Use the unadjusted trial balance on the Original Trial Balance worksheet, plus the information you gather from the owner / accountant's discussion to develop GAAP-compliant financial statements

Prepare adjusting / error correction journal entries in the General Journal worksheet. Prepare an Adjusted Trial Balance on the Trial Balance worksheet. Prepare a Statement of Retained Earnings

Accountant Business Owner Accountant Business Owner Accountant Business Owner Accountant Business Owner Accountant Business Owner Accountant Business Owner Accountant Business Owner Accountant Business Owner Accountant Business Owner Accountant Business Owner Come in Thank you for seeing me today. First Bank recommended t l see an accountant, but I'm not sure exactly why. I'm just trying to set up a line of credit so that I can stock up on inventory before the Christmas buying season. The bank is asking for an income statement and balance sheet on my business I'm sure l can help you. That's a very standard request. Let me see the information you have This is the print out from my accounting software I'm very careful to enter every transaction, so l don't see why this list isn't good enough That's a great start. Let's see if I understand what you have here. (Pause) You seem to have a very high accounts receivable Yes. That's one of the strongest points of the business to show the bank. We have just received a $20,000 order, so I entered it right away as sales and accounts receivable. want to keep track of every transaction Have you delivered anything on the order yet? No. We're on track to finish by the 15th and then inspect and ship by the end of the month That's actually something that will need to be adjusted. Did you decrease your inventory yet for this order? No.It hasn't been shipped yet, so l wouldn't change inventory. Isn't that righ Yes, that's good that your inventory here matches your inventory at your business today. Now l noticed something else about the assets you have listed. You have a building listed, but no land. That's very unusual. Do you own your own building? Yes, we've just closed on our headquarters. Ofcourse, we own the land too. The $250,000 lrecorded for the building is for both That's what I thought. We'll have to separate out the value for the building and land because they are separate assets and have different accounting treatment But I didn't pay a separate price for the land and building. How would l know the separate values? Most appraisers apply 20% of the total price to the land and 80% to the building in these cases, so we can follow that rule of thumb safely for a new standard purchase I notice that your income statement is missing two expenses that l would normally expect. There is no depreciation listed What's that Depreciation is an expense because all equipment and facilities have a limited life. As they are used, there is wear and tear and their productivity goes down. Now, since you have just purchased the building, it wouldn't have any depreciation yet But I wonder about the equipment. When did you purchase the equipment? At the beginning of the year And how long do you expect before you replace the equipment? About five years