Answer
a) None of the 3 items were properly handled.
b)
WALTERS CORPORATION
INCOME STATEMENT
For the Year Ended December 31, 2014
Revenues
$\ \ \ $ Service Revenue $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\$37,000$
Expenses
$\ \ \ $ Insurance $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\underline{$7,000}$
$\ \ \ $ $\ \ \ $ Total Expenses $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\underline{\ \ \ \ \ 7,000}$
Net Income $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\$30,000$
Work Step by Step
a) 2013 revenue should not be included in the 2014 reports. The 2013 reports should be amended instead. If no rent has actually been paid, it should not be recorded as an expense. Since the trip to Turkey was not for business reasons and was not paid for by the business, it should not appear on the company's financial statements.
b) The corrected income statement should separate and provide subtotals for income and expenses. Accounts receivable should appear on the balance sheet, not the income statement.
