Scenario: You have accepted a job as the Controller of a start-up company a consulting firm, called Smith Steele Consulting. Smith is an excellent consultant, but not a good accountant. He has attempted to prepare the first months financial statements; however, the statements do not balance. The financial statements are a good starting point, but your job is to correct the errors. The statements are presented here. Smith is grateful to have you on board as his Controller, and you are eager to make a good impression on his by finding the errors in his statements. Download Smiths statements and make the changes to them. All the information you need to find the errors is contained in these statements. Checklist: Take a screen shot of your Learning Activities completion and insert them at the top of your Assignment document. Identify two errors in the Balance Sheet, two errors in the Income Statement, one error in the Statement of Owners Equity, and two errors in the Statement of Cash Flows. You will want to keep in mind all that you have learned in terms of the items on financial statements which are duplicated and flow from one statement to another. Prepare corrected financial statements referencing GAAP using Microsoft Excel. Directions for Submitting your Assignment Before you submit your work (i.e. a screen shot, and revised financial statements), you should save your Assignment on your computer in a location and with a name that you will remember. Make sure your Assignment is in the appropriate format (Microsoft Excel).

SMITH STEELE CONSULTING

Balance Sheet

August 31, 2011

Assets Liabilities

Current assets: Current liabilities:

Cash................................. $ 21,300 Accounts payable......... $ 1,250

Accounts receivable........ 3,800 Prepaid rent.................. 2,050

Supplies........................... 875 Unearned fees.............. 1,150

Salaries payable.............. 150 Total liabilities................ $ 4,450

Prepaid insurance........... 1,670

Total current assets..... $ 27,795

Property, plant, and

equipment:....................... Owners Equity

Office equipment............. $ 21,250 Sheila Shaw, capital........ 47,720

Less accum. depr............ 675

Total Property, plant,

and equipment.............. 20,575 Total liabilities and

Total assets........................ $ 48,370 owners equity.............. $ 52,170

SMITH STEELE CONSULTING

Income Statement

For the Month Ended August 31, 2011

Fees earned.................................................................................... $ 24,325

Expenses:

Salary expense....................................................................... $1,550

Rent expense......................................................................... 1,200

Supplies expense................................................................... 1,250

Insurance expense................................................................. 1,000

Miscellaneous expense......................................................... 715

Interest expense.................................................................... 65

Bad Debt expense................................................................. 150

Repairs and Maintenance..................................................... 200

Utilities expense.................................................................... 150

Payroll Tax expense.............................................................. 125

Office expense....................................................................... 525

Total expenses................................................................... 6,930

Net income..................................................................................... $ 17,395

SMITH STEELE CONSULTING

Statement of Owners Equity

For the Month Ended August 31, 2011

Sheila Shaw, capital, August 1, 2007............................................ $ 0

Additional investments during the month..................................... 36,000

Total............................................................................................... $ 36,000

Net income for the month.............................................................. $ 17,395

Less withdrawals............................................................................ 5,000

Increase in owners equity............................................................ 12,395

Sheila Shaw, capital, August 31, 2007.......................................... $ 48,395

SMITH STEELE CONSULTING

Statement of Cash Flows

For the Month Ended August 31, 2011

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income for the month:..................................................... $17,395

Adjustment for depreciation......................................... 675

Cash provided by operating activities.................................. 18,070

(Increase) in working capital items

Accounts receivable........................................................... (3,800)

Supplies.............................................................................. (875)

Prepaid expenses............................................................... 3,720

Accounts payable............................................................... 1,250

Salaries payable................................................................. 150

Unearned fees.................................................................... 1,150

Cash flows from operating activities............................................. $18,990

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of office equipment............................................. (21,250)

Cash flows from investing activities............................................. $(21,250)

CASH FLOWS FROM FINANCING ACTIVITIES:

Advances from shareholder (net of withdrawals)................. 31,000

Cash flows from financing activities............................................. $31,000

Net increase in cash...................................................................... $28,740

CASH-BEGINNING OF PERIOD.............................................. 0

CASH-END OF PERIOD............................................................. $21,300