Balance Sheet Assignment
We reviewed the balance sheet for VWV in the prior module. This time we are examining the income statement for the same entity.
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VWV Company
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Income Statement
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For the Period Ending December 31, 20XX
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Revenues
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$540,000
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Cost of goods sold
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200,000
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Gross profit
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$340,000
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Operating expenses
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Salaries
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$100,000
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Lease for office
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30,000
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Advertising and promotion
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24,000
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Utilities
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9,700
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Property taxes
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18,000
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Payroll taxes
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11,500
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Insurance
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8,000
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Depreciation
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19,922
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Miscellaneous expenses
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9,000
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Total operating expenses
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$230,122
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Operating income
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$109,878
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Interest income
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$250
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Interest expense
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12,000
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Net interest expense
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$11,750
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Net income
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$98,128
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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.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.