FUNDAMENTALS OF FIN ACCOUNTING >IP<
3rd Edition
ISBN: 9781259675386
Author: PHILLIPS LIBB
Publisher: MCG CUSTOM
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Textbook Question
Chapter 1, Problem 10E
Analyzing and Interpreting an Income Statement
Three individuals organized Pest Away Corporation on January 1 to provide insect extermination services. The company paid dividends of $10,000 during the year. At the end of the first year of operations, the following income statement was prepared:
| PEST AWAY CORPORATION Income Statement For the Year Ended December 31 |
||||
| Revenues | ||||
| Service Revenue | $192,000 | |||
| Sales Revenue | 24,000 | |||
| Total Revenues | 216,000 | |||
| Expenses | ||||
| Supplies Expense | 76,000 | |||
| Salaries and Wages Expense | 33,000 | |||
| Advertising Expense | 22,000 | |||
| Office Expenses | 46,000 | |||
| Total Expenses | 177,000 | |||
| Net Income | $ 39,000 | |||
Required:
- 1. Did the company generate more revenue from selling goods or providing services to customers?
- 2. If salaries and wages were to double, how much net income would the company report?
- 3. If the company paid $20,000 for advertising during the current year, what amount is owed at the end of the year? In what account would the amount still owing be reported?
- 4. Would the $10,000 of dividends be reported on the
balance sheet or statement ofretained earnings ?
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[The following information applies to the questions displayed below.]
Wang Company began operations on January 1, year 1, by issuing common stock for $70,000 cash. During year 1, Wang received $88,000 cash from revenue and incurred costs that required $65,000 of cash payments.
Required
Prepare a GAAP-based income statement and balance sheet for Wang Company for year 1, for the below scenario:
Wang is a manufacturing company. The $65,000 was paid to purchase the following items:
(1) Paid $10,000 cash to purchase materials that were used to make products during the year.
(2) Paid $20,000 cash for wages of factory workers who made products during the year.
(3) Paid $5,000 cash for salaries of sales and administrative employees.
(4) Paid $30,000 cash to purchase manufacturing equipment. The equipment was used solely to make products. It had a three-year life and a $6,000 salvage value. The company uses straight-line depreciation.…
Emily’s Greenhouse Corporation is a local greenhouse organized 10 years ago as a corporation. The bookkeeper prepared the following statement at year-end (assume that all amounts are correct, but note the incorrect format):
EMILY’S GREENHOUSE CORPORATION
Profit and Loss
December 31
Debit
Credit
Net Sales
$
522,200
Cost of Goods Sold
$
323,000
Salaries and Wages Expense
69,000
Office Expenses
16,000
Travel Expenses
4,000
Income Tax Expense
33,060
Net Profit
77,140
Totals
$
522,200
$
522,200
Prepare a properly formatted multistep income statement that would be used for external reporting purposes.
Chapter 1 Solutions
FUNDAMENTALS OF FIN ACCOUNTING >IP<
Ch. 1 - Define accounting.Ch. 1 - Prob. 2QCh. 1 - Briefly distinguish financial accounting from...Ch. 1 - The accounting process generates financial reports...Ch. 1 - Explain what the separate entity assumption means...Ch. 1 - List the three main types of business activities...Ch. 1 - What information should be included in the heading...Ch. 1 - What are the purposes of (a) the balance sheet,...Ch. 1 - Explain why the income statement, statement of...Ch. 1 - Briefly explain the difference between net income...
Ch. 1 - Describe the basic accounting equation that...Ch. 1 - Describe the equation that provides the structure...Ch. 1 - Describe the equation that provides the structure...Ch. 1 - Prob. 14QCh. 1 - Prob. 15QCh. 1 - Prob. 16QCh. 1 - Briefly define what an ethical dilemma is and...Ch. 1 - Prob. 18QCh. 1 - Prob. 1MCCh. 1 - Which of the following is true regarding the...Ch. 1 - Which of the following is false regarding the...Ch. 1 - Which of the following regarding retained earnings...Ch. 1 - Prob. 5MCCh. 1 - Which of the following statements regarding the...Ch. 1 - Prob. 7MCCh. 1 - Which of the following is true? a. FASB creates...Ch. 1 - Which of the following would not be a goal of...Ch. 1 - Prob. 10MCCh. 1 - Prob. 1MECh. 1 - Matching Definitions with Terms or Abbreviations...Ch. 1 - Matching Definitions with Terms Match each...Ch. 1 - Matching Financial Statement Items to Balance...Ch. 1 - Matching Financial Statement Items to Balance...Ch. 1 - Matching Financial Statement Items to Balance...Ch. 1 - Matching Financial Statement Items to Balance...Ch. 1 - Matching Financial Statement Items to the Basic...Ch. 1 - Matching Financial Statement Items to the Four...Ch. 1 - Reporting Amounts on the Statement of Cash Flows...Ch. 1 - Prob. 11MECh. 1 - Preparing a Statement of Retained Earnings Stone...Ch. 1 - Relationships among Financial Statements Items...Ch. 1 - Prob. 14MECh. 1 - Relationships among Financial Statements Items...Ch. 1 - Preparing an Income Statement, Statement of...Ch. 1 - Reporting Amounts on the Four Basic Financial...Ch. 1 - Reporting Amounts on the Four Basic Financial...Ch. 1 - Preparing a Balance Sheet DSW, Inc., is a designer...Ch. 1 - Completing a Balance Sheet and Inferring Net...Ch. 1 - Labeling and Classifying Business Transactions The...Ch. 1 - Preparing an Income Statement and Inferring...Ch. 1 - Preparing an Income Statement Home Realty,...Ch. 1 - Prob. 8ECh. 1 - Preparing an Income Statement and Balance Sheet...Ch. 1 - Analyzing and Interpreting an Income Statement...Ch. 1 - Prob. 11ECh. 1 - Matching Cash Flow Statement Items to Business...Ch. 1 - Preparing an Income Statement. Statement of...Ch. 1 - Interpreting the Financial Statements Refer to...Ch. 1 - Reporting Amounts on the Four Basic Financial...Ch. 1 - Evaluating Financial Statements Refer to CP1-3....Ch. 1 - Preparing an Income Statement, Statement of...Ch. 1 - Prob. 2PACh. 1 - Reporting Amounts on the Four Basic Financial...Ch. 1 - Evaluating Financial Statements Refer to PA1-3....Ch. 1 - Preparing an Income Statement and Balance Sheet...Ch. 1 - Interpreting the Financial Statements Refer to PB...Ch. 1 - Reporting Amounts on the Four Basic Financial...Ch. 1 - Evaluating Financial Statements Refer to PB1-3....Ch. 1 - Finding Financial Information Answer the following...Ch. 1 - Comparing Financial Information Refer to the...Ch. 1 - Prob. 5SDCCh. 1 - Prob. 6SDCCh. 1 - Prob. 1CC
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