The condensed product-line income statement for Suffolk China Ware Company for the month of May is as follows: Suffolk China Ware CompanyProduct-Line Income StatementFor the Month Ended May 31 Bowls Plates Cups Sales $65,700 $90,200 $26,400 Cost of goods sold 25,900 32,000 14,800 Gross profit $39,800 $58,200 $11,600 Selling and administrative expenses 29,900 34,300 15,400 Income from operations $9,900 $23,900 $(3,800) Fixed costs are 14% of the cost of goods sold and 35% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be materially affected if the Cups line were discontinued. a. Prepare a differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2) For the Month Ended May 31 Continue Cups(Alternative 1) Discontinue Cups(Alternative 2) Differential Effecton Income(Alternative 2) Revenues $ $ $ Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Income (Loss) $ $ $ b. Should the Cups line be retained? Explain. As indicated by the differential analysis in part (a), the income will by $ if the Cups line is discontinued
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Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
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Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
The condensed product-line income statement for Suffolk China Ware Company for the month of May is as follows:
| Suffolk China Ware Company Product-Line Income Statement For the Month Ended May 31 |
||||||||
| Bowls | Plates | Cups | ||||||
| Sales | $65,700 | $90,200 | $26,400 | |||||
| Cost of goods sold | 25,900 | 32,000 | 14,800 | |||||
| Gross profit | $39,800 | $58,200 | $11,600 | |||||
| Selling and administrative expenses | 29,900 | 34,300 | 15,400 | |||||
| Income from operations | $9,900 | $23,900 | $(3,800) |
Fixed costs are 14% of the cost of goods sold and 35% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be materially affected if the Cups line were discontinued.
a. Prepare a differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
| Differential Analysis | |||
| Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2) | |||
| For the Month Ended May 31 | |||
| Continue Cups (Alternative 1) |
Discontinue Cups (Alternative 2) |
Differential Effect on Income (Alternative 2) |
|
| Revenues | $ | $ | $ |
| Costs: | |||
| Variable cost of goods sold | |||
| Variable selling and admin. expenses | |||
| Fixed costs | |||
| Income (Loss) | $ | $ | $ |
b. Should the Cups line be retained? Explain.
As indicated by the differential analysis in part (a), the income will by $ if the Cups line is discontinued
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