i am supposed to recasy tje income statement and balance sheet but i dont even know where to begin

Introduction to Accounting and Finance Chapter 2 CASE Note: Igor income tax for this You led a group of investors in purchaning Zodink, Inc. from its founder and momencent the besinning of 2018. You financed the $10 million acquisition of this manufacturer of quality Industrial components with equal amounts of equity and debit capital. Your invest ment team provided the majority of owner financing, and other investors purchased stock to supplement your group's equity infusion. A 820 trillion, ex loan from the First National Bank financed the remainder of the purchase You resigned as chief executive officer (CEO) after the firm's fourth fiscal year, which ended on December 31, 2019, to pursue other business opportunities. You continued in your capacity as chair of Zodiaks Board of Directors (BOD) The BOD elected Johannes Skilling as CEO, effective January 1, 2020, over your objections. Mr. Skilling had a proven record of accomplistuent as an executive and demonstrated strong interpersonal skill during the search process; yet, you had an uneasy feeling about him. Specifically, you felt that Skilling took too murty unnecessary risks and pushed the envelope too far with overly aggressive financial reporting practices. Although Mr. Skilling was thoroughly vetted, you had off the record conversations with trusted business colleagues who echoed your concerns. None was willing, however, to speak on the record. In the end, you acquiesced to the unanimous wish of the rest of the board and ratified the hiring of Mr. Skilling as CEO effective January 1, 2020, Financial Statements Zodiak's financial performance during your tenure as CEO was solid, if not spectacular. Corporate profitability ostensibly soared under Skilling's tutelage in 2020. The accompa nying spreadsheet contains the annual income statements for the last three fiscal years, as well as the last two period's balance sheets. The financial data clearly evidence the superior results Zodiak achieved in 2020, which was the first year that Skilling served as CEO. (This problem ignores income taxes.) Income Statements For the Years Ended December 31 (in 000) Sales revenues Cost of goods sold Gross profit Selling, general, and administrative expenses Depreciation expense Research and development expense Operating income Interest expense Net income 2020 $ 35,735 5.241 20,494 9,270 645 660 9,919 1.200 $8,719 2019 $ 31,906 13,608 18,298 8,427 640 2018 $ 30,100 12.840 17,260 8,025 625 758 700 7,910 8,475 1.200 $7,275 1.200 $ 6,710 50 Chapter 2 The Accounting Halate December 31 2019 CA Ane Ferie TOT LO 883,305 11400 BH 567.907 Other Curre Property, plant, and equipment neto plation TA Liabilities and shareholders' Equity Accounts robe Acondities Care 31.400 SAD NO Total Libes Common stock Retained emines Total shareholders equity Total Liabilities and Shareholders' Equity 20.000 20.000 25.14 342 30.000 30,000 8.261 S.NO BM 2.1 $ 53,300 $ 47.807 The 2020 francial results presented in the spreadshot, however, are handited as of this date. The previous yeurs financial statements received qualified or "clean" odit opinions froen Zodiak's external accounting firme) Reporting Issues One of your most trusted members of the executive team during your time as CEO was Mex Walters, the corporate controller. In early 3021, Ms. Walters expressed concem to you over a number of accounting issues. In sum, she and her internal audit staff feel that Zodiak financial reporting was too agressive and the firm erstated lis 2020 operating performance and year end financial position. Meg told you that she repeatedly expressed her concerns to Mr. Skilling. He assured her that Zodiak's accounting complied with generally accepted accounting principles (GAAP). At one point, Skilling stated to her that "Our inuncil statements conform to GAAP. Our managerial judgments about the numbers may be more optimistic than those of the previous administration but let me assure you that they are legitimate. Moreover, they will pass muster with our new external auditors. I've used the audit firm of Arturo Andersen at my other firms and they've always given me a clean audit opinion. I expect that they will do the same for Zodiak Two areas particularly concerned Ms. Walters: The company booked revenues of $2 million when it shipped product to some of its regular customers at end of 2020. Zodiak reported these sales even though the customers had not ordered the goods. Skilling stated that the sales would "help" the 2020 numbers. In addition, Zodiak's sales force told the . Introduction to Accounting and Finance recipients that they could return the goods in 2021 if they didn't want them, The firm mude no provision for any returns of these sales Ms. Walters firmly believed that the customers would return the 82 million of goods in 2021. She knows that Zodiak could sell the goods to other customers when the customers return them. Meg further notes that Zodiak's cost of goods sold have traditionally been 42.65% of sales revenues, what is now Zodiak added the $1 million cost of corporate reorganization to the balance of its property, plant, and equipment account. Mr. Skilling opined that the restructuring would benefit the firm for at least the next ten years. "And besides," he said, "We recognized 10% of that restructuring cost as a depreciation expense in 2020. Meg believed that the total cost of reorganizing the company should be recorded as a 2020 expense because it was a necessary cost of doing business in that year. You are very concerned about the issues that Ms. Walters presented to you. You would like to bring them to the full Board's attention. In order to do so, you charge Ms. Walters with two tasks: Required: 1. Recast Zodiak's 2020 income statement and balance sheet to conform to generally accepted accounting principles. 2. Compose an executive summary addressing the issues in your calculations and comment on the firm's 2020 financial performance and its financial position as of December 31, 2020. Introduction to Accounting and Finance Chapter 2 CASE Note: Igor income tax for this You led a group of investors in purchaning Zodink, Inc. from its founder and momencent the besinning of 2018. You financed the $10 million acquisition of this manufacturer of quality Industrial components with equal amounts of equity and debit capital. Your invest ment team provided the majority of owner financing, and other investors purchased stock to supplement your group's equity infusion. A 820 trillion, ex loan from the First National Bank financed the remainder of the purchase You resigned as chief executive officer (CEO) after the firm's fourth fiscal year, which ended on December 31, 2019, to pursue other business opportunities. You continued in your capacity as chair of Zodiaks Board of Directors (BOD) The BOD elected Johannes Skilling as CEO, effective January 1, 2020, over your objections. Mr. Skilling had a proven record of accomplistuent as an executive and demonstrated strong interpersonal skill during the search process; yet, you had an uneasy feeling about him. Specifically, you felt that Skilling took too murty unnecessary risks and pushed the envelope too far with overly aggressive financial reporting practices. Although Mr. Skilling was thoroughly vetted, you had off the record conversations with trusted business colleagues who echoed your concerns. None was willing, however, to speak on the record. In the end, you acquiesced to the unanimous wish of the rest of the board and ratified the hiring of Mr. Skilling as CEO effective January 1, 2020, Financial Statements Zodiak's financial performance during your tenure as CEO was solid, if not spectacular. Corporate profitability ostensibly soared under Skilling's tutelage in 2020. The accompa nying spreadsheet contains the annual income statements for the last three fiscal years, as well as the last two period's balance sheets. The financial data clearly evidence the superior results Zodiak achieved in 2020, which was the first year that Skilling served as CEO. (This problem ignores income taxes.) Income Statements For the Years Ended December 31 (in 000) Sales revenues Cost of goods sold Gross profit Selling, general, and administrative expenses Depreciation expense Research and development expense Operating income Interest expense Net income 2020 $ 35,735 5.241 20,494 9,270 645 660 9,919 1.200 $8,719 2019 $ 31,906 13,608 18,298 8,427 640 2018 $ 30,100 12.840 17,260 8,025 625 758 700 7,910 8,475 1.200 $7,275 1.200 $ 6,710 50 Chapter 2 The Accounting Halate December 31 2019 CA Ane Ferie TOT LO 883,305 11400 BH 567.907 Other Curre Property, plant, and equipment neto plation TA Liabilities and shareholders' Equity Accounts robe Acondities Care 31.400 SAD NO Total Libes Common stock Retained emines Total shareholders equity Total Liabilities and Shareholders' Equity 20.000 20.000 25.14 342 30.000 30,000 8.261 S.NO BM 2.1 $ 53,300 $ 47.807 The 2020 francial results presented in the spreadshot, however, are handited as of this date. The previous yeurs financial statements received qualified or "clean" odit opinions froen Zodiak's external accounting firme) Reporting Issues One of your most trusted members of the executive team during your time as CEO was Mex Walters, the corporate controller. In early 3021, Ms. Walters expressed concem to you over a number of accounting issues. In sum, she and her internal audit staff feel that Zodiak financial reporting was too agressive and the firm erstated lis 2020 operating performance and year end financial position. Meg told you that she repeatedly expressed her concerns to Mr. Skilling. He assured her that Zodiak's accounting complied with generally accepted accounting principles (GAAP). At one point, Skilling stated to her that "Our inuncil statements conform to GAAP. Our managerial judgments about the numbers may be more optimistic than those of the previous administration but let me assure you that they are legitimate. Moreover, they will pass muster with our new external auditors. I've used the audit firm of Arturo Andersen at my other firms and they've always given me a clean audit opinion. I expect that they will do the same for Zodiak Two areas particularly concerned Ms. Walters: The company booked revenues of $2 million when it shipped product to some of its regular customers at end of 2020. Zodiak reported these sales even though the customers had not ordered the goods. Skilling stated that the sales would "help" the 2020 numbers. In addition, Zodiak's sales force told the . Introduction to Accounting and Finance recipients that they could return the goods in 2021 if they didn't want them, The firm mude no provision for any returns of these sales Ms. Walters firmly believed that the customers would return the 82 million of goods in 2021. She knows that Zodiak could sell the goods to other customers when the customers return them. Meg further notes that Zodiak's cost of goods sold have traditionally been 42.65% of sales revenues, what is now Zodiak added the $1 million cost of corporate reorganization to the balance of its property, plant, and equipment account. Mr. Skilling opined that the restructuring would benefit the firm for at least the next ten years. "And besides," he said, "We recognized 10% of that restructuring cost as a depreciation expense in 2020. Meg believed that the total cost of reorganizing the company should be recorded as a 2020 expense because it was a necessary cost of doing business in that year. You are very concerned about the issues that Ms. Walters presented to you. You would like to bring them to the full Board's attention. In order to do so, you charge Ms. Walters with two tasks: Required: 1. Recast Zodiak's 2020 income statement and balance sheet to conform to generally accepted accounting principles. 2. Compose an executive summary addressing the issues in your calculations and comment on the firm's 2020 financial performance and its financial position as of December 31, 2020