Background: At the end of 2019, Manar Corporations computerized information systems experienced a serious malfunction. The information technology specialists along with the companys accounting team were able to recover the following information: The following account balances as of January 1, 2019: (in Thousands of Dollars) Debits Credits Cash 38500 Supplies 1,200 Inventory 38,000 Prepaid rent 22,000 Machine 7,000 Accumulated depreciation 200 Salaries payable 5,500 Unearned rent revenue 10,750 Notes payable 0 Retained earnings 1,750

The income statement for the year ending of December 31 2019 (amounts in thousands): Manar Corporation Income Statement For the Year Ended December 31 2019 Sales revenue $54,250 Cost of goods sold 31,000 Gross profit 23,250 Operating expenses: Salaries 14,000 Supplies 2,000 Rent 3,000 Depreciation 1,200 Bad debt 1,950 Total operating expenses $22,150 Operating income 1,100 Other income: Rent revenue 17,250 Net income $18,350

The portion of the statement of cash flows for the year ending December 31, 2019 (amounts in thousands): Manar Corporation Statement of Cash Flows For the Year Ended December 31 2019 Cash Flows from Operating Activities Net income $18,350 Deprecation 1200 Increase in accounts receivable (8,900) Decrease in supplies 250 Decrease in inventory 9,000 Decrease in prepaid rent 3,000 Decrease in Accounts payable (15,000) Increase in salaries payable 7,500 Decrease in unearned rent revenue (10,350) Net cash flows from operating activities $5,050

The team found the following statement of financial position. However, due to the malfunction, the statement has missing information and classification inaccuracies (amounts in thousands). The only additional piece of information that was recovered was a receipt showing that the machines were purchased with cash.

Manar Corporation Statement of Financial Position At December 31, 2019 Assets Current assets: Inventory ? Supplies ? Cash $42,650 Accounts receivable $12,850 Less: Reserve for accounts receivable 2,450 ---- AR= 10,400 Goodwill 2,000 Prepaid rent ? Total current assets 104,000 Property and equipment: Land held for sale 3,000 Machines 12,900 Less: Depreciation reserve ? Total assets $118,500 Shareholders Equity and Liabilities Shareholders equity: Share capital 50,000 Unearned rent revenue ? Retained earnings 18,100 Total shareholders equity $68,100 Current liabilities: Accounts payable 20,000 Salaries payable ? Foreign currency translation reserve 10,000 Note payable (Due in 2022) 7,000 Total current liabilities 50,400 Total shareholders equity and liabilities $118,500

Required: 1. Identify the mistakes and classification inaccuracies in the above statement of financial position. Provide your opinion as to why you believe they are inaccurate. 2. Do you agree or disagree with the following statement: the matching principle means that revenues equal expenses. How could violating the matching principle impact analysis of performance for the company? 3. Find the missing data in the above statement of financial position. 4. Prepare the correct statement of financial position (free of errors and missing information) as of December 31, 2019. 5. Prepare the full statement of cash flows for the period ending December 31, 2019. 6. Discuss the benefits of the classification of the statement financial position.