Description
We reviewed the balance sheet for VWV in the prior module. This time we are examining the income statement for the same entity.
VWV Company | ||
Income Statement | ||
For the Period Ending December 31, 20XX | ||
Revenues | $540,000 | |
Cost of goods sold | 200,000 | |
Gross profit | $340,000 | |
Operating expenses | ||
Salaries | $100,000 | |
Lease for office | 30,000 | |
Advertising and promotion | 24,000 | |
Utilities | 9,700 | |
Property taxes | 18,000 | |
Payroll taxes | 11,500 | |
Insurance | 8,000 | |
Depreciation | 19,922 | |
Miscellaneous expenses | 9,000 | |
Total operating expenses | $230,122 | |
Operating income | $109,878 | |
Interest income | $250 | |
Interest expense | 12,000 | |
Net interest expense | $11,750 | |
Net income | $98,128 |
Use the above income statement to answer the questions below.
- Is VWV a manufacturer/reseller or a service company?
- Explain the term cost of goods sold in your own words. Why is this item significant?
- Does the company have employees?
- Does the company own some type of property? Can we tell from looking at the income statement alone or do we need to look at the balance sheet too?
- Are earnings per share important information for VWV Company?
- How do the dividends affect the income statement?
- How do we know that VWV Company is using the accrual basis of accounting? Hint: Do not forget to look at the balance sheet from the prior module.
- Why is the company using the accrual basis of accounting rather the cash basis?
- Comment on operating income versus net income.
SLP Assignment Expectations
Use Word and respond in a question and answer format. There is no need to use Excel for this particular SLP.
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