Reference no: EM132843715

Performance Corporation was organized on January 1, 2015. At the end of 2015, the company had not yet employed an accountant; however, an employee who was "good with numbers" prepared the following statements at that date:

Problem 1: Prepare proper income statement (correct net income is $32,250 and income tax expense is $10,750).

Performance corporation December 31, 2015

1. Income from sales of merchandise $ 180,000
2. Total amount paid for goods sold during 2015 (90,000 )
3. Selling costs (25,000 )
4. Depreciation (on service vehicles used) (12,000 )
5. Income from services rendered 52,000
6. Salaries and wages paid (62,000 )

Performance corporation December 31, 2015
Resources

1. Cash $ 32,000
2. Merchandise inventory (held for resale) 42,000
3. Service vehicles 50,000
4. Retained earnings (profit earned in 2015) 32,250
5. Grand total $ 156,250

Debts

1. Payables to suppliers 17,750
2. Note owed to bank 25,000
3. Due from customers 13,000
4. Total $ 55,750
5. Supplies on hand (to be used in rendering services) $ 15,000
6. Accumulated depreciation (on service vehicles)* 12,000
7. Common stock, 6,500 shares 65,000
8. Total 92,000
9. Grand total $ 147,750

Accumulated depreciation represents the used portion of the asset and should be subtracted from the asset's balance