BUS500 Trident Financial Intelligence VWV Income Statement

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Business Finance

Financial Intelligence


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



Cost of goods sold


Gross profit


Operating expenses



Lease for office


Advertising and promotion




Property taxes


Payroll taxes






Miscellaneous expenses


Total operating expenses


Operating income


Interest income


Interest expense


Net interest expense


Net income


Use the above income statement to answer the questions below.

  1. Is VWV a manufacturer/reseller or a service company?
  2. Explain the term cost of goods sold in your own words. Why is this item significant?
  3. Does the company have employees?
  4. 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?
  5. Are earnings per share important information for VWV Company?
  6. How do the dividends affect the income statement?
  7. 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.
  8. Why is the company using the accrual basis of accounting rather the cash basis?
  9. 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.

Unformatted Attachment Preview

VWV Company Balance Sheet As at December 31, 20XX Assets Current Assets Cash Accounts receivable Interest receivable Inventory Total Current Assets Amount ($) 72.000 18.000 1.000 60.000 151.000 Non-Current Assets Equipment (net of depreciation) Total Assets The accounts receivables is larger Equipment net of depreciation refers accumulated depreciation charged aga There are both short-term and long term notes payable is worth $100,000. (100,000+24,000). 128.000 279.000 Liabilities and Equities Current liabilities Accounts payable Interest payable Total Current Liabilities The net short term current assets of th The total Amout owed is $124,000 12.000 12.000 24.000 Long term Liabilities Notes Payable 100.000 Shareholders Equity Common stock Paid-in capital Retained earnings Total equity Total liabilites and Equity 10.000 50.000 95.000 155.000 255.000 The balance sheet of the company has Computations A/cs receivables less A/cs Payables Short Term Current Assets Total Liabilities Total Amount Owed 6.000 127.000 124.000 124.000 Expanatory Notes nts receivables is larger than the accounts payables by $6,000. net of depreciation refers to the reported amount of equipment not including all the ted depreciation charged against it. both short-term and long-term payables. Short term payables totals $24,000 and longs payable is worth $100,000. The total liabilities of the company is therefore $124,000 hort term current assets of the company is 127,000 (151,000-24,000) Amout owed is $124,000 ce sheet of the company has common stock hence it is a corporate and not a sole
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