EXERCISE 2-13 (15 MINUTES)

3. In preparing the income statement for August, Sam failed to distinguish

between product costs and period costs, and he also failed to recognize

the changes in inventories between the beginning and end of the

month. Once these errors have been corrected, the financial condition

of the company looks much better and selling the company may not be

advisable.

Problem 2-27 (60 minutes)