Identifying and Correcting Errors in an Income Statement Just after preparing the adjusting entries for the year, the long time controller at Parrot Company took a leave of absence. Her inexperienced assistant did his best to prepare financial statements from the information the controller had left behind. He had particular difficulty with the income statement. The item labeled sales expense is the sum of the amounts charged customers during the year for goods and services provided.
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Income Statement |
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Sales expense |
$260,722 |
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Cost of goods sold |
102,690 |
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Net profit |
$158,032 |
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Operating expenses: |
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Wages |
$59,780 |
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Utilities |
9,002 |
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Interest |
14,420 |
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Depreciation |
13,510 |
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Total operating expense |
97,712 |
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Operating income |
$60,320 |
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Advertising expense |
9,968 |
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Pretax income |
$50,352 |
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Income tax expense |
13,150 |
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Net income |
$63,502 |
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Earnings per share of common stock |
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($64,502 15,000 shares) |
$4.30 |
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Required
A. Identify and list the errors in the income statement above.
B. Prepare a corrected income statement.