A) Variations in the Financial Statements
|
PMI Income Statement December 31, 2011 |
|
| Sunset | |
| Profit and Loss Statements | |
| EndingDec. 31, 2011 | |
| Income | |
| Medical Expenses |
$1,601,050.52 |
| Expenses | |
| Interest Cost |
$16,690.68 |
| General Cost |
$567,372.88 |
| Direct Cost |
$719,880.70 |
| Depreciation Cost |
$34,147.56 |
| Total Expenses |
$1,338,091.82 |
| Net Operating Income |
$262,958.70 |
| Other Income |
$4,261.93 |
| Other Costs |
$(36,050.84) |
| Total Other Income (Cost) |
$(31,788.91) |
| Net Income |
$231,169.79 |
|
PMI Balance Sheet Ended December 31, 2011 |
|
| Sunset | |
| Statement of Financial Position | |
| Ending Dec 31, 2011 | |
| Assets | |
| Receivable Accounts |
$426,876.79 |
| Cash |
$(6,458.09) |
| Less: Accommodation for Bad Debts |
$(426,876.79) |
| Receivable Accounts, Net |
$- |
| Receivable Accounts, Other |
$- |
| Prepaid Costs |
$19,659.78 |
| Receivable Notes - Staff |
$- |
| Receivable Notes– Dr. Jones |
$56,020.51 |
| Equipment &Property |
$308,150.84 |
| Less: Accrued Depreciation |
$(156,023.56) |
| Equipment &Property,Net |
$152,127.28 |
| Total Assets |
$373,476.76 |
| Liabilities | |
| Accounts Payable |
$- |
| Withholding Payable (State) |
$- |
| Withholding Payable(Federal) |
$- |
| Withholding Payable (FICA) |
$- |
| Tax Payable(State) |
$- |
| Payable Notes |
$326,783.95 |
| Total Obligations |
$233,303.29 |
| Shareholders’ Equity | |
| Retained Earnings |
$208,303.29 |
| Common Stock |
$25,0000.00 |
| Total Shareholders’ Equity |
$233,303.29 |
| Total Obligations + Shareholders’ Equity |
$1,026,693.82 |
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A) PMI’s Recomputed Income Statement and Balance Sheet
|
Recomputed Income Statement December 31, 2011 |
|
| Sunset | |
| Profit and Loss Statements | |
| EndingDec. 31, 2011 | |
| Income | |
| Medical Expenses |
$1,601,050.52 |
| Expenses | |
| Interest Cost |
$16,690.68 |
| General Cost |
$567,372.88 |
| Direct Cost |
$719,880.70 |
| Depreciation Cost |
$34,147.56 |
| Total Expenses |
$1,338,091.82 |
| Net Operating Income |
$262,958.70 |
| Other Income |
$4,261.93 |
| Other Costs |
$(36,050.84) |
| Total Other Income (Cost) |
$(31,788.91) |
| Net Income |
$231,169.79 |
|
Recomputed Balance Sheet Ended December 31, 2011 |
|
| Sunset | |
| Statement of Financial Position | |
| Ending Dec 31, 2011 | |
| Assets | |
| Receivable Accounts |
$426,876.79 |
| Cash |
$(6,458.09) |
| Less: Accommodation for Bad Debts |
$(426,876.79) |
| Receivable Accounts, Net |
$426,876.79 |
| Receivable Accounts, Other |
$38,879.88 |
| Prepaid Costs |
$19,659.78 |
| Receivable Notes - Staff |
$- |
| Receivable Notes– Dr. Jones |
$56,020.51 |
| Equipment &Property |
$308,150.84 |
| Less: AccruedDepreciation |
$(156,023.56) |
| Equipment &Property,Net |
$152,127.28 |
| Total Assets |
$839,233.43 |
| Liabilities | |
| Accounts Payable |
$127,018.91 |
| Withholding Payable (State) |
$- |
| Withholding Payable(Federal) |
$- |
| Withholding Payable (FICA) |
$- |
| Tax Payable(State) |
$- |
| Payable Notes |
$326,783.95 |
| Total Obligations |
$453,802.86 |
| Shareholders’ Equity | |
| Retained Earnings |
$208,303.29 |
| Common Stock |
$25,0000.00 |
| Total Shareholders’ Equity |
$233,303.29 |
| Total Obligations + Shareholders’ Equity |
$1,272,898.28 |
B) Recalculated Cash Flow Statement
|
Recomputed Cash Flow StatementEnding December 31, 2011 |
|
| Sunset | |
| Cash Flow Statement | |
| Ending Dec 31, 2011 | |
| Operating Activities’ Cash | |
| Net Income (Loss) |
$231,169.79 |
| Variations in Receivable Accounts, Net |
$(426,876.79) |
| Changes in Receivable Accounts, Other |
$(38,879.88) |
| Alterations in Prepaid Costs |
$(19,659.78) |
| Changes in Accrued Depreciation |
$156,023.56 |
| Variations in Payable Accounts |
$127,018.91 |
| Alterations in Withholding Payable (State) |
$- |
| Variations in Withholding Payable (Federal) |
$- |
| Changes in Withholding Payable (FICA) |
$- |
| Alterations in Tax Payable (State) |
$- |
| Total Variations in Operating Activities Cash Flows |
$28,795.81 |
| Investing Activities Cash | |
| Alterations in Equipment &Property |
$(308,150.84) |
| Variations in Receivable Notes– Dr. Jones |
$(56,020.51) |
| Changes in Receivable Notes - Staff |
$- |
| Total Alterations in Investing Activities Cash Flows |
$(364,171.35) |
| Financing Activities Cash | |
| Variations in Payable Notes |
$326,783.95 |
| Retained Earnings |
$(490,563.43) |
| Common Stock |
$25,000.00 |
| Total Alterations in Financing Activities Cash Flows |
$(809,530.56) |
| Net Variations in Cash |
$(6,458.09) |
| Cash at Beginning |
$- |
| Cash at Ending |
$(6,458.09) |
C) Variations in Cash Flow Statements
The cash flow statements vary in that PMI created two statements instead of one annual statement. More significantly, the retained earnings for the Cash Flow Statement ending December 31, 2011, is inaccurate as it originates from the balance sheet prepared by one prepared by Jackson and Associates (Schroeder, Clark, & Cathey, 2019). According to Minnis and Sutherland (2017), this piece of inaccurate information gives the impression that the total variations from financing activities’ cash are positive ($328,917.45) when the actual figures (-$809,530.56) showsnegative changes from when Jackson and Associates, CPA were in operation.
References
Minnis, M., & Sutherland, A. (2017). Financial statements as monitoring mechanisms: Evidence from small commercial loans. Journal of Accounting Research , 55 (1), 197-233.
Schroeder, R. G., Clark, M. W., &Cathey, J. M. (2019). Financial accounting theory and analysis: text and cases . Hoboken:John Wiley & Sons.
