Company has prepared the following financial statements:

Company. has hired you (an outside consultant) to review the financial statements and make any necessary corrections/adjustments before the financial statements are presented to the board of directors. The President of the Company, Mr. Turnkey has provided the following information to help you adjust the financial statements.

1. Inventory is costed using the average cost method. Inventory at December 31, 2016 was comprised of: 3,000 units at an average cost of $12.00 per unit. 2017 purchases included:

2/27/2017: 800 units @ $10.00 per unit

5/3/17: 500 units @$10.50 per unit

6/25/17: 600 units @ $9.75 per unit

9/28/17: 700 units @ $10.25 per unit

12/2/17: 400 units @ $11.00 per unit 4,000 units were sold in 2017. (ROUND ALL AVERAGE COST INFORMATION TO TWO DECIMAL PLACES)

(2) Equipment includes two assets.

a. Asset #1 was purchased on March 1, 2017 for a cost of $40,000. This asset has a salvage value of $5,020 and an expected useful life of 5 years. The asset is depreciated using the straight-line method.

b. Asset #2 was purchased on December 1, 2017 for a cost of $65,000. This asset has a salvage value of $2,000 and an expected useful life of 3 years. The asset is depreciated using the straight-line method.

(3) Accounts receivable detail is as follows:

The allowance for doubtful accounts is based on the aging of accounts receivable method. The estimated percentage of uncollectible amounts is as follows:

Current amounts (not yet due) = 1%

1 - 30 days past due = 3%

31 60 days past due = 5%

Over 60 days past due = 8%

There were no write-offs during the year. Invoices are billed at net 30 days.

(4) There were two loans with activity during 2017.

a. Note amount #1, $30,000. Annual interest rate of 5%. Interest was accrued monthly. Loan date: September 1, 2012. The loan and all accrued loan interest was paid off on September 1, 2017.

b. Note amount #2, $50,000. Annual interest rate of 6%. Interest is accrued monthly. Loan date: April 1, 2017. The loan is due on May 1, 2022. Accrued interest will be paid annually on January 1 with the final payment due on May 1, 2022.

(5) It has been discovered that $6,000 of product that was paid for and was to be shipped on December 27, 2017 has not been shipped. The product was actually shipped on January 2, 2018.

(6) A physical count of supplies at the end of the year reflected $5,000 of supplies on hand at December 31, 2017.

(7) Total rent for the year should reflect 12 payments of $5,000 per month. Prepaid rent is included in the Prepaid Expenses account.

(8) The Corporate net income tax rate is 15%.

Requirements:

(1) Show a trial balance spreadsheet for the year ended December 31, 2017. You should use the accounts included on the preliminary financial statements provided above. All necessary accounts are included on the preliminary financial statements.

(2) Record the adjustments required based on the eight items of information presented above. Use the numbers above as a reference number on your trial balance spreadsheet. Be sure to include all calculations used to determine adjustment amounts. These calculations should be made on separate sheets (tabs) in your one Excel file. You should have six tabs when you are finished your case study trial balance spreadsheet and financial statements including ratios (on one tab), inventory, depreciation, accounts receivable, notes payable, memo.

(3) Using your adjusted trial balance, prepare a properly formatted income statement, balance sheet, and statement of stockholders equity for the calendar year 2017.

(4) Show a memo to Mr. Turnkey detailing what problems you found on his preliminary financial statements. In addition to the issues with the preliminary financial statement, provide Mr. Turnkey with: current ratio, working capital, net profit margin, receivable turnover ratio, average collection period, inventory turnover ratio, average days to sell inventory. Round your ratios to two decimal places. Additional information to assist you with your memo is:

a. Average net profit margin for Companys competitors is 20.00%.

b. Accounts receivable at 12/31/2016, $60,000

c. Product inventory at 12/31/2016, $18,000

JKS Goods, Inc. Income Statement For the Year Ended December 31, 2017 Revenue Deferred revenue 25,000 Product sales $300,000 Total revenue 325,000 Cost of goods sold $ 11,660 Contribution margin $ 313,340 Operating expenses Salaries expense $ 90,000 Payroll tax expense $ 9,585 Rent expense 65,000 Bad Debt Expense $ 2,000 Supplies expense $ 22,000 Depreciation expense $ 28,000 $ Interest Expense 4,000 $ Pretax income 92,755 S Income tax expense 13,913 $ Net income 78,842 $ Earnings per Share 5.26 JKS Goods, Inc. Statement of Stockholders' Equity As of December 31, 2017 Total Additional Paid in Capital Treasury Stock Stockholders' Common Stock Retained Shares Amount Earnings 3,500 31,020 Shares Amount (6,000) (13,500) $ 500 S Equity 15,000 30,000 Balance as of January 1, 2017 51,020 1,000 Treasury stock, re-sold 1,125 S 2,125 $(15,000) Cash dividends (15,000) $78,842 S Net income 78,842 (5,500) (12,375) 15,000 $ 30,000 $ Balance as of December 31, 2017 4,500 94,862 116,987 JKS Goods, Inc. Balance Sheet For the Year Ended December 31, 2017 ASSETS Accounts receivable S 62,000 Cash S 14,000 Inventory 55,000 3,000 Supplies inventory S Prepaid expenses S 12,000 Equipment 105,000 $ 251,000 Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable 18,500 Accumulated depreciation 28,000 Allowance for doubtful accounts 2,000 Dividend payable 15,000 Income tax payable 13,913 Interest payable 3,000 Notes payable- long-term S 50,000 Payroll taxes payable S 3,000 Sales tax payable S 600 Total liabilities S 134,013 Stockholders' equity: Common stock 30,000 Additional paid-in capital 4,500 Retained earnings 94,862 Treasury stock Total stockholders' equity S (12,375) S 116,987 $ 251,000 Total liabilities and stockholders' equity JKS Goods, Inc. Accounts Receivable December 31, 2017 Customer Name Invoice Date Amount 12/5/2017 16,000 Jackson Company 10/15/2017 Lucas, Inc. 8,500 11/20/2017 12,000 Mason, Corp. 8/6/2017 18,500 Logan, Co. 11/7/2017 Ida, Ltd. 7,000 62,000 JKS Goods, Inc. Income Statement For the Year Ended December 31, 2017 Revenue Deferred revenue 25,000 Product sales $300,000 Total revenue 325,000 Cost of goods sold $ 11,660 Contribution margin $ 313,340 Operating expenses Salaries expense $ 90,000 Payroll tax expense $ 9,585 Rent expense 65,000 Bad Debt Expense $ 2,000 Supplies expense $ 22,000 Depreciation expense $ 28,000 $ Interest Expense 4,000 $ Pretax income 92,755 S Income tax expense 13,913 $ Net income 78,842 $ Earnings per Share 5.26 JKS Goods, Inc. Statement of Stockholders' Equity As of December 31, 2017 Total Additional Paid in Capital Treasury Stock Stockholders' Common Stock Retained Shares Amount Earnings 3,500 31,020 Shares Amount (6,000) (13,500) $ 500 S Equity 15,000 30,000 Balance as of January 1, 2017 51,020 1,000 Treasury stock, re-sold 1,125 S 2,125 $(15,000) Cash dividends (15,000) $78,842 S Net income 78,842 (5,500) (12,375) 15,000 $ 30,000 $ Balance as of December 31, 2017 4,500 94,862 116,987 JKS Goods, Inc. Balance Sheet For the Year Ended December 31, 2017 ASSETS Accounts receivable S 62,000 Cash S 14,000 Inventory 55,000 3,000 Supplies inventory S Prepaid expenses S 12,000 Equipment 105,000 $ 251,000 Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable 18,500 Accumulated depreciation 28,000 Allowance for doubtful accounts 2,000 Dividend payable 15,000 Income tax payable 13,913 Interest payable 3,000 Notes payable- long-term S 50,000 Payroll taxes payable S 3,000 Sales tax payable S 600 Total liabilities S 134,013 Stockholders' equity: Common stock 30,000 Additional paid-in capital 4,500 Retained earnings 94,862 Treasury stock Total stockholders' equity S (12,375) S 116,987 $ 251,000 Total liabilities and stockholders' equity JKS Goods, Inc. Accounts Receivable December 31, 2017 Customer Name Invoice Date Amount 12/5/2017 16,000 Jackson Company 10/15/2017 Lucas, Inc. 8,500 11/20/2017 12,000 Mason, Corp. 8/6/2017 18,500 Logan, Co. 11/7/2017 Ida, Ltd. 7,000 62,000