JKS Goods, Inc. has prepared the following financial statements: JKS Goods, Inc. has hired you (an outside consultant) to review the financial statements and make any necessary corrections/adjustments before the financial statements are presented to the board of directors. The President of the Company, Mr. Turnkey has provided the following information to help you adjust the financial statements.

(1) Inventory is costed using the average cost method. Inventory at December 31, 2016 was comprised of: 3,000 units at an average cost of $12.00 per unit. 2017 purchases included:

2/27/2017: 800 units @ $10.00 per unit

5/3/17: 500 units @$10.50 per unit

6/25/17: 600 units @ $9.75 per unit

9/28/17: 700 units @ $10.25 per unit 1

2/2/17: 400 units @ $11.00 per unit

4,000 units were sold in 2017. (ROUND ALL AVERAGE COST INFORMATION TO TWO DECIMAL PLACES)

(2) Equipment includes two assets.

a. Asset #1 was purchased on March 1, 2017 for a cost of $40,000. This asset has a salvage value of $5,020 and an expected useful life of 5 years. The asset is depreciated using the straight-line method.

b. Asset #2 was purchased on December 1, 2017 for a cost of $65,000. This asset has a salvage value of $2,000 and an expected useful life of 3 years. The asset is depreciated using the straight-line method.

(3) Accounts receivable detail is as follows:

The allowance for doubtful accounts is based on the aging of accounts receivable method. The estimated percentage of uncollectible amounts is as follows: Current amounts (not yet due) = 1%

1 - 30 days past due = 3%

31 60 days past due = 5%

Over 60 days past due = 8% There were no write-offs during the year. Invoices are billed at net 30 days.

(4) There were two loans with activity during 2017.

a. Note amount #1, $30,000. Annual interest rate of 5%. Interest was accrued monthly. Loan date: September 1, 2012. The loan and all accrued loan interest was paid off on September 1, 2017. b. Note amount #2, $50,000. Annual interest rate of 6%. Interest is accrued monthly. Loan date: April 1, 2017. The loan is due on May 1, 2022. Accrued interest will be paid annually on January 1 with the final payment due on May 1, 2022.

(5) It has been discovered that $6,000 of product that was paid for and was to be shipped on December 27, 2017 has not been shipped. The product was actually shipped on January 2, 2018.

(6) A physical count of supplies at the end of the year reflected $5,000 of supplies on hand at December 31, 2017.

(7) Total rent for the year should reflect 12 payments of $5,000 per month. Prepaid rent is included in the Prepaid Expenses account.

(8) The Corporate net income tax rate is 15%.

Requirements:

(1) Prepare a trial balance spreadsheet for the year ended December 31, 2017 as demonstrated in Exhibit 4.5 of the text. You should use the accounts included on the preliminary financial statements provided above. All necessary accounts are included on the preliminary financial statements.

(2) Record the adjustments required based on the eight items of information presented above. Use the numbers above as a reference number on your trial balance spreadsheet. Be sure to include all calculations used to determine adjustment amounts. These calculations should be made on separate sheets (tabs) in your one Excel file. You should have six tabs when you are finished your case study trial balance spreadsheet and financial statements including ratios (on one tab), inventory, depreciation, accounts receivable, notes payable, memo.

(3) Using your adjusted trial balance, prepare a properly formatted income statement, balance sheet, and statement of stockholders equity for the calendar year 2017.

(4) Prepare a memo to Mr. Turnkey detailing what problems you found on his preliminary financial statements. In addition to the issues with the preliminary financial statement, provide Mr. Turnkey with: current ratio, working capital, net profit margin, receivable turnover ratio, average collection period, inventory turnover ratio, average days to sell inventory. Round your ratios to two decimal places. Additional information to assist you with your memo is: a. Average net profit margin for JKS Goods competitors is 20.00%. b. Accounts receivable at 12/31/2016, $60,000 c. Product inventory at 12/31/2016, $18,000

JKS Goods, Inc. Income Statement For the Year Ended December 31, 2017 Revenue $ 25,000 $300,000 $325,000 Deferred revenue Product sales Total revenue $ 11,660 Cost of goods sold $313,340 Contribution margin Operating expenses Salaries expense 90,000 Payroll tax expense 9,585 Rent expense 65,000 Bad Debt Expense 2,000 Supplies expense Depreciation expense 22,000 28,000 $ Interest Expense 4,000 $92,755 Pretax income $ Income tax expense 13,913 $ Net income 78,842 $ Earnings per Share 5.26 JKS Goods, Inc. Statement of Stockholders' Equity As of December 31, 2017 Total Additional Paid-Retained in Capital Stockholders Common Stock Treasury Stock Equity Shares 15,000 $ Earnings 3,500 31,020 Shares (6,000) $ (13,500) $ 500 S Amount Amount Balance as of January 1, 2017 30,000 $ 51,020 Treasury stock, re-sold 1,125 $ 1,000 2,125 $ (15,000) $ 78,842 Cash dividends (15,000) Net income 78,842 (5,500) $ (12,375) $ 30,000 $ Balance as of December 31, 2017 15,000 $ 4,500 94,862 116,987 n JKS Goods, Inc Balance Sheet For the Year Ended December 31, 2017 ASSETS |Accounts receivable $ 62,000 $ $ 55,000 Cash 14,000 Inventory Supplies inventory $ 3,000 $ 12,000 $ 105,000 $ 251,000 Prepaid expenses Equipment Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable $ 18,500 Accumulated depreciation 28,000 Allowance for doubtful accounts $ 2,000 Dividend payable |Income tax payable |Interest payable Notes payable-long-term $ 15,000 13,913 $ 3,000 50,000 Payroll taxes payable $ 3,000 Sales tax payable $ 600 Total liabilities S 134,013 Stockholders' equity: Common stock 30,000 Additional paid-in capital 4,500 Retained earnings $ 94,862 Treasury stock (12,375) Total stockholders equity $ 116,987 $ 251,000 Total liabilities and stockholders' equity JKS Goods, Inc. Accounts Receivable December 31, 2017 Customer Name Invoice Date Amount 12/5/2017 16,000 Jackson Company 10/15/2017 Lucas, Inc. 8,500 11/20/2017 12,000 Mason, Corp. 8/6/2017 18,500 Logan, Co. Ida, Ltd. 11/7/2017 7,000 62,000