Income Statement Case: U.S. GAAP For the month ended March 31, an accountant and his CEO are suspected to have manipulated financial statement records in the computerized accounting system in an effort to meet threshold targets for the bonus. Output statements indicate numbers that are out of the norm. Red flags include: unexpected high levels of sales revenue and cash balance and understated cost of goods sold. Furthermore, the trial balance and balance sheet both failed to balance. Fortunately, hard copies of input documents like invoices (bills), payment vouchers, receipts etc are available. The bank statement the month is also available that provides independent record of transactions between the company and the bank. The company deals in retail of merchandise. You have been hired as a forensic accountant to investigate authenticity of statement numbers. financial Findings include the following: Total invoices (bills) issued to customers for merchandise sold amounted to $100 million. Bank statement records and receipts issued show that only $20 million of that money was received. Of the $100 million invoices issued, 15 million was for a sale on March 31 to a repeat customer. The customer returned merchandise on April 1. Merchandise was not defective and no credit memo was issued to a customer. Collections for the month of Feb receivables amounted to $40 million. Some customers pay in advance. During March, $30 million was collected for orders to be fulfilled in April. During the month of March, orders amounting to $50 million were fulfilled but the customers were not invoiced. The income statement shows sales revenue of $220 million. Is this amount correct? If not, what should be the correct amount? What do you suspect was the motivation for selling merchandise on March 31 and having it returned on April 12 Records indicate that $70 million worth of invoices were received from suppliers for purchases during the month of March. Payment vouchers and check records indicate that $40 million of that amount was paid. An amount of $10 million was paid to settle accounts payable for prior months' purchases. Some contracts require prepayments for merchandise. During the month ended March 31.5 million was prepaid to suppliers for deliveries to be received in April and May. On March 29, the company purchased goods amounting to $20 million. However suppliers for these goods had not yet invoiced the company, and so, no record was made by March 31. The company uses FIFO Periodic system to value inventories. For the month of March, beginning inventory was valued at $5 million and ending inventory was $7 million. Cost of goods sold number in the income statement is $35million. Is this amount correct? If not, what is the correct amount? For a selected inventory item; Inventory at the beginning of the month was 2,000 units valued at $20 per unit, on March 10, merchandise of 4,000 units were purchased at a cost of $22 per unit, on March 28, 6,000 units were purchased at $23 per unit. At the end of the month on March 31, inventory was 7,000 units. The company uses FIFO periodic system to value inventories. For this item, the dollar amount shown for inventory at the end of the month was $265,000. Is this amount correct? If not what is the correct amount? . The bank statement on March 31 showed a balance of only $31 million but the company's records showed a huge cash balance of $80 million. Detailed analysis . of transactions revealed the following: outstanding checks $19,000, deposits in transit $20,000; direct debits (bank charges and standing orders) $42,000, direct credits to bank $4,000; errors in the company's general ledger that resulted into cash account credits to be understated $10,000. What is the correct reconciled cash balance that should appear in the balance sheet? Records show that operating selling, general and administrative expenses amounted to $16,000; nonoperating incomes were $8,000, and nonoperating expenses amounted to $3,000. The company falls in a 21% corporation tax rate bracket . The company follows accrual accounting as prescribed by GAAP Prepare an accrual basis income statement for the month ended March 31