You are a staff accountant at a local CPA firm.Mymess Inc is an important client that has brought in its general ledger in order to have a compilation of its financial statements prepared. As a first step, you have asked a new employee, Sam Klutz, to construct an income statement and balance sheet.The results of Sam's work are presented below and on the next page.You have been tasked with reviewing Sam's work, and construct a memo to him.Your memo should identify each of the errors you find.You do not need to construct adjusting entries.However, you do need to explain the proper GAAP treatment for each item.

Mymess Incorporated Balance Sheet 12/31/2020 Assets Liabilities Current assets Current liabilities Cash 105,000 Accounts payable 680,000 Accounts receivable 510,000 Payroll taxes payable 55,000 Inventory 850,000 Short-term debt 175,000 Prepaid expenses 40,000 Current portion of long-term debt 100,000 Short-term investments 150,000 Dividends payable 20,000 Deferred tax asset 75,000 1,730,000 1,030,000 Long-term assets Noncurrent liabilities Property plant and equipment 1,450,000 Accumulated amortization 22,000 Accumulated depreciation (325,000) Long-term debt 1,200,000 Goodwill 145,000 Otherlong-term liabilities 320,000 Other intangibles 210,000 1,542,000 Treasury stock 50,000 Total liabilities 2,572,000 1,530,000 Stookholders' equity Total assets 3,260,000 Common stock 100,000 Additional paid-in capital 350,000 Preferred stock, 6%, $100 par, 50,000 500 shares, redemption date 1/1/25 50,000 Retained earnings 108,000 Noncontrolling interest 10,000 Total sockholder's equity 668,000 Total liabilities and stocholders' equity 3,240,000Mymess Incorporated Income Statement Year ending 12/31/2020 Net sales 3,920,000 Cost of sales 2,720,000 Unrealized gain on inventory (20, 000) Gross profit 1,220,000 Selling and administrative expenses 620,000 Rent 55,000 Depreciation and amortization 132,000 Interest expense 275,000 Income from operations 138,000 Other income Gain on sale of building* 385,000 Allowance for uncolletable accounts 40,000 Income before taxes 563,000 Provision for income taxes 152,010 Net income 410,990 Mymess sold its headquaters buiding to First National Bank for $480,000. The building had an original cost of $225,000 and accumulated derpreciation of $130,000. The company is leasing the building from the bank on a 20 year lease that requires annual rental payments of $35,000