Multiple-Step Income Statement
The Carlsbad Company income statement for the year ended February 28, 20Y8 contains errors:
CARLSBAD COMPANY Income Statement For the Year Ended February 28, 20Y8 Sales $4,220,000 Cost of goods sold (2,650,000) Operating income $1,930,000 Expenses: Selling expenses $ 800,000 Administrative expenses 600,000 Delivery expense 50,000 Total expenses (1,450,000) Other expense: 480,000 Interest revenue 40,000 Gross profit 440,000
Prepare a corrected income statement for Carlsbad Company for the year ended February 28, 20Y8.
Carlsbad Company Income Statement For the Year Ended February 28, 20Y8
Sales
Cost of goods sold
Gross profit
Expenses:
Selling expenses
Administrative expenses
Delivery expense
Total expenses
Operating income
Other revenue:
Interest revenue
Net income
Multiple-Step Income Statement
The Carlsbad Company income statement for the year ended February 28, 20Y8 contains errors:
| CARLSBAD COMPANY | |||||||||
| Income Statement | |||||||||
| For the Year Ended February 28, 20Y8 | |||||||||
| Sales | $4,220,000 | ||||||||
| Cost of goods sold | (2,650,000) | ||||||||
| Operating income | $1,930,000 | ||||||||
| Expenses: | |||||||||
| Selling expenses | $ 800,000 | ||||||||
| Administrative expenses | 600,000 | ||||||||
| Delivery expense | 50,000 | ||||||||
| Total expenses | (1,450,000) | ||||||||
| Other expense: | 480,000 | ||||||||
| Interest revenue | 40,000 | ||||||||
| Gross profit | 440,000 | ||||||||
Prepare a corrected income statement for Carlsbad Company for the year ended February 28, 20Y8.
| Carlsbad Company | |||
| Income Statement | |||
| For the Year Ended February 28, 20Y8 Sales Cost of goods sold Gross profit Expenses: Selling expenses Administrative expenses Delivery expense Total expenses Operating income Other revenue: Interest revenue Net income |
Related questions
Budgeted Income Statement and Balance Sheet
As a preliminary to requestingĀ budgetĀ estimates of sales, costs, and expenses for the fiscal year beginning January 1, 20Y8, the following tentative trial balance as of December 31, 20Y7, is prepared by the Accounting Department of Mesa Publishing Co.:
| Cash | $ 26,000 | Ā | Ā |
| Accounts Receivable | 23,800 | Ā | Ā |
| Finished Goods | 16,900 | Ā | Ā |
| Work in Process | 4,200 | Ā | Ā |
| Materials | 6,400 | Ā | Ā |
| Prepaid Expenses | 600 | Ā | Ā |
| Plant and Equipment | 82,000 | Ā | Ā |
| Accumulated DepreciationāPlant and Equipment | Ā | Ā | $ 32,000 |
| Accounts Payable | Ā | Ā | 14,800 |
| Common Stock, $1.50 par | Ā | Ā | 30,000 |
| Retained Earnings | Ā | Ā | 83,100 |
| Ā | $159,900 | Ā | $159,900 |
Factory output and sales for 20Y8 are expected to total 3,800 units of product, which are to be sold at $120 per unit. The quantities and costs of the inventories at December 31, 20Y8, are expected to remain unchanged from the balances at the beginning of the year.
Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows:
| Ā | Estimated Costs and Expenses | |||
| Ā | Ā Ā Ā Ā Fixed (Total for Year) |
Ā Ā Ā Ā Variable (Per Unit Sold) |
||
| Cost of goods manufactured and sold: | ||||
| Direct materials | _ | Ā | $30.00 | Ā |
| Direct labour | _ | Ā | 8.40 | Ā |
| Factory overhead: | Ā | Ā | ||
| Ā Ā Depreciation of plant and equipment | $ 4,000 | Ā | _ | Ā |
| Ā Ā Other factory overhead | 1,400 | Ā | 4.80 | Ā |
| Selling expenses: | Ā | Ā | ||
| Sales salaries and commissions | 12,800 | Ā | 13.50 | Ā |
| Advertising | 13,200 | Ā | _ | Ā |
| Miscellaneous selling expense | 1,000 | Ā | 2.50 | Ā |
| Administrative expenses: | Ā | Ā | ||
| Office and officers salaries | 7,800 | Ā | 7.00 | Ā |
| Supplies | 500 | Ā | 1.20 | Ā |
| Miscellaneous administrative expense | 400 | Ā | 2.40 | Ā |
Balances of accounts receivable, prepaid expenses, and accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of $35,000 on 20Y8 taxable income will be paid during 20Y8. Regular quarterly cash dividends of $0.20 per share are expected to be declared and paid in March, June, September, and December on 20,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $22,000 cash in May.
1.Ā Prepare a budgeted income statement for 20Y8.
2.Ā Prepare a budgeted balance sheet as of December 31, 20Y8.
Ā
Common-Sized Income Statement
Revenue and expense data for the current calendar year forTannenhill Company and for the electronics industry are as follows.TannenhillĆ¢ĀĀs data are expressed in dollars. The electronicsindustry averages are expressed in percentages.
| Tannenhill Company | Electronics Industry Average | ||||
| Sales | $2,240,000 | 100 | % | ||
| Cost of goods sold | 1,478,400 | 71 | |||
| Gross profit | $761,600 | 29 | % | ||
| Selling expenses | $448,000 | 16 | % | ||
| Administrative expenses | 179,200 | 7 | |||
| Total operating expenses | $627,200 | 23 | % | ||
| Operating income | $134,400 | 6 | % | ||
| Other revenue | 44,800 | 2 | |||
| $179,200 | 8 | % | |||
| Other expense | 22,400 | 1 | |||
| Income before income tax | $156,800 | 7 | % | ||
| Income tax expense | 67,200 | 4 | |||
| Net income | $89,600 | 3 | % | ||
a. Prepare a common-sized income statementcomparing the results of operations for Tannenhill Company with theindustry average. If required, round percentages to one decimalplace. Enter all amounts as positive numbers.
| Tannenhill Company | |||
| Common-Sized Income Statement | |||
| Forthe Year Ended December 31 | |||
| Tannenhill Company Amount | Tannenhill Company Percent | Electronics Industry Average | |
| Sales | $2,240,000 | % | 100.0% |
| Cost of goods sold | 1,478,400 | % | 71% |
| Gross profit | $761,600 | % | 29% |
| Selling expenses | $448,000 | % | 16% |
| Administrative expenses | 179,200 | % | 7% |
| Total operating expenses | $627,200 | % | 23% |
| Income from operations | $134,400 | % | 6% |
| Other revenue | 44,800 | % | 2% |
| $179,200 | % | 8% | |
| Other expense | 22,400 | % | 1% |
| Income before income tax | $156,800 | % | 7% |
| Income tax expense | 67,200 | % | 4% |
| Net income | $89,600 | % | 3% |
b. The company is managing the cost ofmanufacturing product than the industry, and has slightly sellingand administrative expenses relative to the industry. The combinedimpact causes net income as a percent of sales to be than theindustry average.
The income statement of Vince Gill Company is shown below.
| Vince Gill Company | ||
| Income Statement | ||
| For year ended December 31, 2014 | ||
Sales Revenue | $6,947,090 | |
| Cost of Goods Sold | ||
| Beginning inventory | $1,890,710 | |
| Purchases | 4,323,810 | |
| Goods available for sale | 6,214,520 | |
| Ending inventory | 1,601,450 | |
| Cost of goods sold | 4,613,070 | |
| Gross Profit | 2,334,020 | |
| Operating expenses | ||
| Selling expenses | 446,970 | |
| Admin expenses | 709,920 | 1,156,890 |
| Net income | 1,177,130 | |
| 1. | Accounts receivable decreased $316,040 during the year. | |
| 2. | Prepaid expenses increased $175,400 during the year. | |
| 3. | Accounts payable to suppliers of merchandise decreased $283,580during the year. | |
| 4. | Accrued expenses payable decreased $115,830 during theyear. | |
| 5. | Administrative expenses include depreciation expense of$54,760. |
Prepare the operating activities section of the statement ofcash flows using the direct method.
