical, P.C. Income Statements For Year Ended December 31, 2011 Revenues Medical Revenues $ 1,601,050.52 Expenses Direct Expenses** General Expenses Interest Expense Depreciation Expense Total Expenses Net Operating Income $ 719,880.70 $ 567,372.88 $ 16,690.68 $ 34,147.56 $1,338,091.82 $ 262,958.70 $ 4,261.93 $ (36,050.84) Other Income Other Expense Total Other Income (Expense) Net Income $ (31,788.91) $ 231,169.79 Assets Cash $ (6,458.09) Accounts Receivable $ 426,876.79 $ $ 426,876.79 $ 38,879.88 19,659.78 $ $ Less: Allowance for Bad Debts Accounts Receivable, Net Accounts Receivable, Other Prepaid Expenses Notes Receivable - Employee Notes Receivable - Dr. Jones Property & Equipment Less: Accumulated Depreciation Property & Equipment, Net Total Assets $ 56,020.51 $ 308,150.84 $(156,023.56) $ 152,127.28 $ 687 106, 15 $ 127,018.91 $ $ Liabilities Accounts Payable FICA Withholding Payable Federal Withholding Payable State Withholding Payable State Tax Payable Notes Payable Total Liabilities $ $ $ 326,783.95 $ 233,303.29 $ 25,000.00 Stockholders' Equity Common Stock Retained Earnings Total Stockholders' Equity $ 208,303.29 $ 233,303.29 $ 687.106.15 Total Liabilities + Stockholders' Equity