Tyler William and Matt Brown, two college friends, decided to set up a snow removal business called Crane Snow Removal Services. At the inception of the partnership, Tyler invested $3,280 cash and Matt invested $9,020 cash. Once formed, early in January the partnership purchased equipment and a vehicle. Tyler estimates that the equipment purchased for $1,640 and the vehicle purchased for $8,200 have five-year useful lives, with no residual value. He used the straight-line method to calculate depreciation expense. At the end of the first year of business, Tyler, who was studying accounting, provided the following information:
CRANE SNOW REMOVAL SERVICES
Income Statement
Year Ended December 31, 2024
Service revenue $41,000
Expenses
Supplies expense $4,920
Depreciation expense $1,968
Salaries expense $24,600
Total Expenses $31,488
Profit for the year $9,512
Additional information:
1. Salaries expense is $16,400 and $8,200 cash that was paid to Tyler and Matt, respectively, during the year.
2. All revenues were collected in cash.
3. All supplies were paid for in cash. At the end of the year, there were no supplies on hand.
4. There is $13,940 in the bank account at December 31, 2024.
(a) Prepare a journal entry to correct the errors, if any, on the income statement.