Efendi Company hired an accounting intern, Pat Morgan, to prepare its income statement, statement of retained earnings, and balance sheet. Pat indicated a reluctance to undertake this task due to a lack of adequate training. But, Pat agreed provided someone would examine the work in detail and provide useful suggestions for improvement. Pats work follows:

PAT MORGANS Income Statement December 31, 20X5

Net income

Services to customers $125,000

Expenses

Dividends $13,500

Rent 11,000

=24,500

Revenues $100,500

PAT MORGANS Statement of Retained Earnings For the Year Ending December 31, 20X1

Beginning retained earnings $ 45,000

Plus: Net income 100,500

=$145,500

Less: Capital stock 200,000

Ending retained earnings $ (54,500)

PAT MORGANS Equation Sheet December 31, 20X1

Assets

Cash $ 92,700

Accounts receivable 37,400

Equipment 239,000

Total assets $369,100 Liabilities

Accounts payable $ 7,500

Wages expense 64,000

Total expenses $ 71,500 Stockholders equity

Notes payable $80,100

Retained earnings (54,500)

Total stockholders equity 25,600

Total liabilities and equity $ 97,100

Find specific errors in Pats work. Prepare written review notes for Pat sufficient to allow Pat to understand the errors and make necessary corrections. To get you started, you may assume Pat did manage to get the listing of total assets correct.